HB390 Alabama 2016 Session

Summary

Primary Sponsor

Chris PringleRepresentative

Republican

Session

Regular Session 2016

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 to 40-18-394, inclusive, added

Summary

HB390 would create the Alabama Innovation Act, establishing state tax credits to encourage qualified research in Alabama, modeled after the federal credit.

What This Bill Does

It creates an innovation tax credit for qualified research conducted in Alabama. The credit is 10% of in-house and contract research expenses and 25% of consortium research expenses, each minus 50% of the same expenses averaged over the previous three years. The credit can offset Alabama income tax or the financial institution excise tax, may be carried forward five years, and is capped at $25 million per year with no single taxpayer able to claim more than 20% of annual credits. Credits are allocated on a first-come, first-served basis and may be transferable to another entity; rules will coordinate with the federal credit, and related expense deductions are disallowed when the credit is used.

Who It Affects

• Alabama businesses that perform qualified research (in-house, contract, or consortium) and have Alabama tax liability
• Alabama research entities (universities, university foundations, hospitals, and other eligible research-focused organizations) that conduct qualified research in Alabama
• Taxpayers who may transfer or assign their credits to another entity
• State agencies (Department of Revenue and Department of Commerce) that administer and regulate the credit

Key Provisions

• Establishes the Alabama Innovation Act as Article 17 in Chapter 18 of Title 40, defining terms like Alabama Research Entity, Approved Activity, Consortium Research Expenses, Contract Research Expenses, In-House Research Expenses, and Qualified Research
• Credit amounts: 10% of in-house and contract research expenses for qualified research in Alabama, minus 50% of those expenses averaged over the prior three years; 25% of consortium research expenses for qualified research in Alabama, minus 50% of those expenses averaged over the prior three years
• Annual cap of $25,000,000 in total credits, with no taxpayer receiving more than 20% of the annual credits
• Carryforward of unused credits for up to five years
• Credits may be assigned or transferred to another entity if substantially all assets are transferred; transfer must be documented to the Department
• Credits offset taxes (income tax or financial institution excise tax); deduction for related expenses is disallowed when the credit is used; credits must apply after other state credits
• Administration and rules: Department of Revenue and Department of Commerce will promulgate rules and manage applications; electronic filing; first-come, first-served allocation with pro rata distribution if cap is reached; coordination with the federal research credit
• Effective date: January 1, 2017; repeal of conflicting laws; forms and procedures established for filings

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