Sections 40-18-220 through 40-18-221, Code of Ala. 1975
Section 40-18-220 provides a credit to corporations engaged in coal production within Alabama. The credit amounts to $1 per ton of increased coal production over the previous year’s output. The credit applies to tax years commencing on or after January 1, 1995, based on coal production in Alabama certified by the coal producer.
Provisions of the Coal Credit include:
- The Coal Credit can be used to offset the following taxes:
- Income taxes found in Title 40, Chapter 18, Code of Ala. 1975, or as an estimated tax payment for income taxes.
- Taxes imposed by ยงยง40-21-82 and 40-21-102, Code of Ala. 1975.
- A combination of income taxes and utilities taxes paid, provided the credit is only utilized once.
- The credit is not refundable, but any unused credit can be carried forward for up to five years.
- For owners who are part of a pass-through entity, the credit can be allocated among them in any manner specified, regardless of their pro-rata share ownership.
Calculation of Credit: The total credit amount for a tax year is determined using the following formula:
The amount of the total credit in any one year is calculated as follows:
| The number of tons of Alabama coal produced by the corporation in current tax year |
| (MINUS) |
| the number of tons of Alabama coal produced by the corporation in base year |
| (EQUALS) |
| the amount of coal credit allowable in current tax year. |
Base Year Establishment: If a corporation did not produce Alabama coal during the calendar year 1994, they must establish a base year by producing Alabama coal for 12 consecutive months. The base year begins with the first full year of production. Following this, the corporation becomes eligible for the credit in the amount exceeding the base year’s coal production.
Eligibility Criteria: To qualify for the Coal Credit, a corporation must:
- Be engaged in coal production within Alabama.
- Complete the precertification and allocation process before claiming the Coal Credit as an offset on the income tax return or against utility taxes paid.
Upon approval of the credit claim and the corresponding allocation schedule, the business entity can proceed to claim the allocated income tax credit on their return. If a business entity has been allocated the credit, they will receive a letter from ALDOR, which will request the submission of the Allocation Schedule. For detailed information on how to claim and allocate the coal credits, please contact us at incentives@revenue.alabama.gov.
Individual taxpayers who have been allocated the coal credit will also receive a letter from ALDOR, allowing them to claim the credit on their income tax return.