HB377 Alabama 2011 Session

Summary

Primary Sponsor

Alan Harper

Republican

Co-Sponsors

Richard LindseyRod ScottDarrio Melton

Session

Regular Session 2011

Title

Income tax, reportable transactions, taxpayer responsibility for disclosure, waivers, injunctive relief, penalties, Secs. 40-29-121 to 40-29-130, inclusive, added

Summary

HB377 adds a new framework in Alabama to require disclosure of reportable transactions and tax shelters, with penalties and enforcement for taxpayers and their advisors.

What This Bill Does

It creates Article 7 with definitions for reportable transactions, material advisors, listed transactions, and related terms. Taxpayers must disclose reportable transactions on state returns in line with federal rules, with timing tied to when the transaction occurred. The bill imposes penalties for failing to disclose and for underreporting tax benefits from these transactions, expands penalties for listed transactions, extends the period to assess taxes in some cases, requires material advisors to file disclosures and maintain advisory lists, and authorizes injunctions to stop conduct related to these transactions. It also sets an effective date and provides for waivers of penalties in certain situations.

Who It Affects

• Taxpayers who participate in reportable or listed transactions (including individuals and business entities) and must disclose those transactions on state tax returns.
• Material advisors who organize, promote, or advise on these transactions and who must disclose transactions, file returns, and maintain lists of advisees; they face penalties and confidentiality provisions.

Key Provisions

• §40-29-121 defines key terms: disqualified opinion, disqualified advisor, listed transaction, material advisor, non-economic substance transaction, reportable transaction, and tax shelter.
• §40-29-122 requires disclosure of reportable transactions in the manner required by Treasury Regulations §1.6011-4, with timing tied to when the transaction occurred and the tax year it affects.
• §40-29-123 imposes disclosures penalties for failure to include required information: generally $10,000 for individuals and $50,000 for others, plus up to 10% of the tax benefit; penalties for listed transactions have higher bases and rules.
• §40-29-124 imposes penalties for understatement of tax due to reportable transactions: 20% of the understatement (30% in certain cases), plus separate penalties related to amendments and IRS/department contact, and potential 50% or 100% of associated interest in some scenarios.
• §40-29-125 extends the assessment period for taxes if information about a listed or reportable transaction was not disclosed or requirements were not met, effectively delaying the end of the statute of limitations in those cases.
• §40-29-126 requires material advisors to file a transaction return and, if applicable, disclose to the department; advisors must maintain a list of taxpayers advised and may have regulations to simplify filing; lists must be kept and made available to the commissioner.
• §40-29-127 imposes penalties for failure to file disclosures or for providing false information; higher penalties apply to listed transactions, and some penalties may be calculated as a percentage of gross income related to the transaction.
• §40-29-128 imposes penalties for gross valuation overstatement and related misconduct by advisors; confidentiality restrictions are adjusted to reduce protections in promotion of tax shelters; penalties apply to post-enactment activities.
• §40-29-129 authorizes civil injunctive relief in Montgomery County Circuit Court to stop conduct related to reportable transactions or tax shelters when appropriate.
• §40-29-130 sets the act’s effective date, with general effectiveness upon the Governor’s signature or as otherwise law.

AI-generated summary using openai/gpt-5-nano on Feb 24, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Taxation