ADOR - Individual and Corporate Tax Division What's New for 2008

Individual and Corporate Tax Division

What's New for 2009 Tax Year

Information on new forms, law changes, or other changes to the Individual & Corporate Tax Forms for the 2009 tax season.

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Business Privilege Tax

Form Changes

Book Value of Investments by the taxpayer in the equity of other taxpayers doing business in Alabama - This exclusion has been removed on Page 2, Part B (Exclusion and Deductions), Line 2 of Forms CPT, BPT-IN and PPT.

Property Owner's Checkbox - A checkbox for Property Owners has been removed from the the Forms BPT-IN, CPT, and PPT.

Legal Name of Taxpayer - The "Legal Name of Taxpayer" has been changed to "Legal Name of Business Entity".

Automatic Six-Month Extension to File Form CPT and PPT - Effective with taxable years beginning on or after January 1, 2009, the filing of a Form PSE will no longer be required in order to obtain an extension to file the business privilege tax return. According to Rule 810-2-8-.06 any taxpayer required to file a business privilege tax return will be granted an automatic six month extension of time for filing the return. While an automatic extension is in place for the filing of the annual business privilege tax return, payment of the total tax due (including any corporate annual report fees) must be received on or before the original due date of the return. Payments made for a taxable year in which the automatic extension provision is utilized are referred to as automatic extension payments. Form BPT-V must accompany all business privilege tax payments, unless payments are made electronically.

Form BPT-IN will be used for all entities filing the initial return. The Forms PPT and CPT will no longer be used for initial returns. The checkboxes on these returns have been removed.

Form BPT-V - Business Privilege Tax Voucher is required to submit return and automatic extension payments due with the 2010 Business Privilege tax returns. DO NOT USE THE FORM BIT-V TO PAY YOUR BUSINESS PRIVILEGE TAXES.

FEIN to Use for Completing Business Privilege Tax Returns - The taxpayer’s federal employer identification number (FEIN) is required to complete Form CPT and Form PPT. Enter “applied for” if an FEIN will be assigned to the taxpayer. Check the box (FEIN Not Required) if a FEIN will not be assigned to the taxpayer and enter the BPT (Business Privilege Tax) account number on Form PPT or CPT, Line 3d or Form BPT-IN, Line 3c. Single member limited liability companies should not use their owner’s FEIN or Social Security Number.

BPT (Business Privilege Tax) Account Number applies to the Forms BPT-IN, PPT and CPT. The BPT (Business Privilege Tax) account number is used only if the taxpayer does not have a FEIN (Federal Employer Identification Number). The account number is issued when the account is opened and is provided in the notice advising the taxpayer of the Business Privilege Tax liability. The account number is also provided in the letter notifying the taxpayer of a Sign-On ID and an Access Code for using the Electronic Funds Transfer (EFT) System.

Taxable Year Information - The Determination Period” box has been removed on the Forms CPT and PPT. Boxes for Calendar Year, Fiscal Year, Amended Return with ending dates populated have been added. The determination period is defined in Section 40-14A-1, Code of Alabama 1975, as the taxpayer’s taxable year next preceding the taxpayer’s current taxable year. (Generally, it is the taxable year that just ended.) For more information on the Determination Period, please see the Business Privilege Tax Forms Instructions (for CPT and PPT) and the BPT-IN instructions.

Schedule BPT-E - The Form BPT-E (Family LLE Election) is no longer a form but a schedule that needs to be attached to the return. Single member LLC's that are treated as a disregarded entity for federal income tax purposes do not qualify for this limitation in accordance with Section 40-14A-1(h). The Signature, Date, and Title lines were removed from Schedule BPT-E. The signature on page 1 is certification that the profits and capital interests of the entity were calculated using the ownership rules of 26 U.S.C. Section 318, without regard to the 50% limitation contained in 26 U.S.C. Section 318(a)(2)(C) and 26 U.S.C. Section 318(a)(3)(C).

Credit Card Payments - You may be able to use your credit card to pay your tax liability with Official Payments Corporation, Link 2 Gov and Value Payment Systems. You may choose to use your Discover/Novus, MasterCard, Visa or American Express card. Value Payment Systems does not accept American Express but has a program called BillMeLater. There is a convenience fee for these services that is paid Official Payments Corporation, Link 2 Gov or Value Payment Systems.

Official Payments Corporation: Visit www.officialpayments.com or call 1-800-272-9829. If you choose to use the phone method, you will need to enter the Alabama Jurisdiction Code which is 1101.

Link2Gov: Visit www.ALTaxPayment.com or call 1-866-972-9829.

ValuePaymentSystems: Visit http://www.payaltax.com/

Financial Institution Excise Tax

Decoupling from the Federal Depreciation and Section 179 Expense Deduction Rules - The Alabama Legislature decoupled Alabama Income Tax Law from the bonus depreciation and additional Section 179 expense deductions for the federal Economic Stimulus Act of 2008. As a result, the 2010 Form ET-1 provide a means to record Alabama-allowed depreciation on line 15. Also, as a result of the decoupling, assets disposed of might have an Alabama basis different from the federal basis, resulting in a gain or loss for Alabama income tax purposes that might differ from the gain or loss for federal income tax purposes. As of the time, the Alabama Legislature has passed no other legislation decoupling Alabama Income Tax Law from the federal depreciation and Section 179 expense deduction rules that changed for 2009 and forward.

Form FIE-V - Financial Institution Excise Tax Payment Voucher is required to submit payments due with all 2010 excise tax returns. Any excise tax return payment mailed to the Department should be remitted with Form FIE-V. Payments of $750 or more are required to be remitted electronically. If the payment is made electronically, do not remit Form FIE-V.

Corporate Income Tax

Qualifying Employers Deduction for Employee Health Insurance (Small Business Health Insurance Premiums Deduction) - The Alabama Legislature passed Act Number 2008-559 during the 2008 legislative session. The new law allows qualifying employers to deduct an additional fifty percent (50%) of the amount paid as health insurance premiums on qualifying employees in connection with an employer-provided health insurance plan. Qualifying employers are defined in the law as employers with less than 25 employees. Qualifying employees are defined in the law as those employees that are Alabama residents, earn no more than $50,000 of wages, and report no more than $75,000 of Alabama Adjusted Gross Income ($150,000 if married filing jointly). The new deduction should be claimed on the Alabama corporate income tax return, Form 20C, page 1, line 11b. See §40-18-15.3, Code of Alabama 1975, Alabama Department of Revenue Regulation Number 810-3-15.3-.01, Deductions for Small Business Health Insurance Premiums, and the Small Business Health Insurance Premiums Deduction Page for additional information.

Decoupling from the Federal Depreciation and Section 179 Expense Deduction Rules - The Alabama Legislature decoupled Alabama Income Tax Law from the bonus depreciation and additional Section 179 expense deductions for the federal Economic Stimulus Act of 2008. As a result, the 2009 Forms 20C provides a means to record Alabama-allowed depreciation on Schedule A.. Also, as a result of the decoupling, assets disposed of might have an Alabama basis different from the federal basis, resulting in a gain or loss for Alabama income tax purposes that might differ from the gain or loss for federal income tax purposes. Form 20C, Schedule A, lines 4b and 21 have been provided to make the required adjustment. As of the time, the Alabama Legislature has passed no other legislation decoupling Alabama Income Tax Law from the federal depreciation and Section 179 expense deduction rules that changed for 2009 and forward.

Entertainment Industry Incentive Act of 2009 - The Alabama Legislature passed Act Number 2009-144 during the 2009 Regular Session stating a Qualified Production Company is entitled to a rebate for Production Expenditures. The rebate is equal to 25 percent (25%) of the State-Certified Production’s Production Expenditures excluding payroll paid to residents of Alabama plus 35 percent (35%) of all payroll paid to residents of Alabama for the State-Certified Production, provided the total Production Expenditures for a project equal or exceed at least five hundred thousand dollars ($500,000), but do not exceed ten million dollars ($10,000,000).

Form BIT-V - Taxpayers with a business income tax payment of less than $750 must complete Form BIT-V, Alabama Business Income Tax Voucher, to submit single business tax payments (including automatic extension payments) due on your 2009 return.

Electronic Filing - The Alabama Department of Revenue is accepting the electronic filing of the Alabama Corporate Income Tax Returns, schedules, forms, and correspondence for tax years 2007 and forward. For additional information and links to software providers, visit the Corporate E-file main page at http://www.revenue.alabama.gov/income tax/corpefilemain.htm.

Captive Real Estate Investment Trusts (Captive REITS) - Captive REITS are defined in Section 40-18-1, Code of Alabama, 1975. When filing an Alabama Form 20C return, Captive REITS are required to add to income the amount of the Dividends Paid Deduction.

Automatic Six-month Extension to File the Form 20C - An automatic extension of six months has been granted to file the Alabama Form 20C Return, but the full amount of the tax due for a tax year is due, in full, by the original due date of the return. If the total of the estimated tax payments made for a tax year is less than the amount of tax due for the tax year, then an automatic extension payment in the amount of the tax deficiency is due by the original due date of the return for the tax year.

Form 20C-C - is now used to file your Consolidated Corporation Income Tax Return.In order for Form 20C-C to be complete, a Proforma Form 20C should be completed, including all appropriate schedules, for each separate nexus member of the Alabama Affiliated Group (AAG) and attached behind Form 20C-C. Any Form 20C-C filed without the completed and attached 20C’s for the separate members of the AAG, will be considered incomplete. See instructions for Form 20C-C for additional information.

Form 20C-AS - Alabama Affiliations Schedule has been included on page 2 of Form 20C-C, Consolidated Corporation Income Tax Return to replace Form 20C-AAGIS for tax year 2008 and forward.

Credit Card Payments - You may be able to use your credit card to pay your tax liability with Official Payments Corporation, Link 2 Gov and Value Payment Systems. You may choose to use your Discover/Novus, MasterCard, Visa or American Express card. Value Payment Systems does not accept American Express but has a program called BillMeLater. There is a convenience fee for these services that is paid Official Payments Corporation, Link 2 Gov or Value Payment Systems.

Official Payments Corporation: Visit www.officialpayments.com or call 1-800-272-9829. If you choose to use the phone method, you will need to enter the Alabama Jurisdiction Code which is 1101.

Link2Gov: Visit www.ALTaxPayment.com or call 1-866-972-9829.

ValuePaymentSystems: Visit http://www.payaltax.com/

Individual Income Tax

Military Spouses Residency Relief Act (Form 40NR Only) - During the last session of the United States Congress, the “Military Spouses Residency Relief Act” (Public Law 111-97) was passed and signed in to law by President Obama. Under this Act, the income for services performed by the spouse of a service member shall not be deemed to be income for services performed or from sources within a tax jurisdiction of the United States if the spouse is not a resident of the jurisdiction in which the income is earned because the spouse is in the jurisdiction solely to be with the service member serving in compliance with military orders. This law was retroactive to January 1, 2009.

Since Alabama tax may have been withheld for tax year 2009 on spouses that qualify for this exemption, a 2009 Alabama non-resident (Form 40NR) income tax return must be filed to claim a refund of the Alabama taxes withheld. It is very important that if the qualifying spouse will be working in Alabama in 2010 that they complete and give to their employer a new Form A-4 with the appropriate box checked claiming exemption under the “Military Spouses Residency Relief Act”. Taxpayers filing an Alabama income tax return under this Act must use the following procedures to complete their tax return:

Taxpayer must file a Form 40NR.

The Alabama withholding tax must be entered on page 1, line 5, column A.

All wages (both spouses if a joint return) must be entered on page 1, line 5, column B.

All Alabama wages including those of the qualifying spouse must be entered on page 1, line 5, column C.

On page 2, Part I, line 8, column C enter the Alabama wages of the qualifying spouse as a negative figure. Also write or type “Military Spouses Residency Relief Act” in the space provided on line 8.

Complete the rest of the return as per the instructions in the tax booklet or form.

A copy of Form DD2058 indicating the state of legal residence of the spouse in the military must be attached.

Qualified Mortgage Interest Premiums - If you qualify for the Mortgage Interest Credit on your Federal return, the total interest you paid (before the credit) is deductible for Alabama purposes. This deduction can be taken on Schedule A, Line 13 of Form 40 or 40NR.

Federal Tax Liability Deduction - The Federal Income Tax Deduction is now computed using a worksheet. This worksheet is located in the Form 40, 40A and 40NR instruction booklets. On the Form 40NR, The amount computed from the worksheet is prorated for non-residents.

Direct Deposits (Refunds) - Due to changes in the electronic banking rules, the Alabama Department of Revenue will no longer allow direct deposits to or through foreign financial institutions. A checkbox has been added on Page 2, Part IV of the Form 40 to answer the question "Is this refund going to to through an account that is located outside of the United States?". If the answer to this question is "yes", you will be issued a paper check.

ACH Debit Payments - All taxpayers who are required to pay or select to pay via EFT will be required to state whether the payment transaction being submitted is an International ACH Transaction (IAT) by answering the following question," Will this payment be funded by money received from a financial institution located outside of the territorial jurisdiction of the United States?. If the taxpayer answers "Yes" to this question, the transaction is an IAT transaction and the payment being submitted will be required to made via ACH Credit. ACH payment method requires pre-registration and Department approval. For more information on ACH Credit payments, please contact our EFT Unit at 1-800-322-4106, and press option 7.

Health Insurance Deduction - You may deduct 50 percent of the premiums you pay for health insurance if you work for an employer that has less than 25 employees.

Deduction for Education Savings Programs - Alabama taxpayers may deduct up to $5,000 per year or $10,000 if joint filers, for contributions made after Dec. 31, 2007, to the Alabama Prepaid Affordable College Tuition Program (PACT) or the Alabama College Education Savings Program.

Automatic Six-Month Extension to File - If you know you cannot file your return by the due date, you do not need to file for an extension. You will automatically be granted an extension until October 15, 2010. If you anticipate that you will owe additional tax on your return you should submit your payment with a payment voucher (Form 40V) by April 15, 2010. Except in cases where taxpayers are abroad, no extension will be granted for more than 6 months. An extension means only that you will not be assessed a penalty for filing your return after the due date. Interest on the additional tax due from the due date of the return and any penalties will be assessed if applicable to your return.

Estimates - You may now file and pay your estimated tax electronically by visiting https://www.alabamainteractive.org/taxestimation/

Form 40V - If making a payment with your original or amended return (for 2008 and forward), you MUST complete Form 40V. Submit Form 40V along with your payment, loose in the envelope with your return. If you electronically filed your return and are making a payment by check or money order, you must complete a Form 40V. If you are making a payment by credit card or E-Check, a Form 40V is not required. If you are making an automatic extension payment, you also must use Form 40V unless it is made electronically.

Refund Status - You can check the status of your current year refund by calling 1-800-558-3912 or online at https://www.revenue.alabama.gov/Refunds/refundstatus.aspx.

Credit Card Payments - You may be able to use your credit card to pay your tax liability with Official Payments Corporation, Link 2 Gov and Value Payment Systems. You may choose to use your Discover/Novus, MasterCard, Visa or American Express card. Value Payment Systems does not accept American Express but has a program called BillMeLater. There is a convenience fee for these services that is paid Official Payments Corporation, Link 2 Gov or Value Payment Systems.

Official Payments Corporation: Visit www.officialpayments.com or call 1-800-272-9829. If you choose to use the phone method, you will need to enter the Alabama Jurisdiction Code which is 1100.

Link2Gov: Visit www.ALTaxPayment.com or call 1-866-972-9829.

ValuePaymentSystems: Visit http://www.payaltax.com/

Pass-Thru Entities

Qualified Investment Partnerships - The Alabama Legislature passed the Entertainment Industry Incentive Act of 2009 during the regular 2009 legislative session. The law, Act Number 2009-144, created an entity referred to as a Qualified Investment Partnership(QIP). The new law creates §40-18-24.2, Code of Alabama 1975, which generally defines a QIP as a partnership or other entity classified as a subchapter K entity, or a business trust as defined in §40-18-1, Code of Alabama 1975, that for a tax period meets the gross income and asset requirements for a Qualified Investment Partnership as required by §40-18-24.2; and, for which an authorized officer, partner, member or manager of the entity has certified for the tax period that the entity meets the gross income and asset requirements. Proper certification of a QIP requires the completion of Alabama Schedule QIP-C, Qualified Investment Partnership Certification, which must be filed by the due date of the Alabama partnership income tax return for the entity. The requirements concerning the Alabama QIP are similar to the qualified investment partnership provisions in other states, but are not necessarily the same. Instructions for the preparation of Alabama Schedule QIP-C are available on the Department’s website, along with additional information concerning the Alabama QIP. Alabama Form 65 and Schedule K-1 for Alabama Form 65 have been revised to accommodate the QIP income tax return requirements. An Alabama partnership return filed by a QIP must be indicated by completing the QIP indicator on page one of the Form 65 and on each K-1 accompanying the return. Regulations to implement the new law have not been finalized at this date. Copies of the draft versions of these regulations are available at www.revenue.alabama.gov

New Composite Payment and Return Requirements for Partnerships - The Entertainment Industry Incentive Act of 2009, Alabama Act Number 2009-144, also created new composite payment and return requirements for partnerships. Under the new law, a partnership, or other entity classified as a Subchapter K entity, is required to file a composite return and make composite payments on behalf of its nonresident owners or members if there are one or more nonresident owners or members at anytime during the taxable year. The law specifically exempts estates, trusts, and business trusts from the requirement to file a composite return and make a composite payment. The law generally exempts Alabama QIPs from the composite payment and return requirement. No changes have been made to the law concerning composite payment and returns for Alabama S corporations. The instructions for TY 2009 Alabama Form PTE-C, Nonresident Composite Payment Return are available on the Department’s website, along with additional information concerning the new composite payment and return requirements for partnerships. Regulations to implement the new law have not been finalized at this date. Copies of the draft versions of these regulations are available at www.revenue.alabama.gov.

Qualifying Employers Deduction for Employee Health Insurance (Small Business Health Insurance Premiums Deduction) - The Alabama Legislature passed Act Number 2008-559 during the 2008 legislative session. The new law allows qualifying employers to deduct an additional fifty percent (50%) of the amount paid as health insurance premiums on qualifying employees in connection with an employer-provided health insurance plan. Qualifying employers are defined in the law as employers with less than 25 employees. Qualifying employees are defined in the law as those employees that are Alabama residents, earn no more than $50,000 of wages, and report no more than $75,000 of Alabama Adjusted Gross Income ($150,000 if married filing jointly). The new deduction is claimed on the Alabama partnership return on Schedule K, Line 10 (Small Business Health Insurance Premiums) on Forms 65 and 20S. See §40-18-15.3, Code of Alabama 1975, Alabama Department of Revenue Regulation Number 810-3-15.3-.01, Deductions for Small Business Health Insurance Premiums, and the Small Business Health Insurance Premiums Deduction Page for additional information.

Decoupling from the Federal Depreciation and Section 179 Expense Deduction Rules - The Alabama Legislature decoupled Alabama Income Tax Law from the bonus depreciation and additional Section 179 expense deductions for the federal Economic Stimulus Act of 2008. As a result, the 2009 Forms 65 and 20S provide a means to record Alabama-allowed depreciation on Schedule A, line 7a (Form 65) and Schedule A, line 8a (Form 20S). Also, as a result of the decoupling, assets disposed of might have an Alabama basis different from the federal basis, resulting in a gain or loss for Alabama income tax purposes that might differ from the gain or loss for federal income tax purposes. Schedule A, line 7b (Form 65) and Schedule A, line 8b (Form 20S) have been provided to make the required adjustment. As of the time, the Alabama Legislature has passed no other legislation decoupling Alabama Income Tax Law from the federal depreciation and Section 179 expense deduction rules that changed for 2009 and forward.

New "Required Entity Information" page (Forms 65 and PTEC) - This new page requests the following information:

List of general partners,

Other states where the partnership/LLC operates,

Other countries where the partnership/LLC operates,

Partnership/LLC investments in other pass through entities

Electronic Filing - The Alabama Department of Revenue is accepting the electronic filing of the Alabama Partnership (Form 65) and Corporate Income Tax (Form 20S) returns, schedules, forms, and correspondence for tax years 2007 and forward. The PTE-C (Non-Resident Composite) can be electronically filed for tax year 2008 and forward. For additional information and links to software providers, visit the Corporate E-file main page at http://www.revenue.alabama.gov/income tax/corpefilemain.htm.

Automatic Five-Month Extension to File Forms 41 and 65 - The Forms 4868A and 20E are no longer required to be completed to request an extension of time to file the Forms 41 or 65. A five month extension of time for filing Form 41and 65 will be granted automatically. However, the extension of time for filing the return is not an extension of time for payment of tax.The amount of tax due must be paid on or before the original due date of the return without considering the extension of time to file the return. Automatic Extension payments can be made using the Form FDT-V for Form 41 and Form BIT-V for Form 65.

Automatic Six-Month Extension to File Form 20S - The Form 20E or 7004 are no longer required to request an extension of time to file the 20S. A six month extension of time for filing Form 20S will be granted automatically. However, the extension of time for filing the return is not an extension of time for payment of tax. The amount of tax due must be paid on or before the original due date of the return without considering the extension of time to file the return. The automatic extension payments can be made using the Form BIT-V.

Estimated Payments - Estimated payments for Form PTEC and Form 20S must be made using the business income tax voucher Form BIT-V. Voluntary estimate payments for the Form 41 can be made using the Fiduciary Income Tax Voucher Form FDT-V.

Return Payments - Payment of amounts over $750 must be made electronically. Payment of amounts less than $750 made with the Form 20S and Form PTEC must be accompanied by the business income tax voucher Form BIT-V. The voucher is available under Forms at www.revenue.alabama.gov.

Form FDT-V - Taxpayers making a payment for taxes due on a Form 41 return or as an estimated tax payment on the return must complete and file Form FDT-V, unless the payment is made electronically.

Credit Card Payments - You may be able to use your credit card to pay your tax liability with Official Payments Corporation, Link 2 Gov and Value Payment Systems. You may choose to use your Discover/Novus, MasterCard, Visa or American Express card. Value Payment Systems does not accept American Express but has a program called BillMeLater. There is a convenience fee for these services that is paid Official Payments Corporation, Link 2 Gov or Value Payment Systems.

Official Payments Corporation: Visit www.officialpayments.com or call 1-800-272-9829. If you choose to use the phone method, you will need to enter the Alabama Jurisdiction Code which is 1101.

Link2Gov: Visit www.ALTaxPayment.com or call 1-866-972-9829.

ValuePaymentSystems: Visit http://www.payaltax.com/

Withholding Tax

Lower E-filing Requirement for Employers/Filing Agents - Effective January 1, 2010, employers and filing agents who have issued 50 or more Alabama W2’s (and/or 1099’s with Alabama income tax withheld) must electronically file this information through the Department’s Website.

Withholding Booklet - Effective December 10, 2009, the withholding booklet has been revised. An updated copy can be downloaded at http://www.revenue.alabama.gov/Withholding/index.html

Bulk Filer Registration for Accountants and Tax filing Services - Effective April 7, 2008, accountants or tax filing services who file withholding tax returns and payments on behalf of employers must register with the Department as a bulk filer and must utilize their bulk filer registration when filing withholding tax returns on behalf of their clients. For more information about bulk filing, go to http://www.revenue.alabama.gov/withholding/bulkfl.html.

Updated last: January 15, 2009