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  • Does Alabama provide for a federal income tax deduction?.

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.

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).

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).

Related FAQs in Corporate Income Tax

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.

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.
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.

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 MAT account in order to receive the credit and the Schedule BC attached to the return. For more information on credits, please visit ADOR’s Tax Incentives page and see instructions for Schedule BC.

If the payment is $750 or more, payments must be made electronically. For more information, visit ADOR’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 (MAT).

NOTE: Corporate income tax returns cannot be filed on MAT.

Electronic Payment Options Available:

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 pre-approved by ADOR. To register, complete and submit Form EFT: EFT Authorization Agreement Form .
Alabama Interactive– The Department will accept e-payments for estimated and automatic extension payments through Alabama Interactive. Visit Tax Estimation or Tax Extension .
Official Payments– The Department will accept credit card payments through Official Payments Corporation. Visit Official Payments Corporation . 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.
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 Pay AL Tax . 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.

View information on the Small Business Health Premiums Deduction (Act 2008-559, amended by Act 2011-155). View Form 4020- Small Business Health Insurance Deduction Information.

View information regarding Alabama Consolidated Income Tax Returns.