HB548 Alabama 2014 Session

Summary

Primary Sponsor

Rod Scott

Democrat

Session

Regular Session 2014

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

HB548 would create a factor presence nexus standard for Alabama income tax and adopt the Multi-State Tax Commission’s rules to determine when a taxpayer has Alabama tax obligations.

What This Bill Does

The bill adds a formal factor presence nexus standard for income tax. Residents and Alabama-organized entities have substantial nexus; nonresidents and out-of-state entities doing business in Alabama have substantial nexus if their property, payroll, or sales in the state meet certain thresholds. Thresholds are $50,000 in property, $50,000 in payroll, $500,000 in sales, or 25% of total property/payroll/sales, and they are adjusted annually using CPI-U if CPI has changed by 5% or more since 2014. It also sets counting rules for property, payroll, and sales and creates aggregation rules for commonly owned enterprises and unitary groups, including how passthrough income is taxed when nexus is met.

Who It Affects

• Group 1: Alabama residents and in-state entities (organized or domiciled in Alabama) would have substantial nexus and may owe Alabama income tax based on their property, payroll, and sales in the state.
• Group 2: Nonresident individuals and out-of-state businesses doing business in Alabama (and their passthrough members or unitary groups) would have nexus and owe tax if they exceed the thresholds or are part of a unitary enterprise meeting thresholds.

Key Provisions

• Establishes a factor presence nexus standard for income tax by adding Section 40-18-31.2.
• Adopts the Multi-State Tax Commission nexus standard for determining nexus.
• Sets nexus thresholds: $50,000 property, $50,000 payroll, $500,000 sales, or 25% of total property/payroll/sales, with CPI-based adjustments.
• Defines how property, payroll, and sales are counted and sets rules for aggregation among commonly owned enterprises and unitary business groups, including joint returns and pass-through taxation.
• Includes provisions related to pass-through entities, commonly owned enterprises, unitary groups, and Public Law 86-272 considerations; specifies effective date (three months after passage and governor approval) and severability.

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