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FAQ Categories / Tax: Corporate Income Tax

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.

Yes. If an extension has been granted for federal purposes, the extension is also granted for Alabama purposes; the Federal Form 7004 must be submitted with the Form 20C.

NOTE: This is an extension for filing purposes ONLY. The full amount of the tax liability is due by the original due date of the return.

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.

 

Schedule BC. The Alabama Department of Revenue now requires the use of Schedule BC - Business Credits, 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 BC will carry over to the Form 20C, page 1. Many credits now must be claimed on the taxpayer’s My Alabama Taxes account in order to receive the credit and the Schedule BC attached to the return. For more information on credits, visit ALDOR’s Tax Incentives and see instructions for Schedule BC.

If the payment is $750 or more, payments must be made electronically. For more information, visit ALDOR’s Make A Payment Page or call the EFT unit at 1-877-256-2447 or 334-353-7659.

New taxpayers, who have recently created a corporate income tax account, will receive an Online Filing Information letter. The Online Filing Information letter is for information purposes only and provides the taxpayer with the account number, Sign-on ID, and Access Code which will allow the taxpayer to create an account at My Alabama Taxes.

NOTE: Corporate income tax returns cannot be filed on My Alabama Taxes.

Electronic Payment Options Available:

  • ACH Credit – Taxpayers may remit tax payments by electronic funds transfer (EFT). The taxpayer must be pre-approved by ALDOR. To register, complete and submit Form EFT: EFT Authorization Agreement Form or call the EFT unit at 1-877-256-2447 or 334-353-7659.  For more information on EFT, please go to ALDOR’s Pay by EFT/ACH Page.
  • ACH Debit – Taxpayers making e-payments via ACH Debit must have a Sign On ID and Access Code to login to  My Alabama Taxes. 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.

  • Alabama Interactive – ALDOR will accept e-payments for estimated and automatic extension payments through Alabama Interactive. Visit Tax Estimation or Tax Extension .

Payments less than $750 not remitted electronically must be remitted with Form BIT-V. DO NOT MAIL FORM BIT-V IF THE PAYMENT IS REMITTED ELECTRONICALLY. To obtain Form BIT-V visit revenue.alabama.gov.

 

C-corporations, and those LLCs that have elected to file as a c-corporation, doing business in Alabama or deriving income from sources within Alabama, including income from property located in Alabama and on every corporation licensed or qualified to transact business in Alabama except for those corporations specifically exempted by §40-18-32.

Yes. If the corporation’s tax liability is $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. Please refer to Alabama Code Section 40-18-80.1 for details on the specific requirements.

Alabama Code § 40-18-31.2 creates the factor presence standard for business activity in the state to determine nexus for business income tax, business privilege tax and financial institution excise tax. The section stipulates that the threshold amounts may be adjusted periodically consistent with the Consumer Price Index.

A corporation is deemed to have “substantial nexus” for the tax period in which they exceed the following thresholds for Alabama:

For tax years January 1, 2015 – December 31, 2018:

  • $50,000 of property,
  • $50,000 of payroll,
  • $500,000 of sales, or
  • 25% of the total property, total payroll, or total sales.

 

For tax years beginning on or after January 1, 2019:

  • $54,000 of property,
  • $54,000 of payroll,
  • $538,000 of sales, or
  • 25% of the total property, total payroll, or total sales.

 

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

  • $60,000 of property,
  • $60,000 of payroll,
  • $596,000 of sales, or
  • 25% of the total property, total payroll, or total sales.

 

Corporations organized in Alabama or commercially domiciled in this state have substantial nexus in Alabama.

If a corporation is not organized or commercially domiciled in Alabama, and the activities do not exceed the standard of “mere solicitation of sales” that fall under the protection of PL 86-272, the factor presence nexus standards established for tax years beginning January 1, 2015, forward will not apply.

For assistance in determining nexus and filing responsibilities of a corporation in Alabama, complete the nexus questionnaire online at nexus.revenue.alabama.gov.

For tax periods beginning before January 1, 1999 – No. Alabama’s income tax laws and rules specifically required each corporation to file a separate return with the department (§40-18-39(a) and Rules 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 consolidated filing fee is a maximum of $25,000 due by the extended due date of the return. To make the election, the Alabama Form 20C-CRE must be filed by the due date of the return, including extensions, for the first taxable year for which the election is applicable. The consolidated election is binding for 120 consecutive months (10 years).

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.

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.

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.

Yes. Charitable contributions are deductible to the extent deductible for federal income tax purposes under 26 U.S.C. §170.

No. Alabama law does not require the payment of a minimum corporate income tax.

No. Alabama law does not provide for the carry back of a net operating loss for corporations.

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 an affiliated 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.

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).