Alabama Schedule BC: claiming 2025 business credits on Form 20C

Alabama Schedule BC (Form 20C) is where a C corporation works out which business credits it can use against its 2025 Alabama income tax. The seven-page schedule lists 21 credits as Parts A through U, applies them to the Form 20C tax row by row and ends with two totals: nonrefundable credits for Form 20C page 1, line 18, and refundable credits for line 20f.

Who attaches Schedule BC to a 2025 Form 20C

ALDOR’s corporate income tax FAQ says the department requires Schedule BC when a corporation claims business tax credits, and that the amounts on it carry over to Form 20C page 1. Every page of the schedule repeats the corporation’s name and federal employer identification number as shown on Form 20C.

A corporation that receives a credit through Schedule K-1 from a pass-through entity enters its allocable share on the matching Schedule BC line and attaches that K-1. Parts C, M, P, Q, R, S and T each have a K-1 line with a space for the entity’s FEIN; when the share comes from more than one entity, a separate schedule is attached.

The form marks some credits with an asterisk and says they must be submitted through My Alabama Taxes (MAT) before Schedule BC is completed. On the 2025 form those are Parts C, D, E, F, G, H, I, K, M, N, R, S, T and U. The coal credit instructions add one exception: if the coal credit comes from a partnership or S corporation, the entity submits the claim in MAT and the corporation does not. Negative numbers take a minus sign; parentheses are only for fields that print them.

Credit parts A through U and what each one needs

The table follows the order of Section B. “Allowable” lines are the amounts that move to Section C, Column 3.

Part U sits on page 5 of the form, printed above Parts S and T, but Section C still lists it last. The general paragraph of the instructions says the KRCC capital credit goes in Part R; on the 2025 form Part R is the Employer Tax Credit, and both the form and the Part U instructions put the KRCC boxes in Part U.

How to fill out Section A and the computed credit lines

Section A is the Form 20C tax: copy Form 20C page 1, line 17 here and into Section C, Part A, Column 4. Parts J, M and P use half of this figure as their limit.

In Part B, B6 is filled in only when B4 and B5 are both yes, meaning every participant worked for the corporation continuously for at least 16 weeks and at least 24 hours a week. The instructions also say the employer cannot receive or require reimbursement for the education cost, and they ask for the approval document with a schedule of actual costs and employment periods.

The Part C coal credit is $1 for each ton of Alabama coal produced above the corporation’s calendar 1994 output. A corporation that mined no Alabama coal in 1994 sets a base year by producing Alabama coal for 12 consecutive months. Beginning with calendar 2023, unused coal credit can be carried forward for up to 5 years.

Part D starts with a yes/no question on whether the business had 50 or fewer full-time and/or part-time employees on June 9, 2011; a no means the business does not qualify. As printed on the 2025 form, D1 is the full-time headcount on 12-31-2024 and D2 the headcount on 12-31-2023; D4 counts the new employees from D3 who completed their first 12 months of service in 2025. The instructions describe jobs paying more than $10 an hour. E1 counts the unemployed veterans already included in D4, at $2,000 each; the instructions describe full-time positions paying at least $14 an hour with most duties at a business located in Alabama.

The Part F start-up credit is for one business started after April 2, 2012, located in Alabama, in which the unemployed veteran holds at least 50% ownership and which shows a net profit of at least $3,000 for the year the credit is taken. F5 is the lesser of the start-up expenses on F3 and the $2,000 printed on F4.

The Part G credit covers one purchase and installation of qualified irrigation equipment or one qualified reservoir per taxpayer, taken in the year it is placed in service. G4 is 20% of equipment and installation cost plus fuel-to-electric conversion cost (G1 plus G2); G6 is 20% of the reservoir construction cost on G5. The instructions carry the greater of G4 or G6 to G7, and G9 is the lesser of G7 and the $10,000 maximum on G8. The booklet’s line text for G6 refers to “line G7” and for E2 to “line F1”; the form itself multiplies G5 and E1.

The remaining parts take their figures from a certificate or approval, or in Part H from the contribution itself. For Part O, check O1a for a certificate the railroad received and O1b for a Transfer Credit Certificate; the form states that a refundable credit is not allowed with a transfer certificate.

Parts J, M and P: the 50% limit and carryforward rows

These three parts have both a “credit available” line, which goes to Section C, Column 2, and a “credit allowable” line, which goes to Column 3. For Part J, J1 is the amount on the Department of Postsecondary Education Tax Certificate and J2 is half of it. J3 is half of the Section A tax, and J4 is the $500,000 annual maximum. J5 is the lesser of J2 and J3; J6 is the lesser of J2, J3 and J4.

For Part M, M3 is the contribution amount approved for the economic development organization named on M1, and M2 adds any K-1 share. Part P follows the same pattern with the amount approved by Innovate Alabama on P3. In both parts the credit available (M4, P4) is the K-1 share plus the approved amount, the maximum (M5, P5) is 50% of the Section A tax, and the allowable credit (M6, P6) is the lesser of the two.

J7, M7 and P7 subtract the allowable credit from the 50% limit. What is left is the room for older carryforwards of the same credit, entered in Column 3 of the first carryforward row (J8a, M8a, P8a). Each row lists the credit year, the carryforward available and the limit; Column 4 takes the lesser of Columns 2 and 3, and Column 5 is the limit not yet used, which becomes Column 3 of the next row. Part J has three rows and Parts M and P have five. If line 7 is zero, the rows are left blank.

For example, with $60,000 on Section A and a $40,000 Growing Alabama contribution approved, M4 is $40,000, M5 is $30,000 and M6 is $30,000. M7 is zero, so no older Growing Alabama carryforward can be used this year, and the $10,000 difference between Columns 2 and 3 of Section C is part of that row’s Column 8 carryforward.

Section C: using current-year credits against the tax

Section C runs down the rows from Part A to Part U. Column 4 of the Part A row is the Section A tax. On each row, Column 5 is the credit actually used, which is the smaller of the allowable credit (Column 3) and the tax still to be offset (Column 4). Column 6 is the tax left after that credit and becomes Column 4 of the next row; Column 7 is any allowable credit the remaining tax could not absorb.

Column 8 is the current-year carryforward: Column 2 minus Column 3, plus Column 7. Where Column 2 is blank, which is every part except J, M and P, Column 8 equals Column 7. The Total Current Credits line adds Column 5.

For example, a corporation with $12,000 of tax on Section A has a $10,000 Accountability Act credit on H3 and an $8,000 childcare facility credit on S3. The Part H row uses $10,000 and leaves $2,000 of tax. The Part S row uses that $2,000, leaving $6,000 in Column 7. Because Part S is a refundable credit, that $6,000 is what Section F, line F3 picks up, and E1 shows $12,000.

Section D: older carryforwards

Section D has ten rows for credits from earlier years. Enter them oldest year first, and leave out years whose credit has already been used up. Column 2 is the tax year end (MM/DD/YYYY) in which the credit was generated, Column 3 the credit generated, Column 4 the amount used in earlier years and Column 5 the difference. Column 6 equals Column 5, except for the dual enrollment, Growing Alabama and Innovate Alabama credits, where it is limited to Column 4 of lines J8, M8 and P8.

Column 7 is the amount used this period, limited to the tax still to be offset; Column 8 is the unused remainder (Column 5 minus Column 7); Column 9 is the tax left for the next row. The total of Column 7 goes to E2. The form and the instructions both say the starting tax comes from “Section C, Column 7”, which is headed Excess Credit Allowable; the tax remaining after current credits is in Section C, Column 6. If those figures differ on your return, ask the Corporate Income Tax Section before filing.

The 2025 instructions give these carryforward periods: coal 5 years (from calendar 2023), irrigation/reservoir 5, Accountability Act 3, 2013 historic rehabilitation 10, dual enrollment 3, Jobs Act investment 5, port 5, Growing Alabama 5, Innovate Alabama 5 and workforce housing 5. The 2017 historic rehabilitation credit and the childcare facility credit cannot be carried forward.

Sections E and F: the totals for Form 20C lines 18 and 20f

E1 is the Total Current Credits from Section C, Column 5, and E2 the total from Section D, Column 7. E3 adds them and goes to Form 20C, page 1, line 18, the nonrefundable credits line.

Section F collects the Column 7 excess of four refundable credits: F1 from Part N (2017 historic rehabilitation), F2 from Part O only when box O1a is checked, F3 from Part S (childcare facility) and F4 from Part T (employer provider). F5 adds them and goes to Form 20C, page 1, line 20f. The Employer Tax Credit in Part R is nonrefundable except for qualifying childcare providers, and those providers claim the refundable version in Part T.