SB250 Alabama 2020 Session

Summary

Primary Sponsor

Dan RobertsSenator

Republican

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.

Summary

SB250 lowers Alabama business taxes for corporations and financial institutions, shifts to a single-sales-factor apportionment, creates an Electing Pass-Through Entity taxed at the entity level, and adopts the Multistate Tax Compact to coordinate multistate taxation.

What This Bill Does

The bill reduces the financial institution excise tax rate to 4.75% and ends the federal income tax deduction for those taxes. It also lowers the corporate income tax rate to 4.75% and ends the federal income tax deduction for corporate taxpayers. It moves from a three-factor apportionment with the sales factor double-weighted to a single sales-factor formula. It creates an Electing Pass-Through Entity taxed at the entity level (3.95% rate) and adopts the Multistate Tax Compact to align Alabama tax rules with other states and provide arbitration for disputes; it also decouples Alabama from certain federal tax changes and adjusts related rules, with specific effective dates.

Who It Affects

• Financial institutions operating in Alabama, which would face a lower excise tax rate and lose the federal income tax deduction.
• Corporations and electing pass-through entities (and their owners) in Alabama, who would see a lower corporate tax rate or entity-level tax for pass-throughs, a switch to a single-sales-factor apportionment, and new rules related to federal tax deductions and cross-state credits.

Key Provisions

• Decrease the financial institution excise tax rate to 4.75% of net income and repeal the deduction for federal income taxes paid or accrued.
• Decrease the corporate income tax rate to 4.75% of taxable income and repeal the federal income tax deduction for corporate taxpayers.
• Change the apportionment method for corporate income taxpayers from a three-factor formula with the sales factor double-weighted to a single sales factor.
• Decouple Alabama income tax from certain federal Tax Cuts and Jobs Act provisions (including contributions to state development grants/incentives and global intangible low-tax income) and modify the rules governing the business interest expense deduction.
• Provide for an Electing Pass-Through Entity to be taxed at the entity level at 3.95% of taxable income, with corresponding credits and governance rules, and protections for owners not being taxed on pass-through income.
• Adopt the Multistate Tax Compact to harmonize multistate tax rules, establish arbitration for apportionment disputes, and set related administrative procedures.
• Set effective dates: most provisions take effect for tax years beginning in 2020; the corporate and financial institution rate changes and federal tax deduction repeal take effect for tax years beginning in 2021; no refunds are provided for years ending before 2020.

AI-generated summary using openai/gpt-5-nano on Feb 23, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Taxation