Attorney calls Alaska's proposed PTE tax highest in nation, structurally broken

A tax attorney's formal critique posted to the Alaska Legislature argues that the proposed pass-through entity tax on oil and gas income is both the highest mandatory rate of any state in the nation and structurally incompatible with Alaska's existing corporate income tax statute.

F. Steven Mahoney, a Glenfarne Group attorney who practices Alaska tax law, labeled the proposal "Rushed, Targeted & Volatile" in a written analysis posted to the legislature's bill tracking system on June 27, 2026. He argued the 9.4 percent top rate exceeds New Hampshire's 7.5 percent, the current national high among the only four states that impose a mandatory, non-elective pass-through entity tax. California's comparable rate is 1.5 percent.

A Structural Mismatch

The core technical objection Mahoney raises is that the proposal grafts pass-through entities onto Alaska's corporate income tax statute, which calculates tax starting from federal corporate taxable income. Pass-through entities have no such figure. Their income flows through to individual owners and is taxed at the owner level. Mahoney's analysis states the problem plainly: "AS 43.20 tax calculation starts w/federal taxable income – PTE has none – Owners do."

Mahoney also flagged that the bill's definition of "qualified entity" includes sole proprietorships. Sole proprietorships are not separate legal entities from their owners under federal tax law, and Alaska repealed its individual income tax in 1980. His analysis raises the question directly: sole proprietorships "cannot be S Corps- aren't they simply Natural Person's who are exempt?"

Additional Defects

Two additional concerns round out Mahoney's critique. He argues the proposal would tax qualifying entities years before they begin commercial operations, and he contends it strips pass-through entities of credits and deductions available to C-corporations under the existing corporate income tax statute, specifically removing AS 43.20.021. Mahoney counts roughly 15 legislative attempts to impose a pass-through entity tax since 2019 and argues this version carries the same defects as its predecessors.

Department of Revenue Concerns and Bill Details

The Alaska Department of Revenue, presenting separately to the conference committee on the same day, offered its own assessment of the proposal's complexity. The department described the concept as "relatively novel" and warned it may create "unintended consequences and unforeseen difficulties with compliance and administration." Officials noted it may be difficult and expensive for taxpayers to compute their taxable income as if they were a C-corporation, and that the bill's language regarding when the department could require both AGDC and Glenfarne to file returns is unclear.