Alabama § 16-37A-4 - Creation of the Train Act Credit; Eligibility. [Credit Terminates Dec. 31, 2031]

§ 16-37A-4. Creation of the Train Act Credit; Eligibility. [Credit Terminates Dec. 31, 2031]

(a) There is hereby created a tax credit that an employer may apply against any of the following:

(1) To offset the income taxes levied in Chapter 18 of Title 40.

(2) To offset the state portion of the financial institution excise tax levied in Chapter 16 of Title 40.

(b)(1) The amount of the tax credit shall equal the portion of the qualified employee’s salary paid by the employer for time directly attributable to the teaching assignment in the applicable tax year, subject to the limitations provided in this section.

(2)a. Notwithstanding subdivision (1), a taxpayer may claim a tax credit to offset eligible taxes for donations to a community development foundation to support a designated CTE program or to supplement the salaries of instructors who teach a designated CTE program.

b. For any donation made to a community development foundation to supplement the salary of an instructor to teach a designated CTE program, the instructor must teach a minimum number of hours in the classroom, as determined by an Alabama community college, a local education agency, or a public high school.

(c) Subject to the provisions of this chapter, an employer shall be eligible to claim a credit if it meets all of the following conditions:

(1) The employer enters into a memorandum of understanding (MOU) or other agreement between the eligible educational institution and the employer which outlines the conditions under which a qualified employee with a workforce teaching certificate or other teaching certificate would be authorized to participate in a teaching assignment in a designated CTE program. Each MOU or agreement between an employer and an eligible educational institution, at a minimum, shall include all of the following:

a. The name of the qualified employee and a description of the designated CTE program in which instruction will occur.

b. The duration of the teaching assignment, including total instructional hours and term or terms covered.

c. A statement confirming that the employer will continue to pay the qualified employee’s full salary and benefits during the teaching assignment. A qualified employee is not entitled to any compensation from an eligible educational institution, but the institution may elect to compensate a qualified employee in whatever manner it deems appropriate.

d. A certification by the employer that the qualified employee has passed, or will pass prior to beginning the teaching assignment, all background screening requirements as required by the eligible educational institution.

e. The method of verifying attendance, instructional hours, and program completion for purposes of credit certification.

f. A provision authorizing the department to inspect records and verify compliance.

g. A provision acknowledging that noncompliance with any of these requirements may result in recapture of the tax credit, as provided in this chapter.

h. A statement that the employer shall maintain workers’ compensation and general liability coverage for the qualified employee during the teaching assignment.

i. A statement regarding liability for actions performed by the qualified employee in furtherance of the teaching assignment.

(2) The employer has received a TRAIN Act credit reservation certificate from the department for an approved agreement with an eligible educational institution.

(3) The employer continues to pay the qualified employee’s full salary and benefits during the teaching assignment.

(4) The eligible educational institution provides the qualified employee with the classroom space, equipment, and other instructional materials required to conduct the teaching assignment unless otherwise agreed to in the MOU.

(d) To the extent that a tax credit is used by an employer, the employer shall not be allowed any deduction that would have otherwise been allowed for the employer’s payment of the qualified employee’s salary or for donations to an eligible educational institution. Credits may only be claimed by the employer and may not be assigned or transferred to any other taxpayer, provided the credit issued to a parent or holding company may be claimed by the subsidiary, provided both parent or holding company and subsidiary are filing as part of an Alabama consolidated return, as defined under Section 40-18-39.

(e) In no event shall the credit cause a taxpayer’s tax liability to be reduced by more than 50 percent. Unused credits may be carried forward for no more than five years but shall not be transferable.

(f) If a teaching assignment is not completed in full, the credit shall be prorated and available to the employer only for the portion of the salary paid for services actually rendered by the qualified employee and accepted by the eligible educational institution. If an agreement is terminated by the eligible educational institution, the Department of Revenue, after consultation with the department, may disallow the credit in its entirety for that tax year.

(g) The tax credits may be claimed beginning January 1, 2027.

(h) The statewide annual aggregate of tax credits allowed under this section shall not exceed ten million dollars ($10,000,000), provided that credits claimed by entities making donations to community development foundations may not exceed four million dollars ($4,000,000) in any single calendar year.

(i) Notwithstanding any other provision of this chapter, the total amount of credit that may be reserved and claimed by any single taxpayer shall not exceed two hundred fifty thousand dollars ($250,000) in a calendar year. The department shall ensure that no credit reservation certificate is issued that would cause a taxpayer to exceed this limitation.