SB497 Summary

• Establishes a factor presence nexus standard for income tax in Alabama by adding Section 40-18-31.2 to the Code of Alabama, effective for tax years beginning after December 31, 2014.

• Deems resident individuals and in-state organized business entities to have substantial nexus automatically; nonresident individuals and out-of-state businesses have nexus when property, payroll, or sales exceed $50,000 for property or payroll, $500,000 for sales, or 25 percent of total property, payroll, or sales during the tax period.

• Requires the commissioner to adjust nexus thresholds annually based on consumer price index changes of 5 percent or more since January 1, 2015, with adjustments rounded to the nearest $1,000 and applying to subsequent tax periods.

• Defines property, payroll, and sales thresholds, including valuation methods for owned and rented property, compensation paid to employees in the state, and gross receipts from various transaction types within Alabama.

• Preserves Public Law 86-272 protections preventing Alabama from taxing out-of-state businesses covered by federal law, even if property, payroll, or sales exceed thresholds.