HB548 Alabama 2011 Session

Summary

Primary Sponsor

Jay Love

Republican

Session

Regular Session 2011

Title

Partnerships and limited liability companies, Subchapter K entities and Alabama S corporations, owners and resident beneficiaries of estates or trusts provided a proportionate tax credit for taxes paid to a foreign country, Secs. 40-18-14, 40-18-21 am'd. (2011-20801)

Summary

HB548 expands how Alabama taxes resident owners of pass-through entities by requiring inclusion of their share of the entity income from all sources and creates credits for taxes paid to other states or foreign countries to reduce double taxation.

What This Bill Does

It changes the gross income definition for resident individuals to include their proportionate share of income from Subchapter K entities, Alabama S corporations, and estates/trusts, regardless of where the income is earned. It allows a credit against Alabama income tax for the proportionate share of income taxes paid to other states or territories on income earned outside Alabama, capped at the Alabama tax that would be due on that income, and it requires a certificate to claim the credit. It also provides a separate credit for the amount of taxes paid to foreign countries on the entity's income, subject to a cap tied to the Alabama tax and limited to certain NAICS-sector related income. The bill would supersede conflicting Department of Revenue rules and take effect for tax years after 2010.

Who It Affects

• Resident individuals who are partners or members of Subchapter K entities, shareholders of Alabama S corporations, or beneficiaries of estates or trusts; they would include their proportionate share of income from these entities on Alabama returns and may receive credits for taxes paid to other states or foreign countries.
• Other states/territories and foreign countries that tax the income; due to Alabama offering credits against its tax, taxes paid to those jurisdictions can reduce Alabama tax revenues attributed to these residents.

Key Provisions

• Amends 40-18-14 to define gross income for residents as including their proportionate share of income from Subchapter K entities, Alabama S corporations, or estates/trusts from all sources; defines proportionate share by entity status and allocable interest.
• Allows residents to claim a credit against Alabama tax for proportionate share of income taxes paid to other states/territories on income earned outside Alabama, with limits that the credit cannot exceed Alabama tax due on that income and requires a certification on the Alabama return.
• Allows a separate credit for the proportionate share of income taxes paid to foreign countries on the entity's income, limited to Alabama tax that would be due and tied to specified NAICS sectors (Sector 21 and subsectors 324, 325, 482, 483, 486).
• Restricts credits to residents; credits are not intended to apply to nonresident taxpayers' situation and supersedes existing Gross Income Regulations that conflict with these changes.
• Effective for tax years beginning after December 31, 2010; retroactive application with no penalties for underpayment due to retroactive changes.

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