HB429 Alabama 2013 Session

Summary

Primary Sponsor

Rod Scott

Democrat

Co-Sponsors

Oliver RobinsonJoe HubbardBarry MaskJoe Faust

Session

Regular Session 2013

Title

Taxation, factor presence nexus standard based on business activity established for purpose of being subject to income taxation in the state, in state residence or domicile for individuals, businesses organized in state are subject to tax, nonresident individuals and businesses organized out of state that do business in the state are subject to state tax on income, Sec. 40-18-31.27 added

Summary

HB429 would establish a factor presence nexus standard for Alabama income tax, tying tax obligations to a combination of property, payroll, and sales in the state.

What This Bill Does

It creates a new rule (Section 40-18-31.2) that says residents and Alabama- organized businesses have substantial nexus, and that nonresidents or out-of-state businesses have nexus if their property, payroll, or sales in Alabama exceed certain thresholds. The thresholds are 50,000 dollars in property, 50,000 dollars in payroll, 500,000 dollars in sales, or 25 percent of total property, payroll, or sales. The thresholds are adjusted each year based on the Consumer Price Index. The bill also defines how property, payroll, and sales are counted, sets rules for pass-through entities and commonly owned enterprises, and includes unitary business group and joint information return requirements. It preserves Public Law 86-272 protections and specifies when the new rules apply (tax years beginning after December 31, 2012).

Who It Affects

• Alabama residents and Alabama-organized businesses would have substantial nexus with the state and be subject to Alabama income tax if they meet the threshold amounts.
• Nonresident individuals and out-of-state businesses that do business in Alabama would gain substantial nexus and be subject to Alabama income tax on income earned in the state, including their owners or members in pass-through structures and entities within commonly owned or unitary groups when thresholds are met.

Key Provisions

• Establishes a factor presence nexus standard for purposes of Alabama income tax (new Section 40-18-31.2).
• Nexus is created if property, payroll, or sales exceed thresholds during a tax period, with thresholds of $50,000 for property and payroll, $500,000 for sales, or 25% of each category.
• Thresholds are adjusted annually based on changes in the Consumer Price Index (CPI-U) and rounded to the nearest $1,000; adjustments apply to tax periods that begin after the change.
• Property, payroll, and sales are defined with specific counting rules (e.g., how property value is calculated, how payroll is measured, and how sales are counted and allocated across states).
• Special rules for pass-through entities: threshold amounts are determined at the entity level; if exceeded, members or owners are taxed on their share of income in this state.
• Commonly owned enterprises can aggregate property, payroll, and sales to determine nexus, with joint information returns required and intercompany transaction adjustments to avoid double counting; unitary business group rules may apply.
• Public Law 86-272 protections are preserved, limiting nexus for certain protections and outlining throwback implications if those protections change; implications outlined if Congress repeals 86-272 applicability.
• Effective for tax years beginning after December 31, 2012.

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