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

https://revenue.alabama.gov/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).

Yes, the taxpayer can submit the Alabama Form PWR after paying all tax and interest due. The PWR does not guarantee relief of penalty. To obtain Form PWR visit revenue.alabama.gov.

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.

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.

When computing the federal income tax deduction for any taxable year for members of qualified corporate group filing a consolidated federal income tax return the consolidated FIT liability must be apportioned only among the members of the group that individually report positive federal taxable income. Each member is apportioned a share of the consolidated FIT based on a fraction, the numerator of which is the member’s positive federal taxable income and the denominator of which is the sum total federal taxable income of all members separately reporting positive federal taxable income (without regard to any election under 26 U.S.C. §1502) for its consolidated federal return.

Financial institutions which do business in Alabama are allowed to deduct federal income taxes attributable to their Alabama income (Code of Alabama, 1975, §40-16-1.2).

Allocation and apportionment rules for financial institutions can be found in rule 810-9-1-.05

• State, county and city sales and use taxes paid on tangible personal property purchased and paid for by the institution for its consumption;
• State utility taxes paid on telephone, electrical power, gas or water;
• Rental or leasing taxes paid directly to the state for the privilege of leasing tangible personal property to others within Alabama;
• Increases in the city or county license taxes imposed upon financial institutions between July 10, 1943, and October 1, 1951.

Credits will not be allowed on any taxes not levied on the financial institution.

Examples of these taxes:

• State, county or city sales or use taxes on items purchased for resale such as checks, promotional items or equipment;
• Gross receipts taxes levied on the seller;
• Rental or leasing taxes paid to others;
• Federal taxes of any nature;
• Taxes paid to contractors or others on equipment attached to real property or in the construction of buildings, etc.;
• the tax imposed by this chapter.

The Alabama Department of Revenue now requires the use of Schedule EC, Business Credits when claiming business tax credits.

Taxes not taken as a credit may be allowed as a deduction.

Interest income taxable for federal purposes, including interest from loans and discounts, obligations of the United States Government, and State, county, and municipal interest income from loans and securities that is exempt for federal income tax purposes.

Some business credits are required to be submitted through My Alabama Taxes. For these credits, log in to My Alabama Taxes, click on the link for the Financial Institution Excise Tax account, under the “I Want To” section select “Submit a Credit Claim.” Choose the credit being claimed from the drop-down menu, complete the submission with the taxpayer’s information, and attach the supporting documentation or certificate. If you do not have a My Alabama Taxes account or the My Alabama Taxes Online Registration Card with the account information needed to set up a My Alabama Taxes account, then contact the Business Income Tax Section at 334-242-1170, option 6, to request this information.

Schedule EC. The Alabama Department of Revenue now requires the use of Schedule EC when claiming business tax credits. The schedule allows the taxpayer to compute the total amount of tax credits allowable. The amounts entered on the Schedule EC, Business Credit will carry over to the Form ET-1, page 1, line 17. This schedule must be submitted with the return to receive credit(s). See instructions for Schedule EC for additional information.

Complete and submit the Application for Certificate of Compliance to determine whether or not a corporation is in compliance with Alabama’s filing requirements.

If the taxpayer owns 20 percent or more of the stock, by vote or value, of the distributing corporation, dividend income, including amounts described in 26 U.S.C. § 951, from non—U.S. corporations to the same extent such dividend income would be deductible under 26 U.S.C. § 243 if received from U.S. corporations.

The amount treated as dividends under 26 U.S.C. § 78.

A financial institution may deduct the applicable percentage of dividend income from a Captive REIT if such dividend income would be deductible under 26 U.S.C. § 243 if received from an entity that is not a REIT, as defined in Section 40-18-1-(27), whose shares or certificates of beneficial interest are not regularly traded on an established securities market and are owned or controlled, at any time during the last half of the tax year, by an association taxable as a corporation that is not exempt from tax under 26 U.S.C. § 501(a) or a REIT, as defined in Section 40-18-1(27).

Dividends received from other credit unions and credit union service organizations as defined by federal law and the regulations of the National Credit Union Administration shall be subtracted from financial statement income for purposes of computing the net income of a credit.

Yes. Alabama Code §40-2A-7(c)(2) states, “A petition for refund shall be filed with the department or an automatic refund issued pursuant to Section 40-29-71, or a credit allowed, within (i) three years from the date that the return was filed, or (ii) two years from the date of payment of the tax, whichever is later, or, if no return was timely filed, two years from the date of payment of the tax.”

Interest expense is allowed per the federal return (except for interest that was treated as paid or incurred in the current taxable year under 26 U.S.C.§163(j)(2)),

Interest not deductible for federal income tax purposes under 26 U.S.C.§163(j)(1), and

Interest not deductible for federal income tax purposes under 26 U.S.C.§265 or §291 related to tax-exempt securities

View information regarding Alabama Consolidated Income Tax Returns.

Qualified corporate groups, shall have the option to file one excise tax return on a consolidated basis or to file separate returns. Each financial institution 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.

In order for financial institution members of a controlled group to be eligible to elect to file on a consolidated basis, the members would have to meet the following two tests:

• Ownership test: Includable financial institutions will be connected through stock ownership with a common parent corporation. Financial institutions are includable corporations if:

• Stock possessing at least 80 percent of the voting power of all classes of stock and at least 80 percent of each class of the nonvoting stock of each of the includable corporations (except the common parent corporation) is owned directly by one or more of the other includable corporations; and
• The common parent owns directly stock possessing at least 80 percent of the voting power of all classes of stock and at least 80 percent of each class of the nonvoting stock of at least one of the other includable corporations.

• Filing test: In order to be eligible for this election, each member must be a financial institution as defined in Section 40-16-1 and be required to file an excise tax return.

For tax periods beginning after December 31, 2019 – Act 2019-284(HB) revised the Consolidated filing requirements in Alabama Code Section 40-16-3(e). For tax periods beginning on or after January 1, 2020, the election is binding for 120 consecutive months (10 years).

No. The election to file consolidated return is irrevocable.

Yes. Act 2019-284(HB419) revised the Consolidated filing requirements in Section 40-16-3, Code of Alabama, 1975 for tax periods beginning after December 31, 2019.

Each corporation included in the Alabama consolidated return must compute their Alabama taxable income on a separate company basis. The taxable income of the Alabama group is combined to determine the tax due.

There is no consolidated filing fee. To make the election, Alabama Form ET-C must be filed by the designated parent on or before the due date of the Alabama consolidated return, including extensions, and on or before the date the consolidated return is filed for the first taxable year for which the election is made and is to be effective. The consolidated election is binding for 120 consecutive months (10 years).

No. Alabama law does not require the payment of a minimum financial institution excise tax.

The Financial Institution Excise Tax rate is 6.5% of net income.

Mail correspondence to:

Alabama Department of Revenue
Income Tax Administration Division
Financial Institution Excise Tax Section
P.O. Box 327900
Montgomery, AL 36132-7900

Mail returns and payment vouchers to:

Alabama Department of Revenue
Income Tax Administration Division
Financial Institution Excise Tax
P.O. Box 327439
Montgomery, AL 36132-7439

 

Mail Consolidated Returns, Form ET-1C and Proforma Form ET-1 and Payments to:

Alabama Department of Revenue
Income Tax Administration Division
Financial Institution Excise Tax
P.O. Box 327437
Montgomery, AL 36132-7437