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Individual & Corporate Income Tax

Alabama Department of Revenue - Corporate Income Tax FAQ

Frequently Asked Questions Corporate Income Tax

New Questions

Filing Requirements

Consolidated Taxpayers

Tax Rates

Addresses

Estimated Tax payments

Net Operating Losses (NOLs)

Deductions and Credits

Where can I find information pertaining to Capital Credits?

IRS Audits

Multistate Tax Compact

EFT Information

 

 

CORPORATE INCOME TAX

FAQ'S

 

  • What are the recent law changes that affect filing a corporate income tax return?
    • Electronic Filing Option. Alabama’s Paperless Filing and Payment System (ACH Debit Method) is no longer available. Effective July 1, 2013, taxpayers are required to remit electronic payments using one of the options listed here.
    • Schedule BC. The Alabama Department of Revenue now requires the use of Schedule BC, Business Credits, when claiming business tax credits. The new schedule allows the taxpayer to compute the total amount of tax credits allowable. The amounts entered on the Schedule BC will carry over to the Form 20C, page 4, Schedule F. This schedule must be submitted with the return to receive credit(s). See instructions for Schedule BC for additional information.
    • Entertainment Industry Incentive Act of 2009. Act Number 2013-34 passed the Alabama Legislature during the 2013 Regular Session. The Act amends Code of Alabama Section 41-7A-43 (Act 2012-212, originally passed in 2009). Act Number 2013-34 clarifies certain expenses allowed to be rebated, retroactive to June 14, 2011.
    • Irrigation Credit. The Alabama Legislature passed Act Number 2013-66 during the 2013 Regular Session. The Act amends Code of Alabama Section 40-18-342 (Act 2012-391, originally passed in 2012). Act Number 2013-66 makes changes to the flow rate of rivers/streams excepted from the reservoir requirements; allowance for the credit to be carried forward for 5 years and pro rata share of the credit on a pass-through basis.
    • Alabama Accountability Act of 2013. The Alabama Legislature passed Act Number 2013-64 during the 2013 Regular Session. The act authorizes a tax credit for contributions to organizations that provide educational scholarships to qualifying schools. The credit is equal to 100% of the total contributions made to a scholarship granting organization for educational scholarships during a taxable year for which the credit is claimed up to 50% of the tax liability of the taxpayer. For more information, please visit the Alabama Accountability Act Guidance page.
  • What are Alabama’s e-filing requirements for corporations?
    • Alabama’s e-filing requirements for corporations can be found here.
  • Is there a time limitation to file my corporate income tax return with a request for a refund?
    • 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.”
  • What steps can be taken to verify that a corporation is in compliance with Alabama’s filing requirements?
  • What is the due date for filing a corporate income tax return?
    • The return is due on the 15th day of the third month following the end of the tax period. Use Form 20C. Taxpayers will be granted one 6 month extension; no extension shall be for more than six months (Alabama Code Section 40-18-39(a)). Alabama is not tied to the federal due dates for cooperatives and non-profits.
  • What are the filing requirements for an exempt organization operating in Alabama?

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

  • Does our corporation have nexus in Alabama ?
    • Generally refer to Public Law 86-272, Bright Line Test, to determine if you have nexus in Alabama. However, there are instances where a taxpayer would normally fall under Public Law 86-272 and may be required to file a corporate return. To determine a corporation’s status, complete and mail in the Nexus questionnaire.
  • What are the filing requirements for a corporation operating in Alabama as a partner in a partnership?
    • 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 Regulation 810-27-1-4-.02 Application of Apportionment and Allocation.
  • Is the corporation required to file a corporation income tax return after it qualifies to do business through the Alabama Secretary of State when the business is either inactive or never began?
    • Yes, if the company has registered or qualified to do business in the state, a Form 20C is required to report no activity and/or business activity as provided by Sections 40-18-2 and 40-18-31, Code of Alabama 1975.
  • Can a consolidated Alabama return be filed?
    • For tax periods beginning before January 1, 1999 – No.  Alabama's income tax laws and regulations specifically required each corporation to file a separate return with the department (§40-18-39(a) and Regulation 810-3-39-.01).
    • For tax period beginning after December 31, 1998 – Yes.  Alabama’s Tax Conformity Act (Act 98-502) allows an Alabama "affiliated group" to elect to file a consolidated Alabama tax return, provided the "group" files a consolidated federal return for the same taxable year.  An "Alabama affiliated group" means a group of corporations that constitute an affiliated group as defined in 26 U.S.C. §1504, one or more members of which are subject to tax under §40-18-31.
    • For tax periods beginning after December 31, 2001 - Yes. Act 2001-1089(HB4) revised the Consolidated filing requirements in Alabama Code Section 40-18-39 for tax periods beginning after December 31, 2001. Alabama consolidated returns can only include Alabama "nexus" companies.
    • Each corporation 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. The filing fee has also been increased from a maximum of $12,500 to a $25,000 maximum. This election is binding for 120 consecutive months (10 years).
  • Where can I find more information pertaining to consolidated corporate returns?
    • Information regarding Alabama Consolidated Income Tax Returns can be found here.
  • What is the corporate income tax rate?
    • For tax years beginning January 1, 2001, the tax rate is 6.5%. For tax years prior to 2001, the tax rate was 5%.
  • • Does Alabama have a minimum corporate income tax?
    • No, Alabama law does not require the payment of a minimum corporate income tax.
  • What is the mailing address for Form 20C?
    • Mail returns with payments and payment vouchers to:
      Alabama Department of Revenue
      Individual and Corporate Tax Division
      Corporate Income Tax
      P.O. Box 327435 Montgomery, AL 36132-7435

    • Mail non-payment and refund returns to:
      Alabama Department of Revenue
      Individual and Corporate Tax Division
      Corporate Income Tax
      P.O. Box 327430
      Montgomery, AL 36132-7430

    • Mail Consolidated Returns and Payments to:
      Alabama Department of Revenue
      Consolidated Business Tax Compliance Unit (CBTCU)
      P.O. Box 327437
      Montgomery, AL 36132-7437
  • What is the correspondence mailing address for the Corporate Income Tax Section?
    • Mail correspondence to:
      Alabama Department of Revenue
      Individual and Corporate Tax Division
      Corporate Income Tax
      P.O. Box 327900
      Montgomery, AL 36132-7900
  • Estimated Tax Payments
    • Yes. If your tax liability is $500 or more you are required to make estimated tax payments. Please refer to Alabama Code Section 40-18-80.1 for details on the specific requirements.
  • Does Alabama allow calculations to determine interest and penalty due to underpayments of estimated tax?
    • Yes, the taxpayer must submit Form 2220AL and the Federal Form 2220 with the return (Form 20C) when filed to compute the required payment and penalty. The taxpayer also has the option to compute their required quarterly installments using an approved federal method (annualized or seasonal). The Form 2220AL will not be accepted after the return (Form 20C) has been submitted.
  • Does Alabama permit the carry back of a net operating loss?
    • No, Alabama law does not provide for the carry back of a net operating loss.
  • 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.
  • Does Alabama provide for a federal income tax deduction?
    • 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.
    • The federal income tax deduction for any taxable year for members of an affiliated group filing a consolidated federal income tax return, shall be determined in accordance with the method elected under 26 U.S.C. §1552 (without regard to any election under 26 U.S.C. §1502) for its consolidated federal return.
    • Corporations which do business in Alabama are allowed to deduct federal income taxes attributable to their Alabama income (Code of Alabama, 1975, §40-18-35(a)(2), and Rule 810-3-35-.01(1)(b).
  • Does Alabama have a contribution deduction limit?
    • Yes, charitable contributions are deductible to the extent deductible for federal income tax purposes under 26 U.S.C. §170.
  • Where can I find information pertaining to Small Business Health Premiums?
    • Information on Small Business Health Premiums can be found here.
  • Where can I find information pertaining to the Reemployment Act of 2010?
    • Information on the Reemployment Act of 2010 can be found here.
  • What are the reporting requirements as the result of an IRS audit?
    • To report changes made by the IRS, a corporation shall file an amended Form 20C or Form 20S for the specific tax period. The following information MUST be included with the amended return (see Regulation 810-3-40-.01(4)):
      1. 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,
      2. A copy of the Form 20C or 20S as originally filed, and
      3. 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:
      1. A listing of the IRS adjustments made to each company in the consolidated group,
      2. A copy of the Federal Form 851, Affiliations Schedule,
      3. A copy of the income statement spread for every company, and
      4. 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 access the additional tax within one year after the Department has been notified.
  • Has Alabama adopted the provisions of the Multistate Tax Compact?
    • Yes, Alabama has adopted the provisions of the Multistate Tax Compact which provides for the allocation and apportionment of income of taxpayers doing business in more than one state (Code of Alabama, 1975, 40-27-1, and Rule 810-27-1-4).
    • 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 (MAT) via Internet.
  • When is electronic funds transfer (EFT) filing required?
    • If your tax liability is $750.00 or more you must remit your tax payment by electronic funds transfer (EFT). Call the EFT unit at 1-877-256-2447 or (334) 353-7659.  For more information on EFT, please go to http://revenue.alabama.gov/eft/eftindex.html.
    • 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 (MAT) via Internet.
  • • Electronic Payment Options Available:
    • Links to all service providers are available at http://revenue.alabama.gov/eservices/
    • ACH Debit - Taxpayers making e-payments via ACH Debit must have a Sign On ID and Access Code to login to My Alabama Taxes (MAT). Pre-registration is not necessary to make a payment on an invoice or assessment.
    • ACH Credit - Taxpayers making e-payments via ACH Credit must be preapproved by ADOR. To register, complete and submit Form EFT:001 entitled EFT Authorization Agreement Form.
    • Alabama Interactive - The Department will accept e-payments for estimated and automatic extension payments through Alabama Interactive. Visit www.alabamainteractive.org/taxestimation  or www.alabamainteractive.org/taxextension.
    • Official Payments - The Department will accept electronic check (e-check) and credit card payments through Official Payments Corporation on the Internet. Visit www.officialpayments.com/echeck. There is a convenience fee for credit card payments. The fee is based on the amount of the tax payment and is paid directly to Official Payments Corporation.
    • Link2Gov -The Department will accept credit card payments through Link2Gov. You may choose to use your Discover/Novus, MasterCard, Visa or American Express card. Visit https://www.altaxpayment.com/. There is a convenience fee for this service. The fee is based on the amount of the tax payment and is paid directly to Link2Gov.
    • Value Payment Systems - The Department will accept credit card payments through Value Payment Systems. You may choose to use your Discover/Novus, MasterCard or Visa card. Value Payment Systems does not accept the American Express card but has a program called BillMeLater. Visit https://www.payaltax.com/. There is a convenience fee for this service. The fee is based on the amount of the tax payment and is paid directly to Value Payment Systems.

Updated last: October 22, 2014