HB187 Alabama 2024 Session

Summary

Primary Sponsor

David FaulknerRepresentative

Republican

Session

Regular Session 2024

Title

Income tax, due date for electing pass-through to make election extended

Summary

HB187 extends the election deadline for Alabama electing pass-through entities to match the return due date (including extensions) starting in 2024 and clarifies ongoing election timing and tax effects.

What This Bill Does

The bill requires electing pass-through entities (AL S corporations and subchapter K entities) to file their election by the due date of the applicable income tax return, including extensions, for tax years beginning in 2024 and later. Starting in 2025, the election or revocation must be made on the timely filed return (including extensions). The election remains in effect until revoked by filing in a later year, with both actions needing approval from the entity's governing body and owners controlling more than 50% of voting power. It also specifies the tax treatment of these entities, including that the entity pays tax at the highest rate, the tax is not deductible from the entity’s taxable income, owners are not personally liable, and the election does not trigger liquidation or a taxable event.

Who It Affects

• Electing pass-through entities (Alabama S corporations and subchapter K entities) that choose to be taxed as electing pass-through entities, who must file the election by the new due date on or before the return deadline (including extensions) for 2024 and beyond.
• Owners, members, partners, or shareholders with more than 50% voting control of the electing pass-through entity, who must approve both the initial election and any revocation along with the entity’s governing body.
• The Alabama Department of Revenue, which administers the election process and may adopt rules to implement the act.

Key Provisions

• Extends the election due date for tax years beginning January 1, 2024, to the due date of the applicable Alabama income tax return, including extensions.
• From tax years beginning January 1, 2025, the election or revocation must be made on the timely filed return, including extensions.
• Election and revocation require a vote or written consent of the entity’s governing body and owners holding more than 50% of voting control, within the prescribed time.
• The election binds for the current year and all subsequent years unless revoked following the same voting process and deadlines.
• The electing pass-through entity pays tax at the highest marginal rate applicable, with the tax not deductible in calculating Alabama taxable income, and owners are not personally liable for the entity’s tax.
• Not a liquidation or taxable event; adjusted basis of owners in the entity is not affected by the election.
• No refunds are provided for tax years ending before January 1, 2020 related to Act 2021-1.
• The Department of Revenue may adopt rules to implement and administer the act.
• The act becomes effective immediately upon passage and approval by the Governor.

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 & Revenue