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Financial Institution Excise Tax

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  • Financial Institution Excise Tax
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General Information for Financial institutions

The Excise Tax on Financial Institutions is levied to give effect to the provisions of federal law limiting the right of the states to tax national banking associations.

It is not a tax on income but is an excise tax measured by income. Sections 40-16-1 and 40-16-4, Code of Alabama 1975, impose an excise tax on every financial institution doing business in Alabama by engaging in the businesses specified therein. See Section 40-16-1, Definition of Financial Institution, and Section 40-16-4, Statute Imposing the Alabama Financial Institution Excise Tax.

 The proceeds of the tax, after the expense of administration, are distributed as follows:

Beginning with the 2019 municipal financial institution excise tax distribution, each municipality shall receive a percentage share of the total municipal financial institution excise tax revenue equal to its average percentage share of the total municipal financial institution revenue distribution over the five years ending in 2018. The first 20 percent of total county financial institution excise tax revenue shall be distributed equally among all counties. The remaining 80 percent county financial institution excise tax revenue shall be distributed among the counties based on each county’s share of total Alabama population as determined in the most recent federal census prior to the distribution.

Filing Requirement:

Every financial institution subject to excise tax under Title 40, Code of Alabama 1975, is required by §40-16 to file Form ET-1.

Consolidated Filing:

Qualified corporate groups may elect to file 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 Ownership test and Filing test. 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). For more information, please see the instructions for Form ET-C.

Due Date/Extension

Original Due Date. The financial institution excise tax return is due on the same date as corresponding federal income returns 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.

Automatic One Month Extension. For tax years beginning on or after January 1, 2021, all financial institutions are automatically granted an extension of one additional month to file its Alabama corporate income tax return following the due date of the corresponding federal income tax return including applicable extensions.

Example: A calendar year taxpayer’s original federal return due date is April 15 – the taxpayer is automatically granted an extension to May 15 to file the Alabama financial institution excise tax return.

Federal Extension. A financial institution will be granted an automatic extension to file its Alabama financial institution excise tax return consistent with the extension allowed for the taxpayer’s corresponding federal income tax return. The corresponding federal extension form must be submitted with the Alabama return.

Example: A calendar year taxpayer filed a six-month extension to file their federal return and the extended due date is October 15 – the taxpayer is automatically granted an extension to November 15 to file the Alabama financial institution excise tax return.

An extension of time granted to file is not an extension of time for payment of the tax. The amount of tax due must be paid on or before the due date of the return without regard any extension to file the return.  For payment options, see https://www.revenue.alabama.gov/individual-corporate/income-tax-payment-options/.

Estimated Tax Payments 

Financial institutions are required to make estimated tax payments if the financial institution’s tax less any credits for the taxable year can reasonably be expected to be $500 or more. Quarterly estimated tax payments are required to be made by the 15th day of the 4th, 6th, 9th, and 12th months of the tax year. For information on payment options, visit https://www.revenue.alabama.gov/individual-corporate/income-tax-payment-options/.

Tax Incentives:

Alabama offers tax incentives for new, existing, or expanding businesses in Alabama. For information on available tax incentives, visit  https://www.revenue.alabama.gov/tax-incentives/income-tax-incentives/.

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