Financial Institution Excise Tax.

Ala. Code tit. 40, ch. 16

in effect

Ala. Code § 40-16-1 Definitions.

40-16-1. Definitions. For the purpose of this chapter, the following terms shall have the respective meanings ascribed to them by this section: (1) FINANCIAL INSTITUTION. Any person, firm, corporation, and any legal entity whatsoever doing business in this state as a national banking association, bank, banking association, trust company, industrial or other loan company or building and loan association, and such term shall likewise include any other institution or person employing moneyed capital coming into competition with the business of national banks, and shall apply to such person or institution regardless of what business form and whether or not incorporated, whether of issue or not, and by whatsoever authority existing. The common parent corporation of a controlled group of corporations eligible to elect to file a consolidated excise tax return, in accordance with Section 40-16-3, shall be considered a financial institution if such parent corporation is a registered bank holding company as defined by the Bank Holding Company Act of 1956, as amended. As a financial institution, the common parent corporation will be governed by Sections 40-16-1 through 40-16-11 and exempt from all income taxes under Chapter 18 of this title, with the exception that the credit for licenses or taxes as provided by Section 40-16-8 and the rules adopted pursuant thereto by the Department of Revenue will not apply to amounts of excise tax on financial institutions imposed hereby and paid by such parent corporation. Financial institution shall not mean or include individual citizens and fiduciaries acting in a representative capacity for individual citizens, not engaged in a banking, loan, investment, or similar business, but merely making personal investments of personal or fiduciary funds in bonds, notes, or other evidences of indebtedness and not made in competition with the business of national banks, nor shall such term apply to insurance companies or insurance associations merely making investments of reserves in bonds, notes or other evidences of indebtedness and not made in competition with the business of national banks. (2) INTERNAL REVENUE CODE or U.S.C. All references in this chapter to the Internal Revenue Code or to 26 U.S.C. shall mean the applicable section of the Internal Revenue Code of 1986, as in effect from time to time, as codified in Title 26 of the United States Code, as in effect from time to time. The Department of Revenue may adopt reasonable rules under the Alabama Administrative Procedure Act prescribing operating rules with respect to the adoption by this state for its financial institution excise tax of certain provisions of the laws of the United States relating to the determination of taxable income for federal income tax purposes, similar to those contained in Section 40-18-1.1 to the extent consistent with this chapter. (3) NET INCOME. In the case of a financial institution subject to the tax imposed by this chapter, the term means federal taxable income without the benefit of federal net operating losses, plus the additions prescribed and less the deductions and adjustments allowed by this chapter, as allocated and apportioned to Alabama according to rules adopted by the Department of Revenue pursuant to Section 40-16-4. Financial institutions not subject to the federal income tax shall begin the calculation of net income by performing a pro forma calculation of federal taxable income. (4) TAX YEAR or TAXABLE YEAR. A full period of 12 consecutive months constituting the fiscal year or calendar year of each financial institution subject to the tax imposed by this chapter. In the case of any financial institution taxable under this chapter whose business was conducted only during a fractional period of any year, or a period of less than 12 months resulting from a change in accounting period permitted by applicable federal authorities, a return shall be made as herein provided and the tax computed as herein provided, and such tax as assessed shall be an excise tax for the privilege of doing business in this state for such fractional year. (5) STATE TAX YEAR. The calendar year. (6) TRUST. Any entity which is classified as a trust for federal income tax purposes. (Acts 1935, No. 194, p. 256; Acts 1939, No. 48, p. 56; Acts 1939, No. 369, p. 496; Code 1940, T. 51, §425; Acts 1945, No. 130, p. 129; Acts 1945, No. 319, p. 520; Acts 1955, No. 568, p. 1232; Acts 1957, No. 639, p. 964; Acts 1978, No. 840, p. 1247, §1; Acts 1993, 1st Ex. Sess., No. 93-852, p. 95, §1; Act 2019-284, §2.)

Ala. Code § 40-16-1.1 Taxation of Trust as Financial Institution.

40-16-1.1. Taxation of Trust as Financial Institution. (a) For purposes of this section, “trust” shall have the same meaning given to it in Section 40-18-1. (b) Any trust which would be subject to tax under Chapter 18 but which also is a financial institution shall be taxed as a financial institution under this chapter, applying the applicable provisions of subsections (a), (b), (d), (e), (f), (h), and (i) of Section 40-18-25. Such a trust shall utilize the allocation and apportionment rules found in this chapter. (c) If a person is treated as the owner of any portion of a trust pursuant to 26 U.S.C. §§ 671-679, relating to grantor trusts, and if such person is a financial institution, the person shall take into account the income, deductions, and credits of such trust as provided in 26 U.S.C. in computing its net income under this chapter. Such person also may deduct the administrative and other expenses of the portion of the trust which it is treated as owning. (Act 2006-114, §3.)

Ala. Code § 40-16-1.2 Additional Items Included in Federal Taxable Income; Items Deducted from Federal Taxable Income.

40-16-1.2. Additional Items Included in Federal Taxable Income; Items Deducted from Federal Taxable Income. (a) The following items shall be added to federal taxable income for purposes of computing net income under this chapter: (1) The tax due under this chapter that is deducted in computing federal taxable income. (2) State and local taxes that are deducted for purposes of calculating federal taxable income for which a credit is claimed under Section 40-16-8, to the extent the credit is utilized to reduce the tax owed under this chapter. (3) Refunds of federal income taxes deducted in prior tax periods for purposes of computing the tax due under this chapter. (4) Dividends received from a corporation in which the taxpayer owns less than 20 percent of the stock, by vote and value, but only to the extent the dividends are properly deducted in computing taxable income for federal income tax purposes. (5) State, county, and municipal interest income from loans and securities that is exempt for federal income tax purposes. (6) Any interest that was treated as paid or incurred in the current taxable year under 26 U.S.C. § 163(j)(2). (7) The amount of foreign-derived intangible income and global intangible low-taxed income that was deducted under 26 U.S.C. § 250. (8) The amount of any capital loss carryback or carryforward deducted for federal income tax purposes. (b) The following items shall be deducted from federal taxable income for purposes of computing net income under this chapter: (1) Refunds of the tax due under this chapter that are included in computing federal taxable income. (2) Federal income taxes paid or accrued during the taxpayer’s taxable year in accordance with the taxpayer’s method of accounting. (3) 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. (4) Federal Deposit Insurance Corporation (FDIC) insurance premiums not deductible for federal income tax purposes under 26 U.S.C. § 162(r). (5) Interest not deductible for federal income tax purposes under 26 U.S.C. § 163(j)(1). (6) Interest not deductible for federal income tax purposes under 26 U.S.C. §§ 265 or 291 related to tax-exempt securities. (7) The amount of global intangible low-taxed income that is included in the gross income of such financial institution under 26 U.S.C. § 951A. (8) The amount treated as dividends under 26 U.S.C. § 78. (9) Expenses otherwise deductible that were not deducted for federal income tax purposes as a result of an election to claim a federal income tax credit for those expenses. (10) Solely with respect to credit unions, the amount paid out as dividends on the withdrawable shares of such credit union. (11) The amount of otherwise deductible capital losses incurred during the taxable year that were not deducted for federal income tax purposes. (c) Nothing in this section shall be construed to allow any item to be deducted more than once or to allow a deduction for any item that is excluded from income or to allow any item to be included in the Alabama net income of more than one taxpayer. (Act 2019-284, §3.)

Ala. Code § 40-16-1.3 Net Income of Credit Unions.

40-16-1.3. Net Income of Credit Unions. (a) With respect to credit unions only, net income means 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 as appropriate, less the subtractions specified in subsection (b) and as allocated and apportioned to Alabama according to rules adopted by the Department of Revenue pursuant to Section 40-16-4. (b) Subtractions. The following items shall be subtracted from financial statement income for purposes of computing the net income of a credit union under this chapter: (1) 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. (2) Reasonable additions to regular reserves as defined by the Capital Preservation Plan approved by each credit union’s Board of Directors annually and accepted by the ACUA pursuant to ACUA regulations pertaining to Capital Preservation Plans. Upon withdrawal or reduction of such reserves the amount withdrawn or reduced shall be included in the calculation of taxable income for the tax year in which the withdrawal occurs. Provided that, direct transfers between reserve accounts, including the allowance for loan losses, that are not included in the calculation of net income shall not be includible in the calculation of taxable income. (c) Nothing in this section shall be construed to allow: (1) Any item to be deducted more than once. (2) A deduction for any item that is excluded from income. (3) Any item to be included in the Alabama net income of more than one taxpayer. (d) No assessments of Financial Institution Excise Tax shall be entered or issued and no refunds shall be granted or paid for tax years ending on or before January 1, 2021, to adjust the amounts subtracted from net income of credit unions for additions to reserves, as previously provided in this section. Further, such amount included in any assessment entered prior to January 1, 2021, shall be void and unenforceable and shall be withdrawn or dismissed with prejudice by the department, and any such refund petitions filed prior to January 1, 2021, shall be denied by the department. (Act 2019-284, §3; Act 2021-128, §1.)

Ala. Code § 40-16-2 Production Credit Associations Taxable Under Chapter.

40-16-2. Production Credit Associations Taxable Under Chapter. Production credit associations, incorporated pursuant to the provisions of the act of Congress known as the Farm Credit Act of 1933, are not foreign corporations, and any such association which may become taxable by the state shall be subject to the same taxation imposed upon national banks under the provisions of this chapter, and such associations shall be exempt from all other forms of income, privilege and license taxes imposed by the state. (Acts 1965, No. 276, p. 390.)

Ala. Code § 40-16-3 Returns.

40-16-3. Returns. (a) Every financial institution, no later than the due date, including applicable extensions, for its corresponding federal income tax or federal information return, shall make and file with the Department of Revenue a return, signed under the penalties of perjury by its cashier, treasurer, or other authorized officer or employee, if a corporation, or by a person or authorized employee in charge of the conduct of the business to be taxed if an individual, firm, association, or other legal entity, in such form as may be prescribed by the Department of Revenue, giving such detailed information as the Department of Revenue may in its opinion require to determine the net income of the financial institution for the taxable year, by the net income of which the excise tax is to be measured. (b) Qualified corporate groups, as in this chapter defined, shall have the option to file one excise tax return on a consolidated basis or to file separate returns. Qualified corporate groups electing to file one excise tax return on a consolidated basis shall be assessed no fee for the privilege of filing on a consolidated basis. Newly acquired corporations which have a potential separate return year as well as a consolidated year shall have the option of filing a separate return including all of their income for that year or filing as part of the consolidated group for the entire taxable year. Newly created, controlled corporations shall have the option of filing a separate return including all of their income for that year or filing as part of the consolidated group for the entire taxable year, as determined by the election of the corporate group for that year. (c) In order for financial institution members of a controlled group to be eligible to elect to file on a consolidated basis, the members must meet the following two tests: (1) OWNERSHIP TEST. Includable financial institutions connected through stock ownership with a common parent corporation are includable corporations if: a. 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 or indirectly, applying the attribution rules of 26 U.S.C. § 318, by one or more of the other includable corporations; and b. The common parent owns directly or indirectly, applying the attribution rules of 26 U.S.C. § 318, 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. (2) 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 under this chapter. (d) To the extent operating rules are required for the filing of a consolidated excise tax return, the consolidated return regulations of the Internal Revenue Code and the principles contained therein shall be used as a guideline in the absence of clarifying rules adopted by the Department of Revenue. (e) Any election to file an Alabama consolidated excise tax return pursuant to this section shall be binding on both the Department of Revenue and the Alabama qualified corporate group for a period of not less than 10 taxable years, except that the election shall terminate automatically upon the revocation or termination of its federal consolidated return election. (f) Returns filed inconsistent with this election shall be considered delinquent and subject to the penalties imposed by Section 40-2A-11. (g) The Department of Revenue may adopt reasonable rules as it may deem necessary to determine whether business conducted in this state is properly classified as a financial institution under this chapter which is subject to the excise tax and to determine the net income of the business by which the tax is to be measured. (Acts 1935, No. 194, p. 256; Code 1940, T. 51, §426; Acts 1971, No. 1941, p. 3136; Acts 1978, No. 840, p. 1247, §2; Act 2019-284, §2.)

Ala. Code § 40-16-3.1 Extension of Due Date for Taxpayers of Financial Institution Excise Tax, Tax Years Beginning on or After January 1, 2021.

40-16-3.1. Extension of Due Date for Taxpayers of Financial Institution Excise Tax, Tax Years Beginning on or After January 1, 2021. (a)(1) For tax years beginning on or after January 1, 2021, a financial institution excise taxpayer shall be allowed one month following the due date of the corresponding federal income tax return, including applicable extensions, to file the Alabama financial institution excise tax return as required by Section 40-16-3. (2) For tax years beginning on or after January 1, 2020, but prior to January 1, 2021, the department may allow a financial institution excise taxpayer one additional month following the due date of the corresponding federal income tax return, including applicable extensions, to file the Alabama financial institution excise tax return, upon request by the taxpayer and approval by the department. (b) The extension provided in this section shall not allow a taxpayer to defer payment of a financial institution excise tax liability beyond the original due date provided in Section 40-16-3. (Act 2022-53, §3.)

Ala. Code § 40-16-4 Levy; Reporting of Tax; Promulgation of Rules.

40-16-4. Levy; Reporting of Tax; Promulgation of Rules. (a)(1) Every such financial institution engaging in any of the following businesses: (2) For purposes of the excise tax imposed by this chapter, any financial institution which has income from business activity that is taxable both within and without this state shall allocate and apportion its net income as provided in rules which shall be prescribed by the Department of Revenue, provided that such rules shall not conflict with any provision of this chapter and provided further that if such rules allocate and apportion the net income of the financial institution based, at least in part, on its property in the state, loans and credit card receivables shall be considered part of the financial institution’s property in the state and shall be sourced to the state using the same sourcing methods as the department uses to allocate and apportion a financial institution’s interest receipts from related loans and credit card receivables. (3) The amount of the excise tax shall not be in excess of any limit fixed thereon by any present or future federal statute relating to the taxation of national banks by this state. Under no circumstances will any dividends paid from a financial institution to the common parent corporation of a controlled group of corporations, as defined in Section 40-16-3, be subject to excise tax. (b) The excise tax provided in this chapter shall be reported in the form to be prescribed by the Department of Revenue. The amount shown to be due by the taxpayer’s return shall constitute and create a prima facie liability for the amount on which taxes shall be paid. Where the Department of Revenue determines that the amount due is different from that shown by the taxpayer’s return or where no return is filed, the department may determine the correct amount due pursuant to the procedures set forth in Chapter 2A of this title. (c)(1) The Department of Revenue shall have 120 days from April 20, 2017 to promulgate rules consistent with this section. Such rules shall be promulgated in accordance with the Alabama Administrative Procedure Act and shall be effective for all tax years beginning on or after January 1, 2017. (2) If, on or before December 31, 2030, the Alabama Department of Revenue certifies to the Legislature (1) that the applicable law in a majority of the states, including two states contiguous to Alabama, requires a financial institution to allocate and apportion its net income based at least in part on the institution’s property in that state, and (2) that the related definition of property in each of those states excludes a financial institution’s loans and credit card receivables, then the Alabama Department of Revenue shall promulgate a rule consistent with the applicable law in those states. Any rule promulgated in accordance with the foregoing sentence shall be promulgated in accordance with the Alabama Administrative Procedure Act and shall be effective for all tax years beginning on or after 120 days from the effective date of the rule. (Acts 1935, No. 194, p. 256; Code 1940, T. 51, §427; Acts 1978, No. 840, p. 1247, §3; Acts 1992, No. 92-186, p. 349, §45; Act 99-665, 2nd Sp. Sess., p. 131, §6; Act 99-664, 2nd Sp. Sess., p. 124, §1; Act 2016-283, §1; Act 2017-165, §§1,2,.)

Ala. Code § 40-16-5 When Tax Due; Extension of Time for Payment. [Repealed]

40-16-5. When Tax Due; Extension of Time for Payment. [Repealed] Repealed by Act 2019-284, §4, effective January 1, 2020. (Acts 1935, No. 194, p. 256; Code 1940, T. 51, §428; Acts 1943, No. 524, p. 490; Acts 1978, No. 840, p. 1247, §4; Acts 1992, No. 92-186, p. 349, §46.)

Ala. Code § 40-16-5.1 Payment of Estimated Financial Institution Excise Taxes.

40-16-5.1. Payment of Estimated Financial Institution Excise Taxes. (a) Financial institutions shall pay estimated financial institution excise tax in accordance with 26 U.S.C. § 6655, except the provisions of 26 U.S.C. § 6655(g)(1)(A)(ii) through (iii) shall not apply. The balance of the tax owed, after reduction by the credits allowed by this chapter, and by prior payments including estimated payments as provided in this section, shall be due and paid at the same time as the due date of an original return. (b) For the purposes of this section: (1) Section 40-16-4 shall be substituted when 26 U.S.C. § 6655 refers to Chapter 1; (2) Section 40-16-4 shall be substituted when 26 U.S.C. § 6655 refers to Section 11; (3) The terms section 1201(a) and Subchapter L of Chapter 1 referred to in 26 U.S.C. § 6655(g)(1)(A)(i) shall be ignored for Alabama excise tax purposes; (4) Section 40-16-8 shall be substituted when 26 U.S.C. § 6655(g)(1)(B) refers to Part IV of Subchapter A of Chapter 1; (5) The term carrybacks referred to in 26 U.S.C. § 6655(g)(2)(B)(iii) shall be ignored for Alabama excise tax purposes; (6) Commissioner shall be substituted when 26 U.S.C. § 6655 refers to Secretary. (Act 2019-284, §3.)

Ala. Code § 40-16-6 Remittance and Disposition of Tax.

40-16-6. Remittance and Disposition of Tax. (a) The remittance of the excise tax due under this chapter shall be made to the Department of Revenue at Montgomery, Alabama, with checks payable to the Department of Revenue. (b) The Department of Revenue shall promptly distribute the balance of financial institution excise tax revenue, net of refunds, as of the close of each calendar quarter, with 50 percent of the revenue distributed to the general fund, 33.3 percent distributed to municipalities, and the remaining 16.7 percent distributed to counties. (c) 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. (d) The first 20 percent of total county financial institution excise tax revenue shall be distributed equally among all counties. The remaining 80 percent of 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. (e) No municipality or county within the state may levy or assess any excise tax for the privilege of engaging in a business in addition to that levied and distributed to it as herein provided, except license taxes. However, license taxes on banks shall not be levied in excess of those which may be legally levied pursuant to Section 11-51-130, provided however, that the license authorized by subdivisions (1) to (12), inclusive, of subsection (a) of Section 11-51-130 may be levied only by the municipality where the bank has its principal place of business. (Acts 1935, No. 194, p. 256; Acts 1939, No. 396, p. 517; Code 1940, T. 51, §429; Acts 1943, No. 547, p. 536; Acts 1951, No. 839, p. 1470; Acts 1991, No. 91-478, p. 866, § 1; Act 99-665, 2nd Sp. Sess., p. 131, §6; Act 99-664, 2nd Sp. Sess., p. 124, §1; Act 2019-284, §2.)

Ala. Code § 40-16-8 Exemptions and Credits.

40-16-8. Exemptions and Credits. All moneyed capital employed in the business the privilege of engaging in which is hereby taxed and the shares of all financial institutions, as in this chapter defined, shall be exempted from assessment and payment of ad valorem taxes, except the moneyed capital and shares of any business hereby taxed which fails to make and file the returns required by this chapter and to pay the tax levied by this chapter as and when in this chapter provided. The real estate owned by every such financial institution shall not be exempted. If any other tax other than the privilege tax levied by Article 2 of Chapter 14A, whether on property (other than ad valorem taxes on real estate), income, business or any element thereof, except license taxes not in excess of those heretofore legally levied and in effect, at any time after July 10, 1935, has been, or is at any time hereafter levied by this state or by any political subdivision of this state on any financial institution as in this chapter defined, the amount of such other tax due by such institution shall be credited on account of the tax payable pursuant to the provisions of this chapter. (Acts 1935, No. 194, p. 256; Code 1940, T. 51, §431; Act 99-665, 2nd Sp. Sess., §6.)

Ala. Code § 40-16-9 Tax Credits Applied to State Portion of Tax Liability.

40-16-9. Tax Credits Applied to State Portion of Tax Liability. Notwithstanding any other laws to the contrary, other than the tax credits allowed by Section 40-16-8, any law enacting or amending a tax credit allowed to a financial institution against the financial institution excise tax imposed by this chapter which becomes effective on or after January 1, 2016, shall be applied only to the state portion of the tax liability and shall not offset or reduce the financial institution excise tax distribution made to municipalities and counties pursuant to Section 40-16-6. This section does not amend, repeal, or supersede any financial institution excise tax credit in effect on December 31, 2015. (Act 2016-280, §1.)

Ala. Code § 40-16-10 Computation of Net Income of Financial Institutions.

40-16-10. Computation of Net Income of Financial Institutions. (a) In computing the net income of financial institutions subject to the tax imposed by this chapter, there shall be allowed, in addition to the deductions specified therein, a deduction for the sum of the net operating losses which may be carried forward to the taxable year for which the net income of the financial institution is being computed. (1) The term “net operating loss” for the purposes of this chapter means the amount by which net income of the financial institution, before the deduction allowed by this section, with respect to a taxable year is less than zero. For purposes of this section, the financial institution’s net income shall be determined under this chapter applicable to the year in which the net operating loss arises. (2) A net operating loss shall be carried forward to the earliest subsequent taxable year in which the financial institution has net income greater than zero, determined without taking into account the deduction allowed by this subsection. The amount of a net operating loss which may be carried to any later taxable year shall be the excess of the net operating loss over the sum of the amounts thereof deductible under this subsection in all the taxable years preceding this taxable year. (3) If net operating losses arising in more than one taxable year can be carried forward to a taxable year of the financial institution, the net operating loss arising from the earliest of those years shall be deducted first. (4) The net operating loss allowed by this section shall be limited to sources attributable to Alabama, as determined by applying the allocation and apportionment methodology in the year in which the loss arose pursuant to Section 40-16-4. (5) A net operating loss may be carried forward and deducted only during the 15 consecutive tax years immediately following the tax year in which it arose. (b) In the case of a financial institution classified as an acquiring corporation within the meaning of 26 U.S.C. § 381, or in the case of a financial institution classified as a new loss corporation within the meaning of 26 U.S.C. § 382, or in the case of the recognized built-in gains of a financial institution classified as a gain corporation within the meaning of 26 U.S.C. § 384, only the net operating losses as are allowable in accordance with 26 U.S.C. §§ 381, 382, and 384 shall be allowed as a deduction under this section. This subsection shall be applied before the limitations in the preceding subsection are applied. (c) Net operating losses incurred by members of a qualified corporate group, as defined in Section 40-16-3(c), (including those net operating losses described in subsection (b)) shall be deducted in the following order: (1) Net operating losses shall be carried forward only on account of the member which incurs the loss (including any prior year net operating losses allocated from the parent under subdivision (2), which subsequently became part of the member’s loss carryforward) and shall be deducted prior to consolidating any resulting taxable income with the other members’ income on the consolidated return under Section 40-16-3(b). Any remaining net operating losses of the member shall be carried forward in accordance with this section. (2) Any current year net operating losses of the parent of a qualified corporate group, as defined in Section 40-16-3(c), shall be allocated among the other members of the qualified corporate group based on the percentage which the gross assets of each member of the qualified corporate group bears to the total gross assets of all members of the qualified corporate group, excluding the parent of a qualified corporate group, and shall be deducted prior to consolidating any resulting taxable income with the other members’ income on the consolidated return under Section 40-16-3(b). To the extent this loss described in the preceding sentence creates or increases a loss for a member, such loss becomes part of that member’s net operating loss carryforward from the year of such allocation. (Act 2019-284, §3.)

Ala. Code § 40-16-11 Transition Rules for Financial Institution Excise Tax Reform Act of 2019.

40-16-11. Transition Rules for Financial Institution Excise Tax Reform Act of 2019. This section provides for transition rules for the implementation of the Financial Institution Excise Tax Reform Act of 2019. (1) Act 2019-284 imposes for the first time a system of prepaid estimated tax payments patterned after the federal system and transitions the Financial Institution Excise Tax from the current post-payment system. To account for this transition, the Department of Revenue shall waive both penalties and interest attributable to underpayments of estimated tax payments occurring within the first two applicable tax years and not attributable to an intentional disregard of the law. (2) Act 2019-284’s conformity of the depreciation deduction allowed in the calculation of the tax due under this chapter with the corollary deduction allowed for federal income tax purposes, as well as the act’s express rejection of the federal Tax Cuts and Jobs Act of 2017’s (i) limitations on the deductibility of Federal Deposit Insurance Corporation premiums under 26 U.S.C. § 162(r), (ii) limitations on the deductibility of certain interest under 26 U.S.C. § 163(j), and (iii) inclusion of global intangible low-taxed income (GILTI) under 26 U.S.C. § 951A and deduction of foreign-derived intangible income and GILTI under 26 U.S.C. § 250, are merely a clarification of existing law and shall apply retroactively to all open tax years. (3) The enactment of Section 40-16-10 extends the carryforward period for net operating losses to a maximum of fifteen tax years, while eliminating the financial institution’s ability to carry back net operating losses to the prior two tax years. The fifteen tax year carryforward period shall only apply to net operating losses incurred in tax years beginning after December 31, 2019. The clarification of the ordering rules applicable to net operating losses provided by Section 40-16-10(c) shall apply to all open tax years. (4) In addition to the deductions from federal taxable income provided by Section 40-16-1.2(b), subject to the limitation provided by Section 40-16-1.2(c), 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). For purposes of this subdivision, a “Captive REIT” shall include any 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). For purposes of the definition of Captive REIT in this subdivision, own or control means to own or control directly, indirectly, beneficially, or constructively more than 50 percent of the voting power or value of an entity, applying the attribution rules of 26 U.S.C. § 318, as modified by 26 U.S.C. § 856(d)(5), in determining ownership and control. For purposes of this subdivision, the “applicable percentage” shall be: (i) One hundred percent for tax years beginning after December 31, 2019 and before January 1, 2021; (ii) Eighty percent for tax years beginning after December 31, 2020 and before January 1, 2022; (iii) Sixty percent for tax years beginning after December 31, 2021 and before January 1, 2023; (iv) Forty percent for tax years beginning after December 31, 2022 and before January 1, 2024; (v) Twenty percent for tax years beginning after December 31, 2023 and before January 1, 2025; and (vi) Zero percent for tax years beginning after December 31, 2024. (5) Act 2019-284’s distribution formula percentages, as stated in § 40-16-6, shall apply to the annual 2019 financial institution excise tax distribution. (Act 2019-284, §3.)

Source: Alabama Legislature (alison.legislature.state.al.us)URL: https://alison.legislature.state.al.us/code-of-alabamaFetched: 10/20/2026