HB353 Alabama 2020 Session

Sponsors

Session

Regular Session 2020

Title

Corporate income tax rate and financial institution excise tax rate, decreased, apportionment factor for corporate income tax rates revised, State income tax decoupled from fed. Tax Cuts and Jobs Act, electing pass-through entities, taxed at entity level, Ala. Business Tax Competitiveness Act, Secs. 40-16-1.2, 40-16-4, 40-18-31, 40-18-34, 40-18-35, 40-27-1 am'd.

Description

Under existing law, financial institutions are taxed at a rate of six and one-half percent of net income and allowed to deduct federal income taxes paid or accrued during the taxpayer’s tax year

Under existing law, corporate income taxpayers are taxed at a rate equal to six and one-half percent of taxable income and allowed to deduct federal income taxes paid or accrued within the year

Under existing law, the apportionment factor for most corporate income taxpayers is calculated using a three-factor apportionment formula, with the sales factor double-weighted

The 2017 federal Tax Cuts and Jobs Act eliminated or limited business deductions and created new classes of income for corporate income taxpayers. Since Alabama is a rolling conformity state, Alabama automatically conforms to many of the federal tax changes without new legislation

This bill would decrease the financial institution excise tax rate but eliminate the deduction for federal income taxes paid or accrued during the taxpayer’s tax year

This bill would decrease the income tax rate for corporations but eliminate the federal income tax deduction for corporate income taxpayers

This bill would change the apportionment factor for most corporate income taxpayers from a three-factor apportionment formula, with the sales factor double-weighted, to a single sales factor formula

For tax years beginning on or after January 1, 2020, this bill would decouple Alabama income tax from the provisions of the Tax Cuts and Jobs Act related to contributions to the capital of a corporation attributable to state economic development grants and incentives and global intangible low-tax income and would make changes to how a corporation limits its business interest expense deduction

This bill would also provide for an Electing Pass-Through Entity to be taxed at the entity level instead of its owners, members, partners, or shareholders

Relating to corporate income tax and financial institution excise tax; to amend Sections 40-16-1.2, 40-16-4, 40-18-31, 40-18-34, 40-18-35, and 40-27-1, Code of Alabama 1975; to decrease the financial institution excise tax rate and the corporate income tax rate, to repeal the deduction for federal income taxes paid or accrued during the taxpayer’s tax year for financial institution excise taxpayers and corporate income taxpayers, and to change the apportionment factor for most corporate income taxpayers from a three-factor apportionment formula with a double-weighted sales factor to an apportionment formula based on a single sales factor; to decouple Alabama income tax from provisions of the federal Tax Cuts and Job Act related to contributions to the capital of a corporation attributable to state economic development grants and incentives and global intangible low-tax income and to change how a corporation limits its business interest expense deduction; to provide that an Electing Pass-Through Entity shall be taxed at the entity level instead of its owners, members, partners, or shareholders; and to provide an effective date.

Subjects

Taxation