§ 40-18-39 — Corporate Returns

Alabama § 40-18-39

• Jurisdiction: Alabama
• Title 40: Revenue and Taxation
• Ch. 18: Income Taxes
• Art. 1: General Provisions

Text

(a) Except as provided in subsection (c), every corporation, joint stock company, or association subject to income tax under this chapter shall file a return with the Department of Revenue for each taxable year, stating specifically the items of its gross income and the deductions and credits allowed by this chapter. In cases where receivers, trustees in bankruptcy, or assignees are operating the property or business of corporations, such receivers, trustees, or assignees shall file returns for such corporations in the same manner and form as corporations are required to file returns. Any tax due on the basis of such returns filed by receivers, trustees, or assignees shall be collected in the same manner as if collected from the corporations of whose business or property they have custody and control. Returns shall be filed by the same date as the corresponding federal income tax returns are required to be filed as provided under federal law. The Department of Revenue may grant a reasonable extension of time for filing returns under such rules and regulations as it shall prescribe. Except in the case of taxpayers who are abroad, no such extension shall be for more than six months.
(b) As used in this chapter, unless the context requires otherwise:
(1) “Alabama affiliated group” means a group of corporations, each member of which is subject to tax under Section 40-18-31 and Public Law 86-272 (15 U.S.C. §§ 381-384), which are members of an affiliated group as defined in 26 U.S.C. § 1504 and which affiliated group files a federal consolidated corporate income tax return, each member of which:
a. Has the same taxable year;
b. Is a member of the group for the entire taxable year or was a member of the group for a portion of the taxable year if the member was subject to Section 40-18-31 during the entire portion of the taxable year during which it was not a member of the federal consolidated group;
c. Apportions Alabama taxable income or loss separately for each corporation;
d. Allocates taxable income or loss separately for each corporation in accordance with Section 40-27-1, Article IV;
e. Computes apportionable income or loss utilizing separate apportionment factors for each corporation in accordance with Section 40-27-1, Article IV; and
f. Combines and reports taxable income or loss computed in accordance with paragraphs c through e of this subsection on a single return for the Alabama affiliated group;
and which includes all members of the affiliated group included on the federal consolidated income tax return that are eligible under this section to be included in the Alabama affiliated group; but shall not include corporations subject to the insurance premium license tax imposed by Section 27-4A-1 et seq. or the financial institution excise tax imposed by Section 40-16-1 et seq.
(2) “Alabama consolidated return” means an Alabama corporation income tax return filed by or on behalf of the members of an Alabama affiliated group in accordance with this section, pursuant to an election made under subsection (c) below.
(3) “Separate return” means an Alabama corporation income tax return filed by a single corporation in accordance with this chapter.
(4) “Common parent” shall have the meaning given to that term by 26 U.S.C. § 1504(a).
(5) “Treasury regulations” means final and temporary regulations now or hereafter promulgated by the U.S. Treasury Department pursuant to 26 U.S.C. § 1501 et seq. References to applicable Internal Revenue Code sections in this section shall include the related Treasury regulations.
(c)(1) An Alabama affiliated group filing or required to file a federal consolidated income tax return may elect to file an Alabama consolidated return for the same taxable year. However, under no circumstances may the Department of Revenue compel a taxpayer to file an Alabama consolidated return if the taxpayer has not so elected.
(2) Notwithstanding any provision in this section to the contrary, foreign corporations that are members of an Alabama affiliated group electing to file an Alabama consolidated return and not otherwise subject to the business privilege tax levied by Section 40-14A-22 shall not become subject to the business privilege tax by virtue of being a member of an Alabama affiliated group filing an Alabama consolidated return.
(3) All transactions between and among members of the Alabama affiliated group shall be reported on an arm’s length basis consistent with subsection (j) in determining the property, payroll, and sales factors of each member of the Alabama affiliated group, in determining the separate allocation and apportionment of income and loss by each member of the Alabama affiliated group, and in computing taxable income in accordance with Section 40-18-33.
(4) The election made in accordance with this subsection shall be filed by the common parent of the Alabama affiliated group as agent for all members of the Alabama affiliated group, on a form prescribed by the Department of Revenue. If the common parent is not a member of the Alabama affiliated group, the members shall designate to the Department of Revenue which member of the Alabama affiliated group shall serve in that role for purposes of this section. The election and designation of common parent, if required, shall be filed with the department on or before the due date of the Alabama consolidated return, including extensions, for the first taxable year for which the election is made and is to be effective.
(5) Each member of the Alabama affiliated group shall determine and allocate and apportion its separate income and loss under Chapter 27 before consolidation. For purposes of allocation and apportionment, each member of the Alabama affiliated group shall be considered a separate taxpayer. Any taxable loss of a member of the Alabama affiliated group shall be deductible against the taxable income of any other member of the Alabama affiliated group only if and to the extent such loss is apportioned and allocated to Alabama.
(6) The tax liability of the Alabama affiliated group shall be determined by applying the rate specified in Section 40-18-31 to the taxable income of the Alabama affiliated group. The separate taxable income or loss of each corporation that is included in the Alabama affiliated group shall be included in the consolidated taxable income or loss to the extent that its taxable income or loss is separately apportioned or allocated to the State of Alabama. The separate taxable income or loss of each member of the Alabama affiliated group, and the separate business and nonbusiness income of each member, shall be computed and determined in accordance with this chapter and with the rules of allocation and apportionment under Section 40-27-1, Article IV, and the regulations promulgated thereunder by the Department of Revenue.
(7) Any election to file an Alabama consolidated return pursuant to this subsection shall be binding on both the Department of Revenue and the Alabama affiliated group for a period beginning with the first month of the first taxable year for which the election is made and ending with the conclusion of the taxable year in which the one hundred twentieth consecutive calendar month expires, except that the election shall terminate automatically upon the revocation or termination of its federal consolidated return election. If an election made pursuant to this subsection is terminated by an Alabama affiliated group by virtue of the revocation or termination of its federal or Alabama consolidated return election, no member of the Alabama affiliated group may be included in an Alabama consolidated return filed by the Alabama affiliated group, or by another Alabama affiliated group with the same common parent or a successor to the same common parent, before the sixty-first month beginning after the first taxable year for which the election was revoked; provided, however, that the Department of Revenue may waive application of this provision to any corporation or Alabama affiliated group for any period, consistent with the provisions of 26 U.S.C. § 1504.
(8) An Alabama affiliated group that has made an Alabama consolidated return election under this subsection shall be assessed an annual fee for the privilege of filing an Alabama consolidated return, which shall be assessed, collected, and distributed as an income tax but shall be due and payable at the time the return is due, including any extensions thereof. The annual fee shall be a graduated fee based upon the aggregate amount of total assets, determined in accordance with Treasury Department Form 1120 or any successor form, of the Alabama affiliated group for the taxable year to which the fee relates, as set out below:
Total Assets
Annual Fee
$0 to $2,500,000
$5,000
$2,500,001 to $5,000,000
$10,000
$5,000,001 to $7,500,000
$15,000
$7,500,001 to $10,000,000
$20,000
$10,000,001 and over
$25,000
(d) Each corporation included as part of an Alabama affiliated group filing an Alabama consolidated return shall be jointly and severally liable for the Alabama income tax liability of the Alabama affiliated group with respect to the taxable year, and the fee prescribed above; except that any corporation which was not a member of the Alabama affiliated group for the entire taxable year shall be jointly and severally liable only for the portion of the Alabama consolidated income tax liability attributable to that portion of the year during which the corporation was a member of the Alabama affiliated group, prorated on a daily basis.
(e) Every corporation return or report required by this chapter shall be executed by one of the following officers of the corporation: The president, vice-president, secretary, treasurer, assistant secretary, assistant treasurer, or chief accounting or financial officer, except that in the case of an Alabama affiliated group filing an Alabama consolidated return, one of the above-described officers of the common parent of the Alabama affiliated group may execute the return on behalf of the Alabama affiliated group. The Department of Revenue may require a further or supplemental report of information and data necessary for computation of the tax.
(f) If the taxpayer has requested an extension of time for the filing of a separate or Alabama consolidated return, the period during which such return will be considered timely filed shall not expire until 10 days after the Department of Revenue mails to the taxpayer a rejection of its request for an extension of time for filing such return.
(g) If, in a taxable year preceding the filing of the first Alabama consolidated return for the Alabama affiliated group of which the corporation is a member, (1) the corporation realized a gain or loss on a transaction; (2) the corporation was subject to tax under Section 40-18-31 in the year; (3) the transaction was treated as a deferred intercompany transaction for federal income tax purposes; and (4) the transaction was not deferred for Alabama income tax purposes, the taxable income and basis in the hands of the Alabama affiliated group shall be adjusted to reflect the different treatment of the transaction and any property acquired or disposed of in the transaction.
(h) If, in a taxable year before the corporation became a member of an Alabama affiliated group that has elected to file an Alabama consolidated return, the corporation incurred a net operating loss, the deductibility of the loss on the Alabama consolidated return shall be limited to only the amount necessary to reduce to zero the Alabama taxable income, calculated on a separate return basis, of the corporation that incurred the net operating loss. Except as provided in the preceding sentence, the separate return limitation year (“SRLY”) rules contained in 26 U.S.C. § 1502 shall apply.
(i) Nothing in this section shall be construed as allowing or requiring the filing of a combined income tax return under the unitary business concept.
(j) The Department of Revenue shall promulgate regulations interpreting the provisions of this section that are consistent, to the maximum extent possible, with applicable Treasury regulations. The regulations shall further provide that, if the commissioner, for the tax year in question, establishes that one or more members of an Alabama affiliated group have engaged in any nonarm’s-length transaction that causes a material distortion of income allocated or apportioned to this state, the commissioner may deny retroactively, for the taxable year or years in which the material distortion occurs or occurred, the consolidation election of any member of an Alabama affiliated group, in order to fairly represent the tax base attributable to this state.
(k) Notwithstanding subdivision (c) (7), due to the material change in the criteria for qualification as a member of an Alabama affiliated group, an Alabama affiliated group filing an Alabama consolidated return under this section, prior to its amendment by Act 2001-1089, shall have the option either to terminate its election with respect to tax years after the period covered by the last Alabama consolidated return due under this section prior to its amendment, or to re-elect under the revised criteria imposed by Act 2001-1089 and to begin another 120 calendar month election period. The decision of an Alabama affiliated group currently filing an Alabama consolidated income tax return to opt out of the Alabama consolidated return election shall be evidenced by written notice thereof to the department. Such notice shall be filed by March 15, 2002, or the due date, with extensions, of the last consolidated income tax return due to be filed under the law prior to its amendment by Act 2001-1089, whichever date occurs last. The failure to timely file such notice shall be deemed an election by those members of the Alabama affiliated group that are subject to tax under Section 40-18-31 and otherwise qualify under this section as members of an Alabama affiliated group to file an Alabama consolidated return under this section, as amended, including a new 120-calendar month election period under subdivision (c)(7).

Legislative History

Acts 1935, No. 194, p. 256; Code 1940, T. 51, §406; Acts 1971, No. 1940, p. 3135; Acts 1985, No. 85-515, p. 517, §19; Act 98-502, p. 1083, §1; Act 2000-705, p. 1442, §3; Act 2001-1089, 4th Sp. Sess., p. 1113, §1; Act 2016-412, §1.)