No. There is no residency requirement for a taxpayer making a cash donation to a qualifying Scholarship Granting Organization (“SGO”). The income tax credit is available to Alabama taxpayers who owe state income tax and make a cash donation to a qualifying SGO, reserve their allotment of credits on the Alabama Department of Revenue’s (“ADOR”) My Alabama Taxes (“MAT”) portal, and have their donation verified by the qualifying SGO within 30 days of receipt. However, in order to use the credit in the tax year in which the donation is made, the donor must have an Alabama income tax liability for that year.
Yes. “C” corporations, "S" corporations, LLCs, partnerships, and pass through entities are allowed 100% credit up to 50% of total income tax liability for their donation to a SGO. Individuals are allowed 100% credit up to 50% of total income tax liability or maximum $50,000 credit.
As long as the taxpayer reserves its allotment of credits and the qualifying SGO verifies the donation within 30 days of receipt, the corporate taxpayer may use its allowable credit to offset up to 50 percent of its 2014/2015 fiscal year Alabama income tax liability. The reservation of the credit would decrease the total credit available to all taxpayers during the 2015 calendar year, i.e., it would be subject to the $30,000,000 annual cap.
Yes. Other entities, such as trusts and estates are not eligible to receive the credit. The Act specifically limits the availability of its income tax credits to individuals, “C” corporations, "S" corporations, LLCs, partnerships, and pass through entities.
Yes. The Act specifically limits the available credit to Alabama income tax. Other state taxes, such as the financial institution excise tax, insurance premium tax, and business privilege tax, may not be offset by the Act’s income tax credits.
An actual cash payment to a qualifying SGO is required before a taxpayer can validly reserve an allotment of AAA credits on the MAT portal, although it is recommended that the taxpayer reserve an allotment as soon as it mails the check, deposits it with an expedited delivery service or wire transfers the money to the SGO. Pledges are not sufficient. In addition, donations of services, forgiveness of debt, barter, or non-cash assets do not qualify.
A taxpayer is not required to apply for approval with the ADOR. However, a taxpayer must establish an account on the MAT portal to enter the donation, reserve the credit allotment and begin the receipting process.
The MAT portal is the ADOR’s online portal where taxpayers can access a variety of online services. Using the MAT portal, a taxpayer can file tax returns, make payments, view letters from the ADOR, manager its tax accounts, and conduct other common transactions with the ADOR. A taxpayer can access the MAT portal by going to the following web address: https://myalabamataxes.alabama.gov/_/#1. In addition, a helpful list of frequently asked questions and tutorial videos are available on the MAT portal. By clicking on the above link, a taxpayer can sign up for a MAT account.
Once a taxpayer reserves an allotment of credits on the MAT portal, an electronic notification is sent to the qualifying SGO alerting it that a particular taxpayer has made a donation of a stated amount. Once the donation is received by the qualifying SGO, it has 30 calendar days in which to verify the donation on the MAT portal. Once the donation is verified, the taxpayer who made the donation almost immediately receives an electronic receipt from the ADOR informing it of its allowable AAA credit amount.
Yes. A taxpayer’s allowable AAA income tax credits may be carried forward for up to three years from the year of donation. A taxpayer may not, however, carry credits back to previous tax years.
A Taxpayer must reserve an allotment of credits on the MAT portal because the total amount of AAA income tax credits for a given calendar year is capped at $30,000,000. AAA credits are reserved on a first-come, first-served basis. Once the $30,000,000 cap is reached in a given calendar year, no additional credits may be reserved or claimed for that calendar year except in the carryover situation described below.
No. A taxpayer may not validly reserve an allotment of credits until after it makes a cash donation to a qualifying SGO. The reservation system on the MAT portal requires a taxpayer to input the date the donation was made, under penalties of perjury. It will not allow a taxpayer to input a future date. A taxpayer may wait to make its donation until the end of the year; but, according to the ADOR, a taxpayer should not reserve an allotment of credits until the cash donation is actually mailed or otherwise transmitted to the SGO.
No, although it would be wise to do so. Under a special rule applicable to year-end donations, a taxpayer who makes a cash donation to a qualifying SGO on December 31, 2015 has only until January 10, 2016 to reserve its allotment of credits on the MAT portal. However, because AAA income tax credits are capped at $30,000,000 annually and reserved on a first-come, first-served basis, the taxpayer runs the risk that the credit will not be available on that later date. In addition, all qualifying SGOs receiving donations at the end of 2015 must verify those donations on the MAT portal by January 10, 2016 in order for those donations to generate AAA income tax credits for the 2015 tax year.
No. All donations postmarked as made during 2015 must be verified on the MAT portal no later than January 10, 2016. This is a special rule. For example, a donation received by an SGO on December 20, 2015 must be verified by the SGO by January 10, 2016. However, a donation received by an SGO on December 5, 2015 must be verified within 30 days of receipt, i.e., by January 4, 2016.
These FAQs were prepared by our legal counsel, Bradley Arant Boult Cummings LLP, Birmingham, Alabama. However, they have not been officially approved by the Alabama Department of Revenue, the administering agency, and constitute only our counsel’s interpretations of the law and regulations, after consultation with the ADOR.