Current through Register Vol. 43, No. 02, November 27, 2024
(1) Scope. This regulation specifies the
amount of Capital Credit available to an Investing Company or Companies or its
shareholders, partners, members, owners or beneficiaries.
(2) Definitions. Terms defined in Reg.
810-2-7-.01 are incorporated
herein by reference for purposes of this regulation, unless the context clearly
indicates otherwise.
(3) Purpose.
The purpose of this regulation is to specify the annual amount of credit
available, to provide a method to determine the amount of credit available
during tax periods of less than one year, to provide the method used to
determine the applicable share of the Capital Credit available to each
Investing Company or its shareholders, partners, members, owners, or
beneficiaries for each tax year which the Investing Company qualifies for the
Capital Credit.
(4) Procedure. An
Investing Company or Companies in a Qualifying Project as defined in Regulation
810-2-7-.03 or the shareholders,
partners, members, owners, or beneficiaries of the Investing Company or
Companies shall be allowed a credit against the Alabama income tax liability
generated by or arising out of the Qualifying Project.
(a) The Capital Credit shall be limited to
the income tax liability attributable to the income generated by or arising out
of the Project or five percent of the Capital Costs of the Qualifying Project,
whichever is less.
1. The Alabama income tax
liability attributable to the Alabama income generated by or arising out of the
Project may be determined by either of the following methods.
(i) Allocation Method. The recipient of the
capital credit may allocate the Alabama income tax liability attributable to
the Alabama income generated by or arising out of the Project using a
computation determined by the Department.
(ii) With/without Method. This method
requires the recipient to compute its tax liability attributable to the Alabama
income generated by or arising out of the Project by completing a second set of
federal and state income tax returns excluding the Alabama income attributable
to project operations. Any deductions limited by the amount of adjusted gross
income, including the federal income tax deduction for state purposes, shall be
adjusted in the second returns. The difference in the Alabama income tax
liability is the amount attributable to the Alabama income generated by or
arising out of the Project.
(b) The credit shall be available for a
period of 20 years beginning with the year in which the Qualifying Project is
Placed in Service and continuing for 19 consecutive years thereafter.
1. For any tax return filed during the 20
year period which is for a tax period of less than one year, the credit
available for the short year period shall be prorated based on a ratio, the
numerator of which is the number of days in the tax period, and the denominator
of which is 365.
2. It is the
intent of this Regulation to allow all entities qualifying for the Capital
Credit the full 240 (i.e., 20 years X 12 months) months of credit.
(c) If the Investing Company or
Companies are not ultimately liable for the Alabama income tax liability on the
income generated by or arising out of the Qualifying Project, the credit shall
be allocated to those shareholders, partners, members, owners, or beneficiaries
of the Investing Company or Companies which are ultimately liable for the
Alabama income tax liability attributable to the income generated by or arising
out of the Qualifying Project.
(d)
A change in ownership or assignment of interest in any Project shall not
increase the amount of capital credit available and the purchasers, assignees,
or successors of the Project or interest therein shall be entitled to the
Capital Credit upon the same conditions and for the same period as the
Investing Company or Companies originally entitled to the Capital
Credit.
(e) The aggregate amount of
the Capital credits utilized during the 20 year period shall not exceed 100
percent of the Capital Costs of the Qualifying Project.
1. For purposes of determining the Capital
Credits utilized by shareholders, partners, members, owners, or beneficiaries
of the Investing Company or Companies, the maximum applicable rate applicable
to individuals under Section
40-18-5, Code of Ala.
1975, as amended, or the maximum applicable rate applicable to
corporations under Section
40-18-31, Code of Ala.
1975, as amended, whichever is applicable, shall be limited 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 of the Code of Ala.
1975.
(f)
The Capital Credit allowable shall be limited to the tax liability attributable
to the income generated by or arising from the qualified Project within the
state.
Authors: Verlon Frost, Melody Moncrief, Jeff
Taylor
