A Texas oil services company that filed Alaska corporate income tax returns on a unitary combined basis was not entitled to exclude dividend income from the company’s foreign parent corporation. The Alaska Department of Revenue (DOR) audited the returns for the tax years in question and concluded that income from the company’s foreign parent corporation should have been included in taxable income of the unitary business. The DOR applied Alaska’s deduction for 80% of foreign dividends and then added the remaining foreign dividends to derive taxable income for Alaska. The administrative law judge for the Office of Administrative Hearing (OAH) correctly relied on the Alaska Supreme Court’s holding in Department of Revenue v. OSG Bulk Ships, Inc., 961 P.2d 399 (1988), that, although the Alaska corporate income tax incorporates Internal Revenue Code (IRC) provisions by reference for purposes of computing taxable income, Alaska’s adoption of a method of worldwide apportionment impliedly excepts IRC foreign income sourcing rules and exemptions.
Schlumberger Technology Corp. & Subsidiaries v. Alaska Department of Revenue, Superior Court of Alaska, 3AN l0-7367CI, March 18, 2012, received July 12, 2012, ¶200-552