HB244 Alabama 2021 Session

Summary

Primary Sponsor

Danny GarrettRepresentative

Republican

Session

Regular Session 2021

Title

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

Summary

HB244 creates the Alabama Research and Development Act, offering a new state tax credit for qualified R&D conducted in Alabama.

What This Bill Does

It provides a tax credit for in-house, contracted, and consortium research expenses conducted in Alabama. The total credits available each calendar year are capped at $20 million for major R&D expenses and $5 million for minor R&D expenses, and no single taxpayer may claim more than 20% of the annual credits. The credit amounts are 10% of in-house and contract research (net of a three-year average) plus 25% of consortium research (net of a three-year average), and credits can offset Alabama state income taxes but not exceed the taxpayer’s liability; unused credits can be carried forward up to five years. The bill also sets application procedures, reporting requirements, sunset date, and effective date, along with rules for coordination with federal credits and other tax provisions.

Who It Affects

• Alabama companies that perform qualified research in Alabama: eligible to claim a credit against state taxes for in-house, contract, and consortium research, subject to annual caps and the 20% per-year limit per taxpayer.
• Pass-through entities (e.g., partnerships, LLCs) and their owners: credits pass through pro rata to partners or members.
• ALABAMA RESEARCH ENTITYs (universities, university foundations, publicly owned hospitals, certain eligible non-profit research entities): may engage in qualified activities and be part of eligible research expenses.
• Alabama Department of Revenue and related state agencies: administer the credit, handle applications and certifications, and enforce reporting and confidentiality requirements.

Key Provisions

• Establishes the Alabama Research and Development Act and a state R&D tax credit for qualified research conducted in Alabama.
• Defines eligible research expenses (in-house, contract, consortium) and qualifying entities (ALABAMA RESEARCH ENTITY).
• Credit calculation: 10% of in-house and contract research expenses minus a 3-year average; plus 25% of consortium research expenses minus a 3-year average.
• Annual caps: $20 million for major R&D expenses and $5 million for minor R&D expenses; no taxpayer may claim more than 20% of the annual credits; pro rata allocation if applications exceed caps.
• Use of credit: may offset the state income tax liability; no deduction for associated expenses if the credit is used; credits apply to the state portion and do not affect municipal distributions.
• Carryforward and transfer: unused credits may be carried forward up to five years; credits for pass-through entities pass through to owners; certain transfer restrictions apply.
• Administration and timing: applications accepted March 15 to December 31 for the tax year; credits issued as certificates after qualification; reporting requirements begin in 2023; sunset date of December 31, 2026; effective for tax years beginning on or after January 1, 2022.

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