Alabama, Other States Invite Lawsuits if They Tax Foreign Income

Alabama, like many states, is likely to face constitutional challenges if it doesn’t break away from the new federal tax on certain foreign corporate income, business-side tax policy advocates say.

The state is set to conform automatically to the new foreign income provisions of the 2017 federal tax act (Pub. L. No. 115-97), according to recent guidance published by the Alabama Department of Revenue. The tax on global intangible low-taxed income (GILTI) will apply to Alabama-based companies that pay the state’s 6.5 percent corporate income tax.

The foreign income provisions, along with a cap on deducting business interest ...