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Individual & Corporate Income Tax

Alabama Department of Revenue - Corporate Income Tax FAQ
 

Frequently Asked Questions Corporate Income Tax

New Questions

 

 

CORPORATE INCOME TAX

FAQ'S

 

  • What are the recent law changes that affect filing a corporate income tax return?

    Payments. Section 41-1-20 requires electronic payments for all single business tax payments of $750 or more. Substantial penalties will be assessed for noncompliance Electronic Payment Options available:

  • My Alabama Taxes (MAT) - Taxpayers making e-payments via MAT must have an account with the Alabama Department of Revenue (ADOR) and register to access. For more information click https://myalabamataxes.alabama.gov.
  • ACH Debit - Taxpayers making e-payments via ACH Debit must have a sign on ID and access code to login to the Alabama Department of Revenue (ADOR) Paperless Filing & Payment Systems. Visit our Web site at revenue.alabama.gov/ eservices.htm for additional information.
  • ACH Credit - Taxpayers making e-payments via ACH Credit must be preapproved by ADOR. To register, complete and submit Form EFT:001 entitled EFT Authorization Agreement Form. Visit our Web site at revenue.alabama.gov/eservices.htm for additional information.
  • Alabama Interactive - The Department will accept e-payments for estimated and automatic extension payments through Alabama Interactive. Visit www.alabamainteractive.org/taxestimation or www.alabamainteractive.org/taxextension.
  • Official Payments -The Department will accept electronic check (e-check) and credit card payments through Official Payments Corporation on the Internet. Visit www.officialpayments.com/echeck. There is a convenience fee for credit card payments. The fee is based on the amount of the tax payment and is paid directly to Official Payments Corporation.
  • Link2Gov- The Department will accept credit card payments through Official Payments Corporation on the Internet. Visit www.officialpayments.com/echeck. There is a convenience fee for credit card payments. The fee is based on the amount of the tax payment and is paid directly to Official Payments Corporation.
  • Link2Gov -The Department will accept credit card payments through Link2Gov. You may choose to use your Discover/Novus, MasterCard, Visa or American Express card. There is a convenience fee for this service. The fee is based on the amount of the tax payment and is paid directly to Link2Gov.
  • Value Payment Systems - The Department will accept credit card payments through Value Payment Systems. You may choose to use your Discover/Novus, MasterCard or Visa card. Value Payment Systems does not accept the American Express card but has a program called BillMeLater. There is a convenience fee for this service. The fee is based on the amount of the tax payment and is paid directly to Value Payment Systems.
  • New taxpayer’s who have recently registered with the Alabama Secretary of State, will receive an Online Filing Information letter. The Online Filing Information letter is for “information purposes’ and provides the taxpayer with a Sign On ID and Access Code which permits access to My Alabama Taxes (MAT) or the Paperless Filing & Payment System via Internet and/or telephone.

    Non-EFT payments (under $750) must be remitted with the Form BIT-V (Business Income Tax Voucher).

    Electronic Filing Available. The Alabama Department of Revenue began accepting the electronic filing of the Alabama Corporate Income Tax Returns, schedules, forms and correspondence for tax years 2007 and forward. For more information, visit our Corporate Electronic Filing Page.

    Captive Real Estate Investment Trusts (Captive REITS). Captive REITS are defined in Section 40-18-1, Code of Alabama, 1975.When filing an Alabama Form 20C return, Captive REITS are required to add to income the amount of the Dividends Paid Deduction.

    Decoupling from the Federal Economic Stimulus Act of 2008. Act Number 2008-549, passed by the Alabama Legislature during the first 2008 Special Session, decoupled Alabama income tax laws from the bonus depreciation and the additional Section 179 expense provisions of the federal Economic Stimulus Act of 2008. The amount of bonus depreciation and the additional Section 179 expense deduction claimed on the federal return (as allowed by the federal Economic Stimulus Action of 2008) must be added back to Federal Taxable Income on Schedule A of the Alabama Form 20C return.

    American Recovery and Reinvestment Act of 2009. Alabama did not decouple from the bonus depreciation provision of the federal American Recovery and Reinvestment Act of 2009. The amount of bonus depreciation claimed on the federal return (as allowed by the federal American Recovery and Reinvestment Act of 2009) is not required to be added back to Federal Taxable Income for the 12/31/2009 and future tax periods.

    Automatic Six-month Extension to File the Form 20C Return. An automatic extension of six months has been granted to file the Alabama Form 20C Return, but the full amount of the tax due for a tax year is due, in full, by the original due date of the return. If the total of the estimated tax payments made for a tax year is less than the amount of tax due for the tax year, then an automatic extension payment in the amount of the tax deficiency is due by the original due date of the return for the tax year.

 

  • What are the filing requirements for an exempt organization operating in Alabama?

    Organizations referred to in 26 U.S.C. § 501(a), as well as several others organizations referenced in 40-18-32 will not be required to file corporation income tax returns with the Alabama Department of Revenue for as long as they retain their exempt status under applicable Federal and State laws. Unless they have unrelated business income determined in accordance with 26 U.S.C. § 512. the organization should file Form 20C with a copy of Federal Form 990T.

 

  • Does our corporation have nexus in Alabama ?

    Generally refer to Public Law 86-272 Bright Line Test to determine if you have nexus in Alabama. However, there are instances where a taxpayer would normally fall under Public Law 86-272 and may be required to file a corporate return. Nexus questionnaire

 

  • Am I required to file a corporation income tax return after I qualify to do business through AL Secretary of State when my business is either inactive or never began?

    Yes, if the company has registered or qualified to do business in the state, a Form 20C is required to report no activity and/or business activity as provided by Sections 40-18-2 and 40-18-31, Code of Alabama 1975.

 

  • What is the mailing address for Form 20C?

    Mail returns with payments and payment vouchers to: Alabama Department of Revenue Individual and Corporate Tax Division Corporate Income Tax P.O. Box 327435 Montgomery, AL 36132-7435

    Mail non-payment and refund returns to: Alabama Department of Revenue Individual and Corporate Tax Division Corporate Income Tax P.O. Box 327430 Montgomery, AL 36132-7430

    Mail Consolidated Returns/Proforma Form 20C and Payments to: Alabama Department of Revenue Consolidated Business Tax Compliance Unit (CBTCU) P.O. Box 327437 Montgomery, AL 36132-7437

 

  • What is the correspondence mailing address for the Corporate Income Tax Section?

    Mail correspondence to:Alabama Department of Revenue Individual and Corporate Tax Division Corporate Income Tax P.O. Box 327900 Montgomery, AL 36132-7900

 

  • What is the due date for filing a corporate income tax return?

    The return is due on the 15th day of the third month following the end of the tax period. Use Form 20C. Taxpayers have been granted one 6 month extension. Alabama is not tied to the federal due dates for cooperatives and non-profits.

 

  • Can a consolidated return be filed?

    For tax periods beginning before January 1, 1999 - No.  Alabama's income tax laws and regulations specifically required each corporation to file a separate return with the department (§40-18-39(a) and Regulation 810-3-39-.01(5)).

    For tax period beginning after December 31, 1998 - Yes.  Alabama's Tax Conformity Act (Act 98-502) allows an Alabama "affiliated group" to elect to file a consolidated Alabama tax return, provided the "group" files a consolidated federal return for the same taxable year.  An "Alabama affiliated group" means a group of corporations that constitute an affiliated group as defined in 26 U.S.C. § 1504, one or more members of which are subject to tax under §40-18-31

For tax periods beginning after December 31, 2001 - Yes. Act 2001-1089(HB4) revised the Consolidated filing requirements in Alabama Code Section 40-18-39 for tax periods beginning after December 31, 2001. Alabama consolidated returns can only include Alabama "nexus" companies.

Each corporation included in the Alabama consolidated return must compute their Alabama taxable income on a separate company basis. Then, the taxable income of the Alabama group is combined to determine the tax due. The filing fee has also been increased from a maximum of $12,500 to a $25,000 maximum. This election is binding for 120 consecutive months. See the new consolidated corporate income tax return (Form 20C-C).

 

  • What is the corporate income tax rate?

    For tax years beginning January 1, 2001, the tax rate is 6.5%. For tax years prior to 2001, the tax rate was 5%.

 

  • Does Alabama require estimated tax payments?

    Yes. If your tax liability is $500 or more you are required to make estimated tax payments. Please refer to Alabama Code Section 40-18-80.1 for details on the specific requirements.

  • Does Alabama allow seasonal or annualization when computing estimated tax payments?

    Yes. Use our new Form 2220AL to compute the required payment and penalty.

 

  • Does Alabama have a minimum corporate income tax?

    No, Alabama law does not require the payment of a minimum corporate income tax.

 

  • Does Alabama permit the carry back of a net operating loss?

    No, Alabama law does not provide for the carry back of a net operating loss.

 

  • Does Alabama have a carry forward provision for net operating losses?

    NOTE: For all tax periods beginning during calendar year 2001, Section 40-18-35.1 ( Act 2001-1088 (HB2)) suspends net operating losses.

    Yes, Alabama's net operating loss carry forward provision began with net operating losses incurred during a tax year beginning on or after January 1, 1984. Prior to this period Alabama did not have a net operating loss provision. A net operating loss incurred during a tax year beginning on or after January 1, 1984 and before January 1, 1985 can be carried forward 5 years. A loss from a tax year beginning on or after January 1, 1985 can be carried forward 15 years. For tax years beginning on or after January 1, 1985 and before January 1, 1990, the net operating loss deduction was limited to $600,000 per year.

 

  • Has Alabama adopted the provisions of the Multistate Tax Compact?

Yes, Alabama has adopted the provisions of the Multistate Tax Compact which provides for the allocation and apportionment of income of taxpayers doing business in more than one state (Code of Alabama, 1975, 40-27-1, and Rule 810-27-1-4).

 

  • Does Alabama provide for a federal income tax deduction?

    Yes, Federal income tax may be deducted for the taxable year in which paid or accrued, according to the method of accounting used in computing taxable income. The federal income tax allowable as a deduction is the net tax liability as accrued and subsequently paid, that is, the amount after subtracting all deductible and/or refundable credits.

    The federal income tax deduction for any taxable year for members of an affiliated group filing a consolidated federal income tax return, shall be determined in accordance with the method elected under 26 U.S.C. §1552 (without regard to any election under 26 U.S.C. §1502) for its consolidated federal return.

    Corporations which do business in Alabama are allowed to deduct federal income taxes attributable to their Alabama income (Code of Alabama, 1975, § 40-18-35(a)(2), and Rule 810-3-35-.01(1)(b).

 

  • Does Alabama have a contribution deduction limit?

    Yes, charitable contributions are deductible to the extent deductible for federal income tax purposes under 26 U.S.C. §170.

 

  • What are the filing requirements for a corporation operating in Alabama as a partner in a partnership?

    The corporation should file an Alabama income tax return just as any other corporation. If the income is business income, then the corporation's pro rata share of the partnerships property, payroll, and sales should be included in the apportionment factor. If the income is nonbusiness, then the income should be allocated to Alabama and/or the appropriate states.

 

  • What are the reporting requirements as the result of an IRS audit?

    To report changes made by the IRS, a corporation shall file an amended Form 20C or Form 20S for the specific tax period. The following information MUST be included with the amended return (see Regulation 810-3-40-.01(4)):

    1. A complete copy of the revenue agent's report (RAR) provided by the IRS to include Form 4549-A, 4549-B and Form 870, 2. A copy of the Form 20C or 20S as originally filed, and 3. Federal Form 1120 as originally filed and/or amended

    If the corporation is part of a consolidated group, the following information is required along with the above information:

    1. A listing of the IRS adjustments made to each company in the consolidated group, 2. A copy of the Federal Form 851, Affiliations Schedule, 3. A copy of the income statement spread for every company, and 4. A copy of the consolidated Federal 1120 as originally filed and/or amended.

    If the IRS audit results in a refund, the request for refund must be made within one year from the date of final determination of the IRS audit. If the audit results in additional tax due, the department can access the additional tax within one year after the Department has been notified.

  • When is electronic funds transfer (EFT) filing required?

    If your tax liability is $750.00 or more you must remit your tax payment by electronic funds transfer (EFT). Call the EFT unit at 1-800-322-4106 or (334) 242-0192.  For more information on EFT, please go to http://revenue.alabama.gov/eft/eftindex.html.

Updated last: September 29, 2011