HB240 Summary

• Modifies Alabama income tax law to require resident individuals who are partners, members, S corporation shareholders, or estate/trust beneficiaries to include their proportionate share of pass-through entity income in gross income, regardless of whether income is earned within or outside Alabama.

• Provides resident owners and beneficiaries a tax credit for their proportionate share of income or gross profits taxes paid by the entity to other states or territories, including taxes paid due to withholding obligations or entity-level taxes.

• Allows resident owners and beneficiaries a credit equal to 50% of proportionate share of income taxes paid to foreign countries, limited to taxes on trade, business, or investment income in specific industry sectors (North American Industry Classification System Sector 21 and at least two of Subsectors 324, 325, 482, 483, and 486).

• Requires the Department of Revenue to report annually to the Legislative Council on the number of taxpayers claiming foreign country tax credits and total credits claimed.

• Applies to tax years beginning after December 31, 2010 (for state/territory credits) and after December 31, 2011 (for foreign country credits), with transitional relief for transactions negotiated before January 1, 2011.