Alabama --Corporate Income Tax

Tuesday, July 11, 2006

An out-of-state subsidiary included on a taxpayer's federal consolidated return was not a financial institution subject to the Alabama financial institution excise tax (FIET) and, therefore, was required to be included in the taxpayer's Alabama consolidated corporate income tax return. Consequently, the taxpayer was required to include billions of dollars in its consolidated taxable income for the tax years at issue. In addition, treatment of the net operating losses (NOLs) incurred by other subsidiaries prior to their acquisition by the taxpayer and inclusion on the taxpayer's consolidated return were subject to the IRC Sec. 382 NOL limitation rules incorporated by Alabama, rather than the IRC Sec. 1502 separate return year limitation (SRYL) rules also incorporated by Alabama. Because Alabama has not enacted any statutes or adopted regulations subjecting the NOL limitations to apportionment, the full amount of the limitation applied on the federal return may be applied to the taxpayer's apportioned NOL claimed on the Alabama consolidated return.