Legislature schedules joint session to attempt override of Dunleavy veto on digital tax bill

By SUZANNE DOWNING

After weeks of quiet negotiations and backroom vote-counting, Alaska lawmakers have scheduled a joint session of the House and Senate to attempt an override of Gov. Mike Dunleavy’s veto of last year’s Senate Bill 113.

The joint session is set for 9 am Thursday, with the sole purpose of voting on whether to override the governor’s veto of Senate Bill 113, tax increase legislation sponsored by Anchorage Democrat Bill Wielechowski.

Originally, Democrat lawmakers who lead both houses had discussed attempting to override two vetoed bills, but legislative leaders ultimately narrowed the agenda to SB 113 after it became clear that was the only measure with a potential path to the required two-thirds vote in each chamber.

SB 113 was designed to modernize Alaska’s corporate income tax system to reflect the realities of the digital economy. Current tax rules, largely unchanged since the 1970s, rely on a “cost-of-performance” model that often allows large out-of-state digital companies to attribute profits to where their servers or offices are located — not where their customers live.

Under that system, major online platforms can generate significant revenue from Alaska users while paying little or no corporate income tax to the state.

SB 113 would change that by:

• Assigning income based on where the customer is located rather than where the work is performed.

• Using a single-sales-factor formula for highly digitized companies, meaning corporate taxes would be based solely on Alaska sales rather than payroll or property.

The Alaska Department of Revenue estimated SB 113 could generate between $25 million and $65 million annually, depending on corporate behavior and enforcement.

The costs could be passed on to consumers and many have concerns about administrative complexity and potential legal challenges.

SB 113 moved through the Legislature with relatively strong bipartisan support. In the Alaska Senate,  it passed in April by a 16–4 vote, and it passed in the House in May by a 26–14 vote.

The combined tally across both chambers was 42 votes in favor and 18 opposed.

Gov. Dunleavy vetoed the bill in September 2025, citing concerns about economic competitiveness and business impacts. No override attempt was successful at the time.

Thursday’s joint session comes just hours before Dunleavy is scheduled to deliver his final State of the State address to the Legislature, closing out his eight-year tenure as governor.

An override would require a two-thirds majority of the combined House and Senate, a high bar that depends on near-perfect attendance and unified support among lawmakers who previously backed the bill. It appears the votes have been already counted and the majorities are confident of the outcome.