HB304 Alabama 2015 Session

Summary

Primary Sponsor

Phil Williams

Republican

Session

Regular Session 2015

Title

Innovation Act, established, tax credits for qualified research expenses, authorized under certain conditions, tax credits authorized to offset certain taxes under certain conditions, to further provide for the allocation and transferability of certain tax credits under certain conditions, Sec. 40-18-390 added

Summary

The Alabama Innovation Act creates a state tax credit program to reward qualified research done in Alabama, with caps and transfer rules to encourage R&D.

What This Bill Does

It establishes a research and development tax credit for qualified research expenses in Alabama, modeled on the federal credit. The credit is 25 percent of consortium research expenses and 5 percent of in-house or contract research expenses, each calculated after subtracting three-year averages. The credit can offset Alabama income tax or the financial institution excise tax, can be carried forward for up to five years, and is subject to a $10 million annual cap and a $2 million per taxpayer limit, allocated on a first-come, first-served basis. The act also allows for allocation and transfer of credits under economic development project agreements, with rules to govern transfers, certificates, and compliance, and requires forms and regulations to implement the program beginning January 1, 2016.

Who It Affects

• Alabama-based companies that perform qualified research in Alabama (in-house, consortium, or contract arrangements) who could claim credits against their state taxes, subject to annual caps and the Department of Revenue’s allocation process.
• Alabama research entities and eligible institutions (universities, hospital systems, and certain 501(c)(3) research organizations) that conduct approved research activities and may participate in consortium efforts or receive credits through project agreements.

Key Provisions

• Enacts the Alabama Innovation Act and creates Article 17 to authorize the R&D tax credits.
• Defines eligible recipients (Alabama Research Entity) and approved activities (specific industries and state economic development targets) for the credits.
• Credit structure: 5% of in-house and contract research expenses plus 25% of consortium research expenses conducted in Alabama, each net of a 3-year average.
• Cap and allocation: maximum $10 million in credits per year; no more than $2 million per taxpayer; first-come, first-served allocation with pro rata reductions if cap is reached; carryforward up to five years.
• Transferability and project agreements: credits may be allocated or transferred under state-approved economic development project agreements with required contracts and certificates; transfers have restrictions and must be properly reported.
• Offset and compliance: credits may offset certain state taxes (income tax and financial institution excise tax); not allowed to reduce estimated payments before Oct 1, 2016; credits reduce eligible deductions and require promulgation of forms/regulations; credits are not securities.
• Effective date: January 1, 2016.

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