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Important Notices!
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Individual & Corporate Income Tax

ADOR - Individual and Corporate Tax Division Current Tax Season Issues

 


General Issues

Catastrophe Savings Account

Turbo-Tax, Business (Intuit) Issue

Oil Spill Information

ADOR Guidance: Requests for Composite Return Payment Relief

Alabama Depreciation and Section 179 Rules

Alabama Composite Payment Transitional Year Relief Index Page

QIPs and the Rebuttable Presumption Concerning Corporate Ownership

 


Corporate Income Tax

Double-weighted Sales Factor -Section 40-27-1, Article IV, Code of Alabama 1975 has been amended by Act 2011-616. For tax years beginning on or after January 1, 2011, the sales factor is required to be double-weighted in the apportionment formula. This change will convert Alabama from a “Cost of Performance” to a “Market Source” state. Sales other than sales described in Title 40, Chapter 27, Section 1, Article IV¶16, are in this state if the taxpayer’s market for the sale is in this state.

Qualifying Employers Deduction for Employee Health Insurance (Small Business Health Insurance Premiums Deduction) - The Alabama Legislature passed Act Number 2008-559 during the 2008 legislative session. The new law allows qualifying employers to deduct an additional fifty percent (50%) of the amount paid as health insurance premiums on qualifying employees in connection with an employer-provided health insurance plan. Qualifying employers are defined in the law as employers with less than 25 employees. Qualifying employees are defined in the law as those employees that are Alabama residents, earn no more than $50,000 of wages, and report no more than $75,000 of Alabama Adjusted Gross Income ($150,000 if married filing jointly). The new deduction should be claimed on the Alabama corporate income tax return, Form 20C, page 1, line 11b. See §40-18-15.3, Code of Alabama 1975, Alabama Department of Revenue Regulation Number 810-3-15.3-.01, Deductions for Small Business Health Insurance Premiums, and the Small Business Health Insurance Premiums Deduction Page for additional information.

Entertainment Industry Incentive Act of 2009 - The Alabama Legislature passed Act Number 2009-144 during the 2009 Regular Session stating a Qualified Production Company is entitled to a rebate for Production Expenditures. The rebate is equal to 25 percent (25%) of the State-Certified Production’s Production Expenditures excluding payroll paid to residents of Alabama plus 35 percent (35%) of all payroll paid to residents of Alabama for the State-Certified Production, provided the total Production Expenditures for a project equal or exceed at least five hundred thousand dollars ($500,000), but do not exceed ten million dollars ($10,000,000).

 


Individual Income Tax

Military Spouses Residency Relief Act (Form 40NR Only) - During the last session of the United States Congress, the “Military Spouses Residency Relief Act”(Public Law 111-97) was passed and signed in to law by President Obama. Under this Act, the income for services performed by the spouse of a service member shall not be deemed to be income for services performed or from sources within a tax jurisdiction of the United States if the spouse is not a resident of the jurisdiction in which the income is earned because the spouse is in the jurisdiction solely to be with the service member serving in compliance with military orders. This law was retroactive to January 1, 2009.

Since Alabama tax may have been withheld for tax year 2009 on spouses that qualify for this exemption, a 2009 Alabama non-resident (Form 40NR) income tax return must be filed to claim a refund of the Alabama taxes withheld. It is very important that if the qualifying spouse will be working in Alabama in 2010 that they complete and give to their employer a new Form A-4 with the appropriate box checked claiming exemption under the “Military Spouses Residency Relief Act”. Taxpayers filing an Alabama income tax return under this Act must use the following procedures to complete their tax return:

  • Taxpayer must file a Form 40NR.
  • The Alabama withholding tax must be entered on page 1, line 5, column A.
  • All wages (both spouses if a joint return) must be entered on page 1, line 5, column B.
  • All Alabama wages including those of the qualifying spouse must be entered on page 1, line 5, column C.
  • On page 2, Part I, line 8, column C enter the Alabama wages of the qualifying spouse as a negative figure. Also write or type “Military Spouses Residency Relief Act” in the space provided on line 8.
  • Complete the rest of the return as per the instructions in the tax booklet or form.
  • A copy of Form DD2058 indicating the state of legal residence of the spouse in the military must be attached.

Qualified Mortgage Interest Premiums - If you qualify for the Mortgage Interest Credit on your Federal return, the total interest you paid (before the credit) is deductible for Alabama purposes. This deduction can be taken on Schedule A, Line 13 of Form 40 or 40NR.

Federal Tax Liability Deduction - The Federal Income Tax Deduction is now computed using a worksheet. This worksheet is located in the Form 40, 40A and 40NR instruction booklets. On the Form 40NR, The amount computed from the worksheet is prorated for non-residents.

Direct Deposits (Refunds) - Due to changes in the electronic banking rules, the Alabama Department of Revenue will no longer allow direct deposits to or through foreign financial institutions. A checkbox has been added on Page 2, Part IV of the Form 40 to answer the question “Is this refund going to to through an account that is located outside of the United States?”. If the answer to this question is “yes”, you will be issued a paper check.

ACH Debit Payments - All taxpayers who are required to pay or select to pay via EFT will be required to state whether the payment transaction being submitted is an International ACH Transaction (IAT) by answering the following question, "Will this payment be funded by money received from a financial institution located outside of the territorial jurisdiction of the United States?. If the taxpayer answers “Yes” to this question, the transaction is an IAT transaction and the payment being submitted will be required to made via ACH Credit. ACH payment method requires pre-registration and Department approval. For more information on ACH Credit payments, please contact our EFT Unit at 1-800-322-4106, and press option 7.

Health Insurance Deduction - You may deduct 50 percent of the premiums you pay for health insurance if you work for an employer that has less than 25 employees.

 


Pass-Thru Entities

Double-weighted Sales Factor -Section 40-27-1, Article IV, Code of Alabama 1975 has been amended by Act 2011-616. For tax years beginning on or after January 1, 2011, the sales factor is required to be double-weighted in the apportionment formula. This change will convert Alabama from a “Cost of Performance” to a “Market Source” state. Sales other than sales described in Title 40, Chapter 27, Section 1, Article IV¶16, are in this state if the taxpayer’s market for the sale is in this state.

Qualified Investment Partnerships - The Alabama Legislature passed the Entertainment Industry Incentive Act of 2009 during the regular 2009 legislative session. The law, Act Number 2009-144, created an entity referred to as a Qualified Investment Partnership(QIP). The new law creates §40-18-24.2, Code of Alabama 1975, which generally defines a QIP as a partnership or other entity classified as a subchapter K entity, or a business trust as defined in §40-18-1, Code of Alabama 1975, that for a tax period meets the gross income and asset requirements for a Qualified Investment Partnership as required by §40-18-24.2; and, for which an authorized officer, partner, member or manager of the entity has certified for the tax period that the entity meets the gross income and asset requirements. Proper certification of a QIP requires the completion of Alabama Schedule QIP-C, Qualified Investment Partnership Certification, which must be filed by the due date of the Alabama partnership income tax return for the entity. The requirements concerning the Alabama QIP are similar to the qualified investment partnership provisions in other states, but are not necessarily the same. Instructions for the preparation of Alabama Schedule QIP-C are available on the Department’s website, along with additional information concerning the Alabama QIP. Alabama Form 65 and Schedule K-1 for Alabama Form 65 have been revised to accommodate the QIP income tax return requirements. An Alabama partnership return filed by a QIP must be indicated by completing the QIP indicator on page one of the Form 65 and on each K-1 accompanying the return. Regulations to implement the new law have been finalized. Copies of the regulations are available at revenue.alabama.gov

Qualifying Employers Deduction for Employee Health Insurance (Small Business Health Insurance Premiums Deduction) - The Alabama Legislature passed Act Number 2008-559 during the 2008 legislative session. The new law allows qualifying employers to deduct an additional fifty percent (50%) of the amount paid as health insurance premiums on qualifying employees in connection with an employer-provided health insurance plan. Qualifying employers are defined in the law as employers with less than 25 employees. Qualifying employees are defined in the law as those employees that are Alabama residents, earn no more than $50,000 of wages, and report no more than $75,000 of Alabama Adjusted Gross Income ($150,000 if married filing jointly). The new deduction is claimed on the Alabama partnership return on Schedule K, Line 10 (Small Business Health Insurance Premiums) on Forms 65 and 20S. See §40-18-15.3, Code of Alabama 1975, Alabama Department of Revenue Regulation Number 810-3-15.3-.01, Deductions for Small Business Health Insurance Premiums, and the Small Business Health Insurance Premiums Deduction Page for additional information.

New "Required Entity Information" page (Forms 65 and PTEC) - This new page requests the following information:

  • List of general partners,
  • Other states where the partnership/LLC operates,
  • Other countries where the partnership/LLC operates,
  • Partnership/LLC investments in other pass through entities


Corporate Income Tax

Turbo-Tax, Business (Intuit) Issue - Turbo-Tax Business (Intuit) is experiencing some problems with the Alabama paper forms 20S, PTEC, BIT-V, PPT, and K-1. Intuit will be putting a patch in place to correct this problem by Monday, February 28, 2011. Until your software has been updated with this patch, please do not file any of the above forms prepared with this software. This problem only applies to the TurboTax Business returns and does not apply to the Intuit Proseries product.

For more information on this problem and the patch, please go to the Turbo Tax Support topic on this issue at http://turbotax.intuit.com/support/iq/Business-States/Alabama-Business--Printing-Issues-with-Partnership-and-S-Corp/SLN47288.html .

Updated last: February 19, 2014