SB39 Alabama 2015 1st Special Session

Summary

Primary Sponsor

Vivian Davis FiguresSenator

Democrat

Session

First Special Session 2015

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. 40-18-31.2 added

Summary

SB39 would create a factor presence nexus standard for Alabama income tax, taxing in-state residents and businesses as well as certain out-of-state entities based on Alabama property, payroll, and sales.

What This Bill Does

SB39 adds a factor presence nexus rule for income tax. It says residents and Alabama-formed businesses have substantial nexus, and nonresidents or out-of-state entities have nexus if their Alabama property, payroll, or sales exceed specific thresholds ($50,000 in property or payroll, $500,000 in sales, or 25% of total). Thresholds can be adjusted annually for inflation using CPI, with changes applying to later tax periods. The bill also explains how property, payroll, and sales are counted, how multi-state activity is allocated, and how nexus works for commonly owned enterprises and unitary business groups; if nexus exists, those entities and their owners may owe Alabama income tax.

Who It Affects

• Group 1: Alabama residents and businesses organized or domiciled in Alabama would be considered to have substantial nexus and would be subject to Alabama income tax.
• Group 2: Nonresidents and out-of-state businesses that do business in Alabama (including members of pass-through entities and commonly owned enterprises/unitary groups) would owe Alabama income tax if their Alabama property, payroll, or sales meet the thresholds or if aggregation shows nexus.

Key Provisions

• Adds Section 40-18-31.2 to establish a factor presence nexus for income tax.
• Nexus thresholds: $50,000 in property, $50,000 in payroll, $500,000 in sales, or 25% of total property/payroll/sales in Alabama during the tax period.
• Inflation adjustments: thresholds are increased annually based on the Consumer Price Index (CPI) and apply to tax periods after the adjustment.
• Counting rules: defines how property, payroll, and sales are counted and valued (including owned vs. leased property, how payroll is determined, and how sales receipts are counted and allocated when activity occurs in multiple states).
• Commonly owned enterprises and unitary groups: requires aggregation and joint information returns; if thresholds are met, the enterprise group files and the affected unitary groups owe tax on income earned in Alabama.
• Public Law 86-272 and jurisdiction: notes limitations on taxing certain entities under 86-272 and how repeal would affect nexus thresholds.
• Effective date: applies to tax years beginning after December 31, 2014.

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