SB107INTRODUCED
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SB107
LDJFYAY-1
By Senator Hovey
RFD: Finance and Taxation Education
First Read: 15-Feb-24
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5 LDJFYAY-1 02/07/2024 KHF (F)KHF 2024-570
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First Read: 15-Feb-24
SYNOPSIS:
Under current law, an Alabama pass-through
entity may elect to be taxed as an Alabama electing
pass-through entity by submitting the appropriate form
to the Department of Revenue anytime during the year or
on or before the fifteenth day of the third month
following the close of that tax year for which the
entity elects to be taxed as an electing pass-through
entity.
This bill will extend the due date for an
Alabama electing pass-through entity to make the
election for tax years beginning January 1, 2024. The
due date for the election shall be the due date of the
corresponding Alabama annual return, including
extensions.
A BILL
TO BE ENTITLED
AN ACT
Relating to income taxes; to amend Section 40-18-24.4,
Code of Alabama 1975, to extend the due date for an Alabama
electing pass-through entity to make the election to be taxed
as an electing pass-through entity.
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as an electing pass-through entity.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. Section 40-18-24.4, Code of Alabama 1975, is
amended to read as follows:
"ยง40-18-24.4
(a) This section shall be known and may be cited as
the, "Alabama Electing Pass-Through Entity Tax Act."
(b) For the purposes of this section, "electing
pass-through entity" means any Alabama S corporation, as is
defined by Section 40-18-160, and any subchapter K entity, as
is defined by Section 40-18-1, that has made an election
pursuant to subsection (d) to pay Alabama income tax at the
rate prescribed in subsection (e).
(c) For tax years beginning on or after January 1,
2021, any Alabama S corporation, as defined in Section
40-18-160, and any subchapter K entity, as defined in Section
40-18-1, may elect to be taxed as an electing pass-through
entity.
(d)(1) For tax years beginning on or after January 1,
2021, through December 31, 2023, an An electing pass-through
entity shall submit the appropriate form to the Department of
Revenue at any time during the tax year or on or before the
fifteenth day of the third month following the close of that
tax year for which the entity elects to be taxed as an
electing pass-through entity. For tax years beginning on or
after January 1, 2024, an electing pass-through entity shall
submit the appropriate form to the Department of Revenue on or
before the due date for filing the applicable income tax
return, including any extensions which have been granted
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return, including any extensions which have been granted
following the close of that tax year for which the entity
elects to be taxed as an electing pass-through entity.
(2) This election shall be binding for that year and
all subsequent tax years and shall not be revoked unless the
electing pass-through entity submits the appropriate form to
the Department of Revenue at any time during a subsequent tax
year or on or before the fifteenth day of the third month the
due dates provided in this subsection following the close of
that tax year for which the entity elects to no longer be
taxed as an electing pass-through entity. Both the election to
become an electing pass-through entity and the revocation of
that election shall be accomplished by a vote by or written
consent of the members of the governing body of the entity as
well as a vote by or written consent of the owners, members,
partners, or shareholders holding greater than 50 percent of
the voting control of the entity, within the time prescribed
above.
(3) For tax years beginning on or after January 1,
2025, the election or revocation shall be made on the timely
filed return, including any extensions which have been
granted.
(e) An electing pass-through entity shall pay a tax at
the highest marginal rate provided in Section 40-18-5,
calculated in accordance with Section 40-18-24 or Section
40-18-161 and Section 40-18-162, as appropriate, and
apportioned in accordance with Chapter 27 of this title. An
electing pass-through entity shall be subject to Section
40-18-80.1 (estimated tax for corporations). In calculating
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40-18-80.1 (estimated tax for corporations). In calculating
taxable income for the purposes of this subsection, Alabama
tax paid under this subsection shall not be deducted in
calculating Alabama taxable income.
(f) The owners, members, partners, or shareholders
shall not be liable for the tax otherwise imposed by Chapter
16 and this chapter of this title on their pro rata or
distributive shares of the electing pass-through entity's
income.
(g) The adjusted basis of the owners, members,
partners, or shareholders of an electing pass-through entity
in their stock or other ownership interests in the entity
shall be calculated without regard to the election under this
section.
(h) Notwithstanding anything in this chapter to the
contrary, neither the election by an electing pass-through
entity under this section nor its revocation of the election
shall be considered a liquidation or termination of the entity
or an otherwise taxable event.
(i) No refunds shall be granted or paid for tax years
ending before January 1, 2020, related to Act 2021-1.
(j) The Department of Revenue may adopt rules for the
implementation and administration of Act 2021-1this section."
Section 2. This act shall become effective immediately
upon its passage and approval by the Governor, or its
otherwise becoming law.
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