HB286 Alabama 2012 Session

Updated Feb 27, 2026

Notable

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: HB286 lets Alabama residents who own Subchapter K entities or Alabama S corporations, and estate or trust beneficiaries, claim credits for taxes paid to other states or foreign countries on income earned outside Alabama, and updates how such passthrough income is taxed.
What This Bill Does
It expands gross income to include a resident owner's proportionate share of income from Subchapter K entities, Alabama S corporations, and estates or trusts. It allows credits against Alabama tax for the proportionate share of taxes paid to other states or territories (and to foreign countries) on income outside Alabama, with caps so credits don’t exceed Alabama tax due. It imposes a separate 50% foreign tax credit for certain foreign-country taxes related to the entity's trade or business income, subject to the same tax-cap rules and with sector qualifiers; it requires the Department of Revenue to report annually on foreign tax credits claimed; and it creates new recurring Education Trust Fund revenue of $10 million after September 30, 2012.

Who It Affects
Resident owners of Subchapter K entities and Alabama S corporations, and resident beneficiaries of estates or trusts, who would receive credits for their share of taxes paid to other states or foreign countries on income earned outside Alabama.
The Department of Revenue, which must track and report annually on the use of foreign tax credits and the number of taxpayers claiming them.
The Education Trust Fund, which would receive $10,000,000 in new recurring revenue from the act for FY2013 onward.

Key Provisions
Amends Section 40-18-14 to define gross income to include a resident owner's proportionate share of income from Subchapter K entities, Alabama S corporations, and estates or trusts, regardless of geographic source.
Amends Section 40-18-21(a) to provide a credit against Alabama income tax for the proportionate share of income taxes paid to other states or territories on outside-Alabama income, including credits claimed by entities on behalf of residents or beneficiaries, with definitions of what constitutes income tax and how credits are calculated and limited.
Imposes a 50% foreign tax credit (Section 40-18-21(c)) for the proportionate share of income taxes paid to a foreign country related to trade, business, or investment income of the entity, subject to a cap that the credit cannot exceed Alabama tax otherwise due, with specific sector and subsector qualifiers (Sector 21; subsectors 324, 325, 482, 483, 486).
Requires the Department of Revenue to annually report to the Legislature the extent of foreign tax credits claimed, including the number of taxpayers and total credits claimed.
Allocates new recurring Education Trust Fund revenue of $10,000,000 after September 30, 2012 for FY 2013 and beyond.
Gives retroactive considerations for tax years and dispositions involving pre-act negotiations and provides related transitional provisions.

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