Opinion ID: 1395261
Heading Depth: 2
Heading Rank: 1

Heading: The Income Tax Exemption Statute.

Text: The principal subsections of the tax exemption statute that are in dispute are AS 43.20.017(a) through (c), which are set forth in the margin. [3] Those individuals who have filed income tax returns reporting income from Alaska sources for the past three years are immediately exempt from paying any further state personal income taxes. Those who have filed tax returns in two previous years are exempt from two-thirds of the tax that would ordinarily be levied under the existing tax structure, and those that have filed in one previous year are exempt from one-third of their tax. The state argues that the system of exemptions falls equally on residents, nonresidents, shorter term Alaskan residents and longer term residents. At oral argument, and in its brief, the state argued at length that there is no evidence of purposeful discrimination against new residents created by the system of exemptions, and that any disproportionate impact the statute may have is incidental to the legislation's main objectives. We think the state's argument is meritless. Regardless of the lack of evidence of purposeful discrimination, the effect of the statute will be that few long-term residents of Alaska will ever have to pay income taxes, [4] while anyone moving to Alaska will have to pay taxes for three years. All Alaskans who have lived here and filed tax returns for more than three years will be exempt from the income tax. Younger long-term residents who file state income tax returns for earnings from summer and part-time jobs can satisfy the three-year exemption requirement by the time they enter the labor force as full-time employees. It is true that some nonresidents, such as fishermen who come to the state each year, will also be exempt under this statute. But we believe the pattern of the impact of the statutory scheme is so striking that it would be naive to assume that the statute does not place the principal burden of taxation on new residents. Contrary to what the state and the dissenters argue, discrimination against new residents created by the series of exemptions is apparent from the statute. Therefore, the legal question presented is whether Alaska may selectively impose an income tax on new residents. The tax statute in effect imposes a durational period of residency before new residents are accorded tax-free status. In analyzing the Zobels' equal protection challenge, we must review those lines of cases which have considered durational residency requirements.