HB286 Summary

• Amends Alabama income tax law to allow resident individual owners of Subchapter K entities and Alabama S corporations to claim credits for income or gross profits taxes paid to other states or territories on out-of-state business income.

• Extends tax credits to resident beneficiaries of estates and trusts for their proportionate share of state and territorial taxes paid on entity income from outside Alabama, regardless of whether the entity itself was recognized as a pass-through entity by the other jurisdiction.

• Provides a 50% credit for proportionate share of foreign income taxes paid on trade, business, or investment income by these entities, limited to sectors related to manufacturing, mining, and petroleum-related industries, not to exceed Alabama tax owed on foreign-source income.

• Requires the Department of Revenue to report annually to the Legislature on foreign tax credits claimed, including number of taxpayers and total credit amounts, due by the fifth legislative day of each regular session.

• Establishes retroactive application to tax years beginning after December 31, 2010 for state and territorial credits and December 31, 2011 for foreign credits, with no penalties for retroactive adjustments.