On May 20, 2026, the Alaska Legislature passed House Bill 280 (HB 280), which would amend the state's apportionment rules to move to market-based sourcing. These changes would be effective for tax years beginning on or after January 1, 2027.

HB 280 would adopt definitions for apportionable and nonapportionable income in lieu of business and nonbusiness income. Apportionable income would include any income apportionable under the United States Constitution. It also would amend the transactional test for apportionable income to include income arising from tangible and intangible property if the acquisition, management, employment, development or disposition of the property is or was related to the operation of the taxpayer's trade or business.

HB 280 would define "sales" to mean all apportionable receipts "that are received from transactions and activity in the regular course of the taxpayer's trade or business; except that sales of a taxpayer from hedging transactions and from the maturity, redemption, exchange, loan, or other disposition of cash or securities, [are] excluded."

HB 280 would assign sales other than sales of tangible personal property to Alaska if the taxpayer's market is in the State. As such, the following sales would be assigned to Alaska:

• Sales, rentals, leases or licenses of real property, if and to the extent the property is located in Alaska
• Rentals, leases or licenses of tangible personal property, if and to the extent the property is located in Alaska
• Sales of services, if and to the extent the service is delivered to a location in Alaska
• Rentals, leases and licenses of intangible property, if and to the extent the property is used in Alaska, provided that intangible property utilized in marketing a good or service to a consumer is "used in this state" if that good or service is purchased by a consumer who is in Alaska
• Sales of intangible property would be treated as follows:
• Contract rights, government licenses, or similar intangible property that authorizes the holder to conduct a business activity in a specific geographic area is "used in this state" if the geographic area includes all or part of Alaska
• Sales from intangible property sales that are contingent on the productivity, use or disposition of the intangible property if and to the extent the property is located in Alaska
• All other sales of intangible property are excluded from the numerator and denominator of the sales factor

If the sales cannot be determined under the foregoing rules, HB 280 would adopt a rule of reasonable approximation. If the sales cannot be reasonably approximated, they would be excluded from the numerator and denominator of the sales factor.

HB 280 also would adopt special rules for broadcasters, financial institutions and telecommunications service providers.

Implications

If HB 280 becomes law, Alaska will become the latest state to adopt market-based sourcing for sales other than tangible personal property. The legislature adjourned the second regular session of the 34th legislature on May 20, 2026. Governor Mike Dunleavy has 20 days to sign or veto HB 280. If the Governor does not act within the 20 days, HB 280 becomes law without his signature.

EY will continue to monitor the progress of this legislation.