SB497 Alabama 2015 Session

Summary

Primary Sponsor

Greg AlbrittonSenator

Republican

Session

Regular 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

SB497 creates a factor presence nexus standard for Alabama income tax based on property, payroll, and sales, with unitary and commonly owned enterprise rules.

What This Bill Does

It establishes a nexus test where Alabama residents and in-state entities have substantial nexus, and out-of-state or nonresident entities have nexus only if their Alabama property, payroll, or sales exceed set thresholds ($50,000 property, $50,000 payroll, $500,000 sales, or 25% of total). Thresholds are adjusted annually for inflation using the CPI-U and applied to tax periods after adjustment. It also defines how property, payroll, and sales are counted, sets rules for pass-through entities and unitary groups, and includes a 86-272 carveout language.

Who It Affects

• Alabama residents and in-state businesses (organized or domiciled in Alabama) would have substantial nexus and be subject to Alabama income tax under the new standard.
• Nonresident individuals and out-of-state businesses doing business in Alabama would have substantial nexus and be subject to Alabama income tax only when their Alabama property, payroll, or sales exceed the specified thresholds.

Key Provisions

• Provision 1: Establishes the factor presence nexus standard for income tax, with residents in-state and nonresidents/out-of-state entities subject to nexus rules based on in-state activity and defined thresholds.
• Provision 2: Provides detailed definitions for property, payroll, and sales, outlines how these amounts are calculated and counted (including CPI adjustments, unitary/grouping rules, pass-through entity treatment, and the 86-272 carveout).

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