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View All Financial Institution Excise Tax, Net Operating Losses (NOLs) FAQs

How should financial institutions treat NOLs?

Effective for tax periods beginning on or after January 1, 2020, a net operating loss is applied to the first taxable year to which it may be carried and deducted only during the 15 consecutive tax years immediately following the tax year in which it arose.

Effective, for tax periods prior to January 1, 2020, all financial institution losses will carry back their net operating losses to apply as a deduction against prior income, and to deduct from succeeding years’ income the excess loss. No net operating loss deduction (arising out of a net loss in an earlier or later year) shall be allowed in computing a net operating loss. Casualty losses and losses arising from theft, fraud and embezzlement, however, shall be deductible in computing the net operating loss. A net operating loss for a taxable year may be carried back two years, then forward to the eight succeeding taxable years in chronological order. A successor financial institution shall be allowed to carry over and deduct from succeeding years’ income, the net operating loss of its predecessor.

Effective for tax periods beginning on or after January 1, 2020, a net operating loss is applied to the first taxable year to which it may be carried and deducted only during the 15 consecutive tax years immediately following the tax year in which it arose.

Effective, for tax periods prior to January 1, 2020, all financial institution losses will carry back their net operating losses to apply as a deduction against prior income, and to deduct from succeeding years’ income the excess loss. No net operating loss deduction (arising out of a net loss in an earlier or later year) shall be allowed in computing a net operating loss. Casualty losses and losses arising from theft, fraud and embezzlement, however, shall be deductible in computing the net operating loss. A net operating loss for a taxable year may be carried back two years, then forward to the eight succeeding taxable years in chronological order. A successor financial institution shall be allowed to carry over and deduct from succeeding years’ income, the net operating loss of its predecessor.

Related FAQs in Financial Institution Excise Tax, Net Operating Losses (NOLs)

Yes. The federal limit is 10% of the federal taxable income without the benefit of the deduction.

To report changes made by the IRS, a corporation shall file an amended Form ET-1 for the specific tax period. The following information MUST be included with the amended return (see above and Regulation 810-3-40-.01(4)):

  • A complete copy of the finalized revenue agent’s report (RAR) provided by the IRS to include, but not limited to, Form 4549-A, 4549-B and Form 870,
  • A copy of the Form ET-1/ET-1C as originally filed, and
  • Federal form as originally filed and/or amended.
  • If the financial institution is part of a consolidated group, the following information is required along with the above information:
  • A listing of the IRS adjustments made to each company in the consolidated group,
  • A copy of the Federal Form 851, Affiliations Schedule,
  • A copy of the income statement spread for every company, and
  • 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 assess the additional tax within one year after the department has been notified.

Amended returns should be completed in full and accurately. Amended returns should include a detailed explanation for filing the amended return, supporting documentation to validate amended changes, and computation of the additional amount due or refund due. Blank or partially completed revenue forms require special handling that delays processing and cause unnecessary expenses.

Section 41-1-20, Code of Ala. 1975, requires electronic payments if your tax liability is $750.

Electronic Payment Options Available:

ACH Credit – Taxpayers may remit tax payments by electronic funds transfer (EFT). The taxpayer must be pre-approved by ALDOR.  For more information on EFT, visit ALDOR’s Pay by EFT/ACH Page.

ACH Debit – Taxpayers making e-payments via ACH Debit who have an active revenue tax account can log in to My Alabama Taxes. Taxpayers can also use the “Make a payment” link to make non-logged in payments.  Pre-registration is not necessary to make a payment on an invoice or assessment.

New taxpayers, 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.

Payments less than $750 not remitted electronically must be remitted with Form FIE-V. DO NOT MAIL FORM FIE-V IF THE PAYMENT IS REMITTED ELECTRONICALLY. To obtain Form FIE-V visit revenue.alabama.gov.

 

ACH Credit – Taxpayers may remit tax payments by electronic funds transfer (EFT). The taxpayer must be pre-approved by ALDOR. For more information on EFT, please go to ALDOR’s Make A Payment page.

ACH Debit – Taxpayers making e-payments via ACH Debit who have an active revenue tax account can log in to My Alabama Taxes. Taxpayers can also use the “Make a payment” link to make non-logged in payments.  Pre-registration is not necessary to make a payment on an invoice or assessment.

New taxpayers, 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.

Payments less than $750 not remitted electronically must be remitted with Form FIE-V. DO NOT MAIL FORM FIE-V IF THE PAYMENT IS REMITTED ELECTRONICALLY. To obtain Form FIE-V visit

Forms

Credit Unions will enter their financial statement net income on Form ET-1 Line 1.

Section 40-16-1.3, Code of Alabama 1975, states that the net income for Credit Unions is the “financial statement income which is the final net income amount, total revenue less total expenses, calculated for financial statement purposes and reported to the Internal Revenue Service as a tax exempt organization and to the Alabama Credit Union Administration (ACUA), or other government regulatory authority.”

In support of Line 1, Credit Unions will need to submit with Form ET-1 a copy of Federal Form 990/990T and the Call Report submitted to the National Credit Union Association (NCUA), or other reporting/insuring entity such as American Share Insurance (ASI).