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Alaska Legislature Passes Education Tax Credits

EDUCATION TAX CREDITS UNDER HB 278

The passage of HB 278 provides the opportunity for existing businesses in the state to have expanded opportunities to make cash contributions and be eligible for the education tax credit effective July 1, 2014 until June 30, 2018. The law provides Educational entities that qualify as recipients of tax credits with the opportunity to solicit donations from those companies with tax liabilities listed below. The Department of Revenue will maintain tax records, but will not be involved in the monetary exchange between donor & recipient.

An entity with a tax liability listed below can make a donation to an eligible recipient and receive a tax credit against the specific liability:

 Corporate Income Tax

 Mining License Tax

 Fisheries Business Tax

 Fisheries Landing Tax

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Entities Eligible to Receive Donations:

New entities were added by the 28th Legislature that can receive donations from companies with tax liabilities listed above, along with existing entities prescribed in past legislation. The following is a listing of the types of entities that can solicit and receive donations. If you have questions regarding eligibility or inquiries about companies with the above mentioned tax liabilities, please contact the Department of Revenue; Robynn.Wilson@alaska.gov or by phone at (907) 269-6634.

Alaska University Foundation Alaska two-year or four-year college

High school vocational programs State-operated vocational school

Native heritage programs Coastal ecosystem center

Public & Private K-12 schools Scholarship Programs for dual-credit students

Early Childhood Programs STEM Program

Adult Vocational Education Programs Residential School Housing

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How the Credit Works:

If an entity with a tax liability listed above wants to make a qualifying contribution and apply for an education credit, they may receive a 50% credit for annual contributions up to $100,000. A company will receive a 100% credit for the next $200,000 in contributions. Finally, a company will receive a 50% credit for annual contributions in excess of $300,000. The education credit is a non-transferable credit, and may not exceed $5,000,000 for any one taxpayer annually across all eligible tax types. The cap is on the tax credit not the donation. A donation of $9,800,000 yields the maximum tax credit for a donor. For instance if a corporation donates $250,000 the corporation will receive $50,000 for the first $100,000 donated and $150,000 for the next $150,000 donation for a total of $200,000 credit for a $250,000 donation. Any donation made over $300,000 will be credited at 50%.

State tax credit:

 50% of contributions up to $100,000

 100% of contributions $100,001 – $300,000

 50% of contributions $300,001 – $5,000,000

 Total claimed Alaska Education Tax Credits may not exceed $5,000,000 ($9,800,000 donation)

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Frequently Asked Questions:

Q) Can a company apply current year gifts to future state taxes owed using Education Tax Credit program?

A) No, a gift must occur in the same year as the taxes that you wish to claim the credit on. A gift cannot be used for future taxes or for past taxes, only the year’s current taxes.

Q) Can an LLC or LP claim an Education Tax Credit?

A) In general a LLC and a LP cannot use the Education Tax Credit unless they have uncharacteristically elected to be taxed as a corporation. A LLC and LP can use the Education Tax Credit for non‐income taxes (such as the Mining License tax, the Fisheries Landing tax etc.) since they are not handled in the same way as state income taxes.

Q) When do mining companies begin paying the Mining License Tax?

A) Mining companies operating in Alaska are required to file a Mining License Tax Return with the Department of Revenue once the mine enters the development phase and while the mine is in the production phase, however the taxability of mining income varies greatly from mining operation to mining operation. The Mining License Tax allows mining expenses to be deducted from a mine’s gross production. So, if the mine has low profit or no profit there is no taxation on the production. If the company is profitable the mining company must pay the tax liability calculated on their Mining License Tax Return by the first day of the fifth month following the end of the mining company’s tax year end.

The links to statutory references by tax type:

 See AS 43.20.014(a) and/or Section 36 in HB 278

 See AS 43.65.018(a) and/or Section 39 in HB 278

 See AS 43.75.018(a) and/or Section 42 in HB 278

 See AS 43.77.045(a) and/or Section 45 in HB 278

 

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