Alabama § 40-18-557 - Tax Credits.

§ 40-18-557. Tax Credits.

(a) A taxpayer may claim a tax credit to offset eligible taxes for each qualified donation as provided in this section.

(1) For a donor who is a single individual, a head of household, or married filing a separate return: an amount equal to 100 percent of the qualified donations the taxpayer made during the tax year for which the credit is claimed, not to exceed fifteen thousand dollars ($15,000).

(2) For a donor who is married filing a joint return: 100 percent of the qualified donations the taxpayer made during the tax year for which the credit is claimed, not to exceed thirty thousand dollars ($30,000).

(3)a. For a qualified donor that is taxed as an electing pass-through entity under Section 40-18-24.4: 100 percent of the qualified donations the taxpayer made during the tax year for which the credit is claimed, not to exceed four hundred fifty thousand dollars ($450,000).

b. The tax credit shall be taken by the taxpayer on a pro rata basis according to the percentage of ownership in the entity or the limitations set forth in this section, whichever is less. In the case of a donor that is taxed as a corporation under the Internal Revenue Code: an amount equal to 100 percent of the qualified donations the taxpayer made during the tax year for which the credit is claimed, or 75 percent of the corporation’s income, excise, or insurance premium tax, not to exceed the amount of the corporation’s income, excise, or insurance premium tax liability, whichever is less, with a contribution limit each tax year of five hundred thousand dollars ($500,000).

(4)a. A credit for utility taxes may be claimed in an amount equal to 100 percent of total qualified donations during the taxable year for which the credit is claimed. In order to claim a credit against utility tax payments levied in Articles 3 and 4 of Chapter 21 under this subdivision, a taxpayer must have a utility tax direct pay permit from the department pursuant to its requirements. A taxpayer shall provide a copy of the utility tax direct pay permit to each utility provider from whom the taxpayer receives services. A taxpayer holding a direct pay permit shall notify the department of each qualified donation pursuant to the department’s procedures. To the extent credits are available, the department shall reserve credits for a taxpayer and provide written confirmation thereof.

b. Upon receipt of a qualified donation, the recipient shall submit to the department certification of the donation received from a taxpayer under this subdivision pursuant to procedures established by the department within 30 business days after receipt of each donation. Upon receipt of the certification from the recipient, the department shall provide written confirmation to the taxpayer within 30 business days that the reserved credits of the taxpayer in the amounts of qualified donations actually made and not yet claimed are eligible to be used on its monthly utility tax direct pay return. A taxpayer may not use a credit against the utility tax until such time as the department provides the notification described in the previous sentence.

(b)(1) The total amount of the tax credit for a tax year may not exceed the taxpayer’s tax liability or, for financial institutions, the state portion of the taxpayer’s financial institution excise tax liability.

(2) Any unused tax credit may be carried forward for up to three years following the qualified donation but shall not be transferable.

(c)(1) The tax credits may be claimed beginning January 1, 2026, for the 2026 tax year.

(2) Any unused tax credit may be carried forward for up to three years following the qualified donations but shall not be transferable.