HB429 Summary

• Establishes a factor presence nexus standard requiring nonresident individuals and out-of-state businesses doing business in Alabama to have substantial nexus when property, payroll, or sales exceed thresholds of $50,000 (property or payroll) or $500,000 (sales), or 25% of total property, payroll, or sales.

• Requires Alabama residents, domiciliaries, and in-state organized business entities to automatically have substantial nexus and be subject to income tax under Chapters 14A, 16, and 18 of Alabama Code.

• Authorizes the tax commissioner to adjust thresholds annually based on Consumer Price Index changes of 5% or more since January 1, 2012, with adjustments rounded to nearest $1,000 and applying to tax periods beginning after adjustment.

• Defines property, payroll, and sales for nexus purposes, including property valuation methods, compensation paid to employees in the state, and gross receipts from in-state transactions including services, intangibles, and digital products.

• Preserves federal Public Law 86-272 protections preventing Alabama from taxing certain out-of-state businesses lacking physical presence, and becomes effective for tax years beginning after December 31, 2012.