HB 187 — Income tax, due date for electing pass-through to make election extended

HB187 ENROLLED IHB187 HBi87 A C T #2024 -IL^ A4UWQ77-2 By Representative Faulkner RFD:

15-Feb-24 V\ W .,.®> F H 'i5 fit Page 0 HB187 Enrolled Enrolled, An Act, Relating to income taxes;

to amend Section 40-18-24.4, Code of Alabama 1975, to expendextend the due date for an Alabama electing pass-through entity to make the election to be taxed as an electing pass-through entity.

■■§40-18-24"§40-18-24.4 4 (a) This section shall be known and may be cited as ththe, e "Alabama Electing Pass-Through Entity Tax Act." (b) For the purposes of this section, "electing pass-through entity^'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 40-18-150,40-18-160, and any subchapter K entity, as defined in Section 40-18-1, may elect to be taxed as an electing pass-through entityentity. .

(d)(d)(1) (1) For tax years beginning on or after January 1, 2021, through December 31, 2023, an-/Anan 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 Page 1 HB187 Enrolled electing pass-through entity.

For tax years beginning on or after January 1, 2024, an electing pass-through entity shall submit rhethe appropriate form to the DeparcmencDepartment of Revenue on or before the due date for filing the applicable income tax return, including any extensions which have been granted 'followingfollowing the close of that tax year for which the entity elects to be taxed as an electing pass-through entity.

_{_2_)_Thielection(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 £ i£ year or on or before the ■feocnth—fifteenth —day eof ---—the third .menththemonththe 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.owners, members, partners, or shareholders holding greater than 50 percent of the voting control of the entity, within the time prescribed above.

.members,(3) partners,For ortax shareholdersyears holdingbeginning greateron thanor 50after percentJanuary of1, 2025, the votingelection controlor ofrevocation theshall entity,be withinmade on the timetimely prescribedfiled above.return, including any extensions which have been granted.

(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 .

An electing pass-through entity shall be subject to Section 40-18-80.1 (estimated tax for corporations)corporations). .

In calculating taxable income for the purposes of this subsection, Alabama tax paid under this subsection shall not be deducted i.nin calculating Alabama taxable income.

(f) The owners.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.

members,(g) partners,The oradjusted shareholdersbasis shallof notthe beowners, liablemembers, forpartners, theor taxshareholders otherwiseof imposedan byelecting Chapterpass-through 16entity andin thistheir chapterstock ofor thisother titleownership oninterests theirin prothe rataentity orshall distributivebe sharescalculated ofwithout theregard electingto pass-throughthe entity'selection incomeunder .this section.

(g)(h) TheNotwithstanding adjustedanything basisin ofthis thechapter owners,to membersthe ,contrary, partners,neither orthe shareholderselection ofby an electing pass-through entity inunder theirthis stocksection ornor otherits ownershiprevocation interestsof in the entityelection shall be calculatedconsidered withouta regardliquidation toor termination of the electionentity underor thisan sectionotherwise .taxable event.

(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 electio.n shall be considered a liquidation or termination of the entity or an otherwise taxable event.

(j) The Department of Revenue may adopt rules for the implementation and administration of Act on2021-1this 4—section." i-thissection." Section 2.

Page 4 HB187 Enrolled 88 90 92 94________________________________________________ Speaker of tnethe House of Representatives 96 98 P________________________________________________ rPresident eand sPresiding idOfficer eandtof Prthe idSenate inHouse gQf^~’vof -Representatives o f th e S e n a te H ouse o fR e p r e s e n ta tiv e s I hereby certify that the within Act originated in and was passed by the House 19-Mar-24.

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