SB122 Alabama 2014 Session

Summary

Primary Sponsor

Arthur OrrSenator

Republican

Session

Regular Session 2014

Title

Taxation, limited state income tax credit for qualified research expenses under certain conditions

Summary

SB122 creates a new Alabama state income tax credit for qualified research expenses conducted in Alabama, with extra incentives for work done at state universities or certain research institutes, plus a refundable option for small employers under cap limits.

What This Bill Does

The bill establishes a state tax credit against Alabama income tax for qualified research expenses incurred in Alabama, modeled after the federal R&D credit, and adds an enhanced incentive if basic research payments go to certain Alabama institutions. The credit amount is calculated from the excess of qualified expenses over a base amount plus basic research payments, with a tiered percentage and a special higher trigger for large amounts, plus an additional 25% credit for basic research payments to specified Alabama institutions. There are annual caps on total credits, rules for proportionate sharing among multiple taxpayers, carryforwards for unused credit, and a refundable option for small employers, along with conversion of pre-2015 research expense carryforwards into credit carryforwards; the program becomes effective for tax years beginning in 2015.

Who It Affects

• Businesses and pass-through entities with qualified research expenses in Alabama, who could claim a state income tax credit (including a potential refundable portion for small employers).
• Taxpayers who pay basic research funds to Alabama public universities, university research foundations, Hudson Alpha Institute, or the Southern Research Institute, who could receive an additional 25% credit on the excess of those payments.

Key Provisions

• Creates a new state tax credit for qualified research expenses conducted in Alabama, with higher incentives if basic research payments go to certain Alabama institutions.
• Credit calculation mirrors IRC Section 41: credit equals 15% of the sum of (a) excess QRE over base amount and (b) basic research payments, with a maximum/step-down structure (up to 2.5M threshold; then 600,000 plus 15% of amount over 2.5M).
• An additional 25% credit is allowed for basic research payments to specified Alabama entities (public universities, foundations, Hudson Alpha, Southern Research Institute) on excess BRP over the base period, limited to actual BRP or Department of Revenue certification.
• Annual aggregate credit caps: 2.5M for 2015-2016; 3.5M for 2017-2018; 5.0M for 2019 onward; credits are certified in priority by filing date and denied if the limit would be exceeded.
• Qualified research must occur in Alabama and be paid by the taxpayer; if multiple taxpayers share expenses, each gets a proportionate share.
• Credits for expenses incurred after January 1, 2015; termination provisions of IRC 41 do not apply.
• Carryforward of unused credit is allowed for up to five years; pre-2015 QREs are converted to credit carryforwards at 20% and can be carried forward five years.
• Refund option for small employers (fewer than 150 employees) in 2015: if credit exceeds tax liability or no tax due, can elect to receive a refund for up to 75% of the excess, with remainder waived; administered by Department of Commerce, and aggregate refundable credits capped (1.0M for 2015-2016; 1.5M for 2017-2018; 2.0M for 2019+).
• Effective for tax years beginning January 1, 2015, after governor approval or enactment.

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