HB263 Alabama 2017 Session

Summary

Primary Sponsor

Ken Johnson

Republican

Session

Regular Session 2017

Title

Taxation, financial institutions excise tax, formula for apportioning income from business activity inside and outside state, loans and credit cards receivables included as property in this state, Sec. 40-16-4 am'd.

Summary

HB263 adds loans and credit card receivables to the state property factor for the financial institutions excise tax, with rules to implement this starting in 2017.

What This Bill Does

The bill changes how net income is allocated for financial institutions with income taxed both inside and outside Alabama by counting loans and credit card receivables as part of Alabama property for apportionment. It requires the Department of Revenue to issue implementing rules within 120 days, using the same sourcing methods as for interest receipts. The rules would apply to tax years beginning on or after January 1, 2017, and a later conditional provision allows Alabama to align with other states’ practices if certain criteria are met by 2030; any such rule would be effective for tax years beginning 120 days after its effective date.

Who It Affects

• Financial institutions operating in Alabama that have income taxed both inside and outside the state (e.g., banks and credit card issuers); their state-based property for apportionment will now include loans and credit card receivables.
• Alabama Department of Revenue, which must promulgate and implement new rules governing the apportionment method.
• Shareholders and parent companies of financial institutions, who may see changes in excise tax liability due to the new apportionment treatment.

Key Provisions

• Loans and credit card receivables are included as part of the financial institution's property in the state for the purposes of the apportionment formula.
• The apportionment rules may allocate net income based, at least in part, on the institution's property in the state and must source receivables to Alabama using the same methods used for sourcing interest receipts.
• The excise tax remains at 6.5% of net income allocated and apportioned for the taxable year (subject to federal limits and dividend exemptions to common parent corporations).
• The Department of Revenue has 120 days to promulgate rules consistent with the act, with rules effective for tax years beginning on or after January 1, 2017.
• If by December 31, 2030 the department certifies that most states require property-based allocation excluding receivables, Alabama will adopt a rule consistent with those states, effective for tax years beginning 120 days after the rule's effective date.

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