Ala. Admin. Code r. 810-2-7-.04
Current through Register Vol. 43, No. 1, October 31, 2024
Section 810-2-7-.04 - Computation Of Available Capital Credit(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
Ala. Admin. Code r. 810-2-7-.04
New Rule: Filed November 9, 1995; effective December 14, 1995. Amended: Filed January 26, 1998; effective March 2, 1998.Statutory Authority:Code of Ala. 1975, §§ 40-2A-7(A)(5), 40-18-197, as amended.