On August 11, 2015, Alabama Governor Robert Bentley signed
legislation enacting a factor presence nexus standard for business
activity for purposes of the business privilege tax, income taxes,
and financial institution excise taxes.1 The
legislation, which is effective for tax years beginning after
December 31, 2014, was passed as part of a special session that was
called after the regular legislative session did not result in a
budget being passed for the state's fiscal year that begins
October 1, 2015.
Factor Presence Nexus Standard Explained
Under the legislation, a non-resident individual or business
taxpayer has "substantial nexus" in Alabama if it has a
factor presence in the state.2 A factor presence is
established if any of the following thresholds are exceeded within
the state during the tax period: (i) $50,000 of property; (ii)
$50,000 of payroll; (iii) $500,000 of sales; or (iv) 25 percent of
total property, total payroll, or total sales.3
