Murkowski: New Tax Law Beneficial to Alaska Native Settlement Trusts
WASHINGTON, D.C. – The bipartisan tax package that President Obama signed into law today includes a provision authored by U.S. Sen. Lisa Murkowski, R-Alaska, that will extend for two years the existing tax treatment for Alaska Native settlement trusts.
Extension of the tax treatment helps settlement trusts to maximize the benefits provided to Alaska Natives by reducing the tax and administrative burden. Under the law, a settlement trust pays taxes at the lowest individual rate on income – whether distributed or not – in place of any beneficiary-level taxes. As such, beneficiaries are not subject to a tax on distributions and the trusts are not required to issue a Form K-1 to beneficiaries. Had this provision expired, settlement trusts would be subject to tax at the highest individual rate on undistributed income and beneficiaries would be subject to tax at their own individual rates on distributed income. U.S. Sen. Mark Begich, D-Alaska, co-sponsored Murkowski’s tax treatment provision, and U.S. Rep. Don Young, R-Alaska, sponsored a similar proposal in the House of Representatives.
“I am pleased that we were able to extend current tax law that allows settlement trusts to be managed to maximize the benefits to Alaska Natives,” Murkowski said. “These benefits include cash distributions to meet basic needs, educational scholarships, and funeral benefits.”
The tax package signed into law today will block huge tax increases from going into effect on January 1, 2011. It preserves for two years the child tax credit and marriage penalty relief and protects at least 26 million households, including nearly 25,000 Alaskan families, from being hit by the Alternative Minimum Tax, or AMT, in 2010-11. It blocks higher taxes on capital gains and dividends, ensures that the estate tax does not revert to a 55 percent top rate with a $1 million exemption, and reduces the current payroll tax by 2 percent, which will pump additional dollars into the economy. It also extends unemployment benefits for 13 months for those who continue to have trouble finding work amid a weak economy.
“I am pleased that we were able to come together as Republicans and Democrats to prevent massive tax hikes from going into effect next month that could threaten our economic recovery,” Murkowski said. “Neither side got everything it wanted in this package, but I believe this new law strikes a fair middle ground that will give American families certainty that their tax bills will not go up in the midst of the worst economic downturn in more than a generation. Absent this agreement, all Americans who pay taxes would be paying more next month. It is my hope that Congress will use the next two years to finally tackle the deficit and undertake a comprehensive review and simplification of the tax code that encourages equity and promotes economic growth.”