HB240 Alabama 2012 Session

This bill would modify the definition of gross income for Alabama income tax purposes so that resident individuals, who are either partners or members of partnerships or limited liability companies, shareholders of Alabama S corporations, or beneficiaries of estates or trusts, during all or part of a tax year, must include their proportionate share of income from the pass-through entity, regardless of whether the income is earned within or outside of Alabama. This bill would provide resident individuals who are owners or beneficiaries of these pass-through entities an income tax credit for the income tax or gross profits tax paid by the entity to other states or territories on behalf of the individual owner or beneficiaries because the other state imposes a withholding or composite return obligation or an entity-level tax on the pass-through entity

This bill would also provide an income tax credit to resident individuals who are owners or beneficiaries of these pass-through entities for a portion of the amount of net income-based taxes paid by the pass-through entity to foreign countries

To amend Sections 40-18-14 and 40-18-21, Code of Alabama 1975, relating to the manner in which resident individual owners of Subchapter K entities and Alabama S corporations are taxed on the entity's income earned from sources outside of Alabama, to provide those owners, as well as resident beneficiaries of an estate or trust, with a credit equal to their proportionate share of certain income or gross profits taxes paid or accrued to other states or territories on behalf of the owners and a credit for a portion of income taxes paid or accrued to a foreign country with respect to the trade or business or investment income of such entity; and to require the Department of Revenue to report annually to the Legislative Council.