October 10, 2003
Over the years, the question has been asked whether placing a requirement to pay a dividend in the Constitution would have tax consequences for the Fund. Past legal opinions have been ambiguous, creating the need for a definitive answer. The Board quested the opinion on the current tax status of the Fund, and asked that Steptoe and Johnson also review the impact of amending the Constitution.
"The Trustees take no position on whether or not amending the Constitution to provide dividend payments is good or bad public policy," said Attorney General and Trustee Gregg Renkes. "This opinion and the conclusion it reaches are not intended to advance or otherwise impact the policy debate on this issue."
Steptoe and Johnson concluded that even with the constitutional amendments, the Fund should not be subject to federal income tax because it would continue to be operated by the State of Alaska, its income is earned directly by the State of Alaska and it is an integral part of the State of Alaska. The firm reviewed prior tax opinions regarding the federal income tax status of the Alaska Permanent Fund and the APFC, pertinent provisions of the Alaska Constitution and the Alaska Statutes, and relevant interpretations of federal income tax law in preparing the opinion.
Select the following links to open a summary letter regarding the opinion and the opinion itself.
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