Section 40-18-194

Section 40-18-194Entities allowed capital credit.

(a) The Legislature recognizes that a substantial number of businesses are organized as limited liability companies, partnerships, and other types of business entities and that certain business entities, organized as corporations, elect to be treated as "S" corporations under federal and state tax laws, and that it is essential that the capital credit amount shall be available on a pass-through basis in the manner hereinafter provided.



(b) Each investing company, or its shareholders, partners, members, owners, or beneficiaries shall be entitled to the capital credit for each tax year of an investing company with respect to which a capital credit is provided pursuant to this article. The capital credit shall be allowed as follows:



(1) The owner of an investing company which is a proprietorship shall receive a credit against the individual income tax levied by Section 40-18-5 that otherwise would be owed to the state in any year by the owner with respect to the income of the investing company generated by or arising out of the qualifying project.



(2) An investing company which is an Alabama C corporation as defined in Section 40-18-160, or which is an Alabama S corporation and which is subject to taxation under Section 40-18-174, or Section 40-18-175, shall receive a credit against the corporate income tax levied by Section 40-18-31 or by Section 40-18-174 or Section 40-18-175, that otherwise would be owed to the state in any year by the investing company with respect to the income generated by or arising out of the qualifying project.



(3) The shareholders of an investing company which is an Alabama S corporation as defined in Section 40-18-160, and whose taxable income is subject to determination under Section 40-18-161, each shall receive a credit against the individual income tax levied by Section 40-18-5 that otherwise would be owed to the state in any year by each shareholder of the investing company with respect to income of the investing company generated by or arising out of the qualifying project.



(4) The partners, members, or owners of an investing company, the income of which is subject to taxation under Section 40-18-24, each shall receive a credit against the corporate income tax levied by Section 40-18-31, or against the individual income tax levied by Section 40-18-5, whichever is applicable to each such partner, member, or owner that otherwise would be owed to the state in any year by each partner, member, or owner of the investing company with respect to income of the investing company generated by or arising out of the qualifying project.



(5) An investing company which is a trust or estate having income subject to taxation under Section 40-18-25(c) shall receive a credit against the income tax levied by Section 40-18-5 that otherwise would be owed to the state in any year by the investing company on the income generated by or arising out of the qualifying project.



(6) The beneficiaries of an investing company which is a trust or estate the income of which is subject to taxation under Section 40-18-25(d) each shall receive a credit against the corporate income tax levied by Section 40-18-31, or against the individual income tax levied by Section 40-18-5, whichever is applicable to each such beneficiary, that otherwise would be owed to the state in any year by each beneficiary of the investing company with respect to income of the investing company generated by or arising out of the qualifying project.



(7) A shareholder, partner, member, owner, or beneficiary which is eligible to receive a credit under subdivision (3), (4), or (6) of this subsection and which is an Alabama S corporation, or which has income which is subject to taxation under Section 40-18-24 or Section 40-18-25(d), solely for purposes of the application of this subsection, shall be treated as though the shareholder, partner, member, owner, or beneficiary were also an investing company.



(8)a. An investing company which is a financial institution as defined in Section 40-16-1 shall receive a credit against the financial institution excise tax levied by Section 40-16-4 that otherwise would be owed to the state in any year by the investing company with respect to the income generated by or arising out of the qualifying project which is a data processing center, is a headquarters facility, or is described in the 2007 North American Industry Classification System National Industry 561422 (other than establishments that originate telephone calls). To receive the capital credit authorized by this paragraph (8)a., Section 40-18-193 shall be complied with. Further, the financial institution must be the investing company or it must own, directly or indirectly, at least 50 percent of the investing company. If the financial institution is a shareholder, partner, member, owner, or beneficiary of an investing company which is not itself subject to taxation, the financial institution shall be entitled to a capital credit corresponding to its relative ownership interest in the investing company, subject to the 50 percent ownership requirement of the immediately preceding sentence.



b. In making the report required by Section 40-16-6(d), a financial institution receiving the capital credit authorized in paragraph (8)a. shall not take into account the qualifying project.



(9) The capital credit allowed under this subsection for any tax year of an investing company shall not exceed the aggregate amount which otherwise would be due from the investing company, its shareholders, partners, members, owners, or beneficiaries to the state in tax with respect to the income of the investing company generated by or arising out of the qualifying project, determined after the application of all other deductions, losses, or credits permitted under Titles 40 and 41, for the taxable year, and determined by applying the maximum rate applicable to individuals under Section 40-18-5, or the rate applicable to corporations under Section 40-18-31, or the rate applicable to financial institutions under Section 40-16-4, as the case may be. Notwithstanding the foregoing, the capital credit allowed under this subsection shall not exceed 60 percent of the aggregate amount which would otherwise be due from the investing company, in the case of a qualifying project for the production of electricity from coal gasification or liquefaction or advanced fossil-based generation, as such terms are defined in Section 40-18-1, or hydropower production, or 80 percent of the aggregate amount which would otherwise be due, in the case of a qualifying project described in Section 40-18-190(a)(13)e which produces electricity from any other type of alternative energy resource.



(10) a. Except as provided in paragraph b. below, in no event may any amount described in this subsection be carried forward or back by any investing company, shareholders, partners, members, owners, or beneficiaries with respect to a prior or subsequent year.



b. If the qualifying project has capital costs of at least one hundred million dollars and provides not less than one hundred jobs for new employees, the capital credit may be carried forward for a maximum of four taxable years, depending on the amount of capital costs. Amounts described in this paragraph may only be carried forward by any investing company, shareholders, partners, members, owners, or beneficiaries as follows:



1. If the capital costs are at least four hundred million dollars, the capital credit may be carried forward for a maximum of four taxable years.



2. If the capital costs are at least three hundred million dollars but less than four hundred million dollars, the capital credit may be carried forward for a maximum of three taxable years.



3. If the capital costs are at least two hundred million dollars but less than three hundred million dollars, the capital credit may be carried forward for a maximum of two taxable years.



4. If the capital costs are at least one hundred million dollars but less than two hundred million dollars, the capital credit may be carried forward for a maximum of one taxable year.



5. If the capital costs are less than one hundred million dollars, the capital credit may not be carried forward.



c. Any provisions of the law to the contrary notwithstanding, any entity described in paragraph b. may delay the initial utilization of the capital credit for up to three years after the qualifying project is placed in service, after which time the 20-year period for the credit shall begin.



(11) Any shareholder, partner, member, owner, or beneficiary of an investing company may elect annually to use his or her allowable portion of the tax credit created by this article as a nonrefundable estimated tax payment against his or her individual income tax liability. If a taxpayer makes an annual election to use the aforementioned credit as a nonrefundable estimated payment, the taxpayer shall compute the amount of the credit as though it were a credit, subject to all the requirements and limitations provided by law for the credit, but shall use the amount computed as a nonrefundable estimated payment and shall not use the same amount as a credit. In no event shall this provision be construed to allow the credit or nonrefundable estimated tax payment to expand the 20-year limitation of the credit or estimated tax payment. In no event shall a credit used as nonrefundable estimated payment exceed the amount that would be available if the credit were not used as a nonrefundable estimate payment.



(c) The amendments made to this section by Act 2008-275 shall be effective for tax years and periods beginning after December 31, 2011.

(Acts 1995, No. 95-187, p. 250, §5; Act 2003-375, p. 1062, §1; Act 2008-275, p. 402, §10; Act 2009-722, p. 2143, §2; Act 2012-385, p. 1025, §1.)