HB109 Alabama 2020 Session

Summary

Primary Sponsor

Danny GarrettRepresentative

Republican

Session

Regular Session 2020

Title

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

Summary

HB 109 would create the Alabama Research and Development Tax Credit program to encourage in-state R&D by providing credits for qualified expenses, with annual caps, transferability, and reporting requirements.

What This Bill Does

It creates a tax credit for qualified research expenses conducted in Alabama, including in-house, contract, and consortium research. The credit is calculated as 10% of in-house and contract expenses (minus a rolling three-year average) plus 25% of consortium expenses (minus a rolling three-year average). There are annual caps: $20 million for major (>= $5 million in expenses) and $5 million for minor (< $5 million) with any single taxpayer limited to no more than 20% of the total credits in a year. Unused credits can be carried forward up to five years and credits offset the state income tax (Chapters 16 and 18) but not the municipal distributions; credits can be transferred to other entities, and there are reporting and rule-making steps, with a sunset in 2025 and effective date for tax years starting January 1, 2021.

Who It Affects

• Alabama-based companies and research entities that conduct qualified research in Alabama (in-house, contracted, or consortium) and may claim the credit against their Alabama state income tax.
• Taxpayers and other entities that participate in credit transfers (transferors and transferees), who must use the transfer process, pay transfer fees, and receive or issue tax credit certificates.

Key Provisions

• Creates the Alabama Research and Development Act and allows a tax credit for qualified research expenses conducted in Alabama (in-house, contract, and consortium).
• Defines major and minor R&D expenses: major if over $5 million in a year; minor if under $5 million.
• Credit formula: 10% of in-house and contract research expenses (minus a 3-year average) plus 25% of consortium research expenses (minus a 3-year average).
• Caps: up to $20 million in major R&D credits and up to $5 million in minor R&D credits per calendar year; no taxpayer may claim more than 20% of the total credits in a single tax year.
• Credit offsets the state income tax (Chapters 16 and 18) and estimated payments, but not before January 1, 2021; does not affect certain municipal financial institution distributions.
• Carryforward: Unused credits may be carried forward up to five years.
• Transferability: Credits may be transferred to another taxpayer; transfer forms, documentation, and a $1,000 transfer fee per transferee; the Department issues transfer certificates to transferees.
• Administration and reporting: Department to issue rules; annual informational reporting starting in 2022; confidentiality protections for individual taxpayer data.
• Coordination with federal research credit: Credits to coordinate with the federal §41 (R&D) credit.
• Sunset and effectiveness: Program sunsets December 31, 2025; effective for tax years beginning on or after January 1, 2021.

AI-generated summary using openai/gpt-5-nano on Feb 22, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Taxation