Current through Register Vol. 42, No. 11, August 30, 2024
(1) Nonseparately Stated Income.
Nonseparately stated income for Alabama S corporations will be computed in the
same manner as for individuals, except for those deductions and exemptions
which are not applicable to nonindividuals, such as:
(a) The personal exemption and credit for
dependents allowed by §
40-18-19,
Code of Ala. 1975,
(b) Charitable contributions allowed by
§
40-18-15,
(c) The net operating loss deduction allowed
by §
40-18-15.2,
(d) Medical expenses allowed by §
40-18-15,
(e) Moving expenses allowed by §
40-18-15,
(f) Alimony allowed by §
40-18-15,
(g) Contributions to an Individual Retirement
Account (IRA) allowed by §
40-18-15,
(h) The deduction for certain expenses of
producing income and determining taxes, allowed by §
40-18-15,
and
(i) Depletion on oil and gas
wells allowed by §
40-18-15.
(2) Separately Stated Income.
Certain items of income, loss and deductions are to be passed through to the
individual returns of the shareholders, rather than being deducted in computing
the nonseparately stated income of the S corporation on the Alabama S
corporation return. Separately stated items are those the separate treatment of
which could affect the liability for tax of any shareholder. These items
include:
(a) Income taxes paid to the United
States,
(b) Charitable
contributions,
(c) Depletion on oil
and gas wells, and
(d) All items of
income, loss, expense or deduction, which for the purpose of computing a net
operating loss deduction for an individual would be classified as "nonbusiness"
as defined in Rule
810-3-15-.22.
These items classified as "nonbusiness" for Alabama net operating loss
deduction purposes are usually classified as "portfolio income and expense" on
the federal S corporation return and supporting schedules.
(3) Net Operating Losses. The net operating
loss carryback/carryforward provision for individuals and the net operating
loss carryforward provision for corporations are not applicable to Alabama S
corporations. The yearly losses, if any, of the S corporation are passed
through to the shareholders, and thus are not available at the corporate level
for carryforward. Any losses incurred by a corporation in any years in which
the corporation was not an Alabama S corporation, may not be carried forward to
any years in which the corporation is an Alabama S corporation.
(4) Multistate Operations.
(a) For tax years beginning before January 1,
1990, Alabama S corporations which conducted business in more than one state
were required to compute the income and deductions attributed to Alabama by
allocating and apportioning the income and deductions to Alabama in accordance
with the rules and regulations applicable to foreign corporations at that time.
This includes Alabama S corporations which were created under Alabama law
(domestic corporations).
(b) For
tax years beginning after December 31, 1989 and before January 1, 1997, the
following rules applied for Alabama S corporations which conducted business in
more than one state:
1. The Alabama S
corporation was required to compute each resident shareholder's pro rata share
of the entire income and deductions of the Alabama S corporation.
(i) In computing taxable income under
subparagraph 1., the Alabama S corporation was allowed a deduction for income
taxes paid to states in which it was not treated as an S corporation.
2. The Alabama S corporation was
required to compute each nonresident shareholder's pro rata share of income and
deductions apportioned and allocated to Alabama in accordance with the rules
and regulations applicable to foreign corporations at that time. For
simplicity, compliance with the requirements of the Multistate Tax Compact,
Chapter 27, Title 40, Code of Ala. 1975, will satisfy
the requirement of this subparagraph.
(c) For tax years beginning after December
31, 1996, Alabama S corporations which conduct business in more than one state
shall compute the income, loss, deductions and credits to be attributed to
Alabama in the same manner as provided in accordance with the Multistate Tax
Compact, Chapter 27, Title 40, Code of Ala.
1975.
(d) An Alabama S
corporation is conducting business in more than one state if it meets the
provisions for being taxable in more than one state set out in Rule
810-27-1-4-.03.
(e) Allocation and Apportionment Reporting
Requirements.
1. For tax years beginning
before January 1, 1990, an Alabama S corporation which did business in more
than one state was required to complete the necessary schedules of Form 20S to
compute the apportionment ratios and to apportion and allocate income, loss,
deductions and credits among the states in which the corporation did
business.
2. For tax years
beginning on or after January 1, 1990 and before January 1, 1997, an Alabama S
corporation which did business in more than one state and which had one or more
nonresident shareholders was required to complete the necessary schedules of
Form 20S to compute the apportionment ratios and to apportion and allocate
income, loss, deductions and credits among the states in which the corporation
did business.
3. For tax years
beginning on or after January 1, 1997, an Alabama S corporation doing business
in more than one state shall complete the necessary schedules of Form 20S to
compute the apportionment ratios and to apportion and allocate income, loss,
deductions and credits among the states in which the corporation does
business.
(5)
Elections. Any election required or permitted to be made with respect to the
computation of income, deductions, credits or allowances shall be made by the
Alabama S corporation.
Authors: Verlon R. Frost, Jeff Taylor, Catherine
McCary, Ann Winborne, CPA, Charlotte Jordan, Ed Cutter, CPA
Statutory Authority: Code of Ala.
1975, §§
40-18-161.
40-2A-7(a)(5).
History: Filed November 20, 1985.
Amended: Filed May 15, 1992. Amended: Filed March 4,
1997; effective April 8, 1997. Amended: Filed March 26, 1998;
effective April 30, 1998. Amended: Filed March 31, 2000; effective
May 5, 2000.
