HB240 Alabama 2012 Session

Summary

Primary Sponsor

Jay Love

Republican

Session

Regular Session 2012

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

HB240 would require Alabama resident owners of pass-through entities to include their share of those entities' income in Alabama gross income and would create credits for taxes paid to other states or foreign countries on that income.

What This Bill Does

It expands the definition of gross income for resident individuals who are partners or members of partnerships or LLCs, shareholders of Alabama S corporations, or beneficiaries of estates or trusts, so they must include their proportionate share of pass-through income regardless of where it is earned. It provides a credit to these residents for income taxes paid to other states or territories on that income (up to the Alabama tax that would be due), and adds a separate credit equal to 50% of the proportionate share of income taxes paid to foreign countries related to that income. The Department of Revenue must report annually to the Legislative Council on how many people claim these credits and the total amount claimed. The changes have specific effective dates by year and allow limited retroactive application in certain asset dispositions.

Who It Affects

• Resident individuals who are owners or beneficiaries of Subchapter K entities, Alabama S corporations, or estates/trusts; they would include their share of the entity's income in Alabama gross income and may claim credits for taxes paid to other states or foreign countries on that income.
• The Alabama Department of Revenue and the state's tax system, which will administer, limit, and report on these credits, including annual disclosures to the Legislative Council.

Key Provisions

• Amends gross income to require resident owners of Subchapter K entities, Alabama S corporations, and estate/trust beneficiaries to include their proportionate share of income from these entities, regardless of where the income is earned.
• Allows a credit equal to 50% of the proportionate share of income taxes paid or accrued to a foreign country on the entity's trade or business income, with the credit tied to the individual's share.
• Allows a credit against Alabama tax for the proportionate share of income taxes paid to other states or territories on income sourced outside Alabama, up to the amount of Alabama tax that would be due on that income.
• Requires a certificate with the Alabama tax return to claim the out-of-state credit for income derived from sources outside Alabama.
• Requires the Department of Revenue to annually report to the Legislative Council the extent of foreign-country tax credits claimed, including number of taxpayers and total credits.
• States the effective dates: credits for out-of-state taxes apply to tax years after 2010; foreign-country credits apply to tax years after 2011; includes limited retroactive provisions for certain asset dispositions negotiated before 2011.
• Provides severability and repeal of conflicting laws.

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