SB250 Summary: The Alabama Business Tax Competitiveness Act

• Reduces corporate and financial institution tax rates: Decreases the corporate income tax rate from 6.5% to 4.75% and the financial institution excise tax rate from 6.5% to 4.75%, effective for tax years beginning January 1, 2021 (pending constitutional amendment ratification).

• Eliminates federal income tax deduction: Repeals the deduction for federal income taxes paid or accrued for both corporate income taxpayers and financial institution excise taxpayers.

• Changes apportionment formula: Shifts from a three-factor apportionment formula with double-weighted sales factor to a single sales factor formula for most corporate income taxpayers.

• Decouples from federal tax law: For tax years beginning January 1, 2020, Alabama income tax decouples from certain 2017 federal Tax Cuts and Jobs Act provisions related to capital contributions from state economic development grants and global intangible low-tax income, and modifies business interest expense deduction limitations.

• Creates Electing Pass-Through Entity option: Allows Alabama S corporations and Subchapter K entities to elect entity-level taxation at 3.95% rate (beginning 2021), with owners/members not liable for individual income tax on their distributive shares.