HB424 Alabama 2019 Session

Summary

Primary Sponsor

Joe LovvornRepresentative

Republican

Session

Regular Session 2019

Title

Taxation, Alabama Innovation Act, tax credit for qualified research expenses, provided, Secs. 40-18-470 to 40-18-475, inclusive, added.

Summary

HB 424 creates the Alabama Innovation Act to offer a capped in-state R&D tax credit for qualified research expenses, modeled after the federal credit, with strict annual and per-tayer limits.

What This Bill Does

This bill creates an Alabama innovation tax credit for qualified research performed in Alabama (in-house, contract, and consortium research). The credit is 10% of in-house and contract research expenses (adjusted by subtracting 50% of the three-year average) plus 25% of consortium research expenses (also adjusted by 50% of the three-year average), and it can offset state income tax or the financial institution excise tax. The total credits are capped at $25 million per calendar year, and no single taxpayer may claim more than $2 million in a year; approvals are first-come, first-served with pro rata reductions if demand exceeds the cap. Unused credits can be carried forward up to five years; credits are transferable only if the taxpayer is fully transferred, and credits do not reduce municipal or county distributions.

Who It Affects

• Alabama-based companies that perform or pay for qualified research in Alabama (in-house, contract with Alabama providers, or consortium research) and their state tax liability.
• Alabama research entities and affiliated institutions (universities, university research foundations, public colleges, publicly-owned hospitals, and similar nonprofits) that conduct eligible research in Alabama or receive consortium research payments, supporting the activities that generate credits.

Key Provisions

• Establishes the Alabama Innovation Act and a new integrated framework for an R&D tax credit.
• Defines Alabama Research Entities, Approved Activity, Consortium Research Expenses, Contract Research Expenses, In-House Research Expenses, and Qualified Research with reference to federal definitions and state-specific limits.
• Credit structure: 10% of in-house and contract research expenses (adjusted by 50% of the 3-year average) plus 25% of consortium research expenses (adjusted similarly).
• Credits may offset the state income tax or the financial institution excise tax, with ordering rules regarding other credits and timing of estimated payments.
• Caps: up to $25 million of credits per calendar year; individual taxpayer cap of $2,000,000; first-come, first-served allocation with pro rata distribution if the cap is reached.
• Carryforward of unused credits for up to five years; transferability only when the entire taxpayer is transferred; credit use affects related deductions and state tax liability only.
• Restrictions: credits do not reduce municipal or county distributions; credits must be documented with department certificates and documentation; no credit claimed on amended returns beyond what was initially claimed unless approved as conditional deny/approval.
• Administration and rules: Departments of Revenue and Commerce issue implementing rules and forms; annual informational reporting starting 2021; data confidentiality and legislative reporting.
• Effective date and sunset: effective for tax years beginning January 1, 2020, with a sunset date of December 31, 2024.

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