Ala. Code § 40-18-376

Current through the 2024 Regular Session.

Section 40-18-376 - Investment credit; realization methods; rulemaking authority

(a) If provided for in the project agreement, the incentivized company is allowed an investment credit in an annual amount [up to 1.5 percent of the capital investment incurred as of the beginning of the incentive period, to be used as follows:

(1) To offset the income taxes found in this chapter, or as an estimated tax payment of income taxes;

(2) To offset the financial institution excise tax found in Chapter 16;

(3) To offset the insurance premium tax levied by Section 27-4A-3(a), or as an estimated payment of insurance premium tax;

(4) To offset utility taxes;

(5) To offset state license taxes levied by Article 2 of Chapter 21; or

(6) To offset some combination of the foregoing, so long as the same credit is used only once.

The incentive period shall begin no earlier than the placed-in-service date. The incentive period shall [ not exceed 10 years. [

(b) A project agreement may specify any one or more of the following methods by which the investment credit shall be realized by the incentivized company, so long as a credit is not utilized more than once:

(1)

a. The investment credit may be claimed as a credit against the taxes in subsection (a) that are actually paid. In any one year, if the credit exceeds the amount of taxes that are allowed to be offset by the project agreement and that are owed by the incentivized company, the incentivized company may carry the credit forward, to the extent allowed in the project agreement. No carryforward shall be allowed for more than five years. Rules similar to those used for Section 40-18-15.2 shall be applied.

b. Prior to claiming the investment credit as provided in this subdivision, the incentivized company shall submit to the Department of Commerce a certification as to its capital investment as of the dates specified in the project agreement. Following such examination as it deems necessary, the Department of Commerce may certify the information and deliver the same to the Department of Revenue. Thereafter, the Department of Revenue shall allow the investment credit.

(2) The project agreement may authorize an incentivized company that is taxed as a flow-through entity to allocate the credit among some or all of the owners in any manner specified, regardless of whether the allocation follows rules similar to 26 U.S.C. § 704 (b) and the regulations thereunder. The owners may then use their allocated share of the investment credit to offset any of the taxes listed in subsection (a), as provided in subdivision (1). This subdivision shall be liberally construed to apply to multiple levels of companies, to allow the investment credits to be used by those persons bearing the tax burdens of the qualifying project, and such companies shall include but shall in no way be limited to flow-through entities, employee stock ownership plans, mutual funds, real estate investment trusts, and it shall also apply to offset the income tax liability of employee/owners of a flow-through entity owned by an employee stock ownership plan trust.

(3) [ The Secretary of Commerce may recommend to the Governor that the incentivized company be granted transferability of the investment credit [

[

[ for up to the first five years. Any investment credit transferred shall be at the value of at least 85 percent of the value of the credit. Any one year's investment credit [ shall not be purchased by more than three transferees, unless such limitation is found by the Secretary of Commerce to unnecessarily [ limit the class of potential transferees[.

[

[If approved by the Governor, transferability shall be allowed in the project agreement, subject to any notice and verification requirements determined by the Department of Commerce. Prior to any transfer, the investment credit shall be certified by the Department of Commerce [pursuant to paragraph (b)(1)b. of Section 40-18-376.

[

[The Department of Revenue shall adopt a transfer statement form to be filed by the transferor in a manner prescribed by the Department of Revenue. The transfer statement form shall include the name and federal taxpayer identification number of the transferor and each transferee listed therein along with the amount of the tax credit to be transferred to each transferee listed on the form. The transfer statement form shall also contain such other information as the Department of Revenue may reasonably require. For each transfer of a credit, the incentivized company shall file with the Department of Revenue, and a copy to the Department of Commerce, (1) a completed transfer statement form; (2) a copy of the investment credit certification issued by the Department of Commerce; and (3) a copy of the executed transfer agreement. Filing of the executed transfer agreement with the Department of Revenue shall perfect such transfer to the respect to such transferee and the Department of Revenue shall thereafter allow the appropriate amount of the investment credit to offset the tax liability of the transferee for any of the taxes listed in subsection (a) and, for any project agreements entered into after January 1, 2021 only, state license taxes levied by Article 2 of Chapter 21. In any one year, if the investment credit exceeds the amount of taxes that are allowed to be offset and that are owed by the transferee, the transferee may carry the credit forward for five years. A transferee may not make a subsequent transfer of the credit.

The Department of Revenue may adopt rules necessary to implement and administer the transfer provisions as provided in this act.

[ If a credit is transferred, an incentivized company that is later determined by the Secretary of Commerce to have defaulted under the project agreement shall be liable for the underpayment of tax attributable to the credit and for penalties and interest thereon. Unless the purchase of the credits is determined to have been made in a fraudulent manner, or is a transfer in anticipation of bankruptcy, insolvency, or closure, a transferee shall not be liable for the unpaid tax attributable to the credit, or for penalties or interest thereon.

(c) The realization methods in subsection (b) shall not create debts of the state within the meaning of Section 213 of the [ Constitution of Alabama of [2022.

(d)

(1) To the extent the investment credit is used to offset a financial institution excise tax liability, in making the report required by Section 40-16-6(d), the financial institution receiving the investment credit shall not take into account the qualifying project, and the Department of Finance shall adopt rules to ensure that the credit in no case would reduce the distribution for municipalities and counties.

(2) To the extent the investment credit is used to offset an insurance premium tax liability, the Department of Finance shall adopt rules to ensure that the credit would in no case reduce the distributions to the Alabama Special Mental Health Trust Fund by using any unencumbered funds.

(3) To the extent the investment credit is used to offset liability for the tax imposed by Section 40-21-82 or Article 2 of Chapter 21, the Department of Finance shall adopt rules to ensure that the credit in no case would reduce the distribution for the Alabama Special Mental Health Trust Fund by using any unencumbered funds.

Ala. Code § 40-18-376 (1975)

Amended by Act 2023-34,§ 2, eff. 4/20/2023.

Amended by Act 2021-423,§ 2, eff. 5/14/2021.

Amended by Act 2021-2,§ 1, eff. 2/12/2021.

Amended by Act 2019-392,§ 3, eff. 8/5/2019.

Added by Act 2015-27,§ 3, eff. 7/2/2015.