§40-18-243. Availability of credit on pass-through basis.

(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, 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 subsection (c) of Section 40-18-25, 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 subsection (d) of Section 40-18-25, 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 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 subsection (d) of Section 40-18-25, 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) 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 this title and Title 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, as the case may be.

(9) No amount described in this subsection shall be carried forward or back by any investing company, shareholders partners, members, owners, or beneficiaries with respect to a prior or subsequent year.

(Act 2001-503, p. 886, §4.)