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  • Does Alabama have a carry forward provision for net operating losses?
View All Corporate Income Tax FAQs

Does Alabama have a carry forward provision for 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.

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 five 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.

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

Related FAQs in Corporate Income Tax

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.”

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. See Alabama Rule 810-27-1-.02 Application of Apportionment and Allocation.

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. If they have unrelated business income as determined in accordance with 26 U.S.C. § 512, then the organization should file Form 20C with a copy of Federal Form 990T.

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

If the corporation files as a separate entity:

  • A complete copy of the 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 20C as originally filed, and
  • 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:
  • 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.

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

For tax years beginning on or after January 1, 2016, Corporate Income Tax began following the federal due dates for corporate returns:

  • For corporations on a calendar year and a fiscal year, other than June 30, the original due date is the 15th day of the 4th month after the end of the tax year.
  • For corporations with a fiscal year ending on June 30, the original due date is the 15th day of the 3rd month following the end of its tax year.

 

For tax year beginning on or after January 1, 2022:

Corporations are required to file their income tax return one month following the corresponding federal income tax returns, including applicable extensions, that are required to be filed as provided under federal law. If the due date falls on a Saturday, Sunday, or state holiday, the return will be due the following business day.

The corporation’s full tax liability is due on or by the original due date of the return without the benefit of the additional one-month extension.