"An Act relating to the rate of interest on delinquent taxes."

Alaska's revenue and taxation laws are laid out in Title 43 of the Alaska Statutes. Section 43.05.225 sets the interest rate that the state must levy for delinquent taxes at 5 percentage points above the 12th Federal Reserve District discount rate or at the rate of 11%, whichever is greater. SB 86 eliminates the 11% minimum interest rate reference and retains the 12th District discount rate plus 5 formula as the only option for calculating interest on delinquent taxes.

Eliminating the statutory reference to a set interest rate of 11% will establish a fair method of calculating interest owed and interest due by allowing it to float with the market. Since 1991, the market driven formula of 5 percentage points above the 12th District discount rate has consistently remained below 11%. It is inappropriate to charge Alaskans 11% interest on delinquent taxes, especially since many delinquencies are a result of legitimate filing errors. In addition, the State has been forced to pay the exaggerated interest rate of 11% on refunds for overpayment of taxes.

According to the Department of Revenue, the fiscal impact to the State as a result of this legislation will be marginal. The State will receive a fair and reasonable interest from delinquent taxpayers and also pay a fair and reasonable interest on refunds to taxpayers.

Last Updated: 03/14/2003

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