HB419 Alabama 2019 Session

Summary

Primary Sponsor

Kyle South

Republican

Session

Regular Session 2019

Title

Taxation, Financial Institution Excise Tax Reform Act of 2019, tax procedure further provided, Secs. 40-16-1, 40-16-3, 40-16-6 am'd.

Summary

HB 419 rewrites Alabama's financial institution excise tax by adding an estimated payment system, updating net income rules, and moving county and municipal tax distributions to quarterly, population-based allocations.

What This Bill Does

Creates the Financial Institution Excise Tax Reform Act of 2019, establishing a prepaid estimated tax system and transitioning from the old post-payment approach. It updates how net income is calculated by adding and deducting items tied to federal tax rules, clarifies treatment for credit unions and Captive REITs, and aligns or clarifies certain rules related to deductions and credits. It overhauls how tax receipts are distributed to counties and municipalities, moving to quarterly distributions with transitional formulas that gradually shift to a population-based method by 2023, while preserving some limitations on local taxes.

Who It Affects

• Financial institutions operating in Alabama: must compute net income under new rules, file estimated payments, and follow updated deductions, additions, and transitional provisions (including NOL carryforwards and new reporting requirements).
• Counties and municipalities: will receive state excise tax distributions under a revised quarterly formula, with transitional sharing rules that change how revenue is allocated over time.

Key Provisions

• Establishes the Financial Institution Excise Tax Reform Act of 2019 and amends multiple code sections (40-16-1, 40-16-3, 40-16-6) while adding new sections (40-16-1.2, 40-16-1.3, 40-16-5.1, 40-16-10, 40-16-11).
• Creates a prepaid estimated tax payment system and transitions from the previous post-payment system, with penalties and interest waived for underpayments in the first two years (Section 40-16-11).
• Alters net income calculations by adding/deducting items to align with federal tax rules (40-16-1.2, 40-16-1.3) and clarifies treatment for captives, dividends, interest, and related deductions; retains certain rejections of TCJA limitations (via Section 40-16-11).
• Extends net operating loss carryforwards to 15 tax years and sets ordering rules for applying losses among group members (Section 40-16-10).
• Reforms the distribution of excise tax revenue to counties and municipalities: quarterly distributions with transitional formulas (20%-75%-25% etc. by year), moving to 100% population-based distributions starting in 2023 (Section 40-16-6 and related sections).
• Repeals Section 40-16-5 and includes related provisions for reporting, penalties for failure to file, and restrictions on local license taxes to align with the new framework.

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