Instructions for Form Et-1 - Financial Institution Excise Tax 2018

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2018
ET-1
I
F
T
P
NSTRUCTIONS
OR
HE
REPARATION OF
A
D
R
FORM
LABAMA
EPARTMENT OF
EVENUE
Financial Institution Excise Tax
INSTRUCTIONS
Alabama Financial Institution Excise Tax law, rules, forms and instructions are available
on the Alabama Department of Revenue’s website at www.revenue.alabama.gov.
What’s New for 2017
Section 40-16-1, Definition of
calendar year.
Financial Institution.
Credit Limitation. Act Number 2016-280 passed the Alabama Legislature dur-
ing the 2016 Regular Session. The act provides that tax credits may only be used
to offset the state portion of the tax liability. For tax credits enacted beginning on or
Section 40-16-1, Code of Alabama 1975, defines the term “financial institution”
after January 1, 2016, financial institution excise taxpayers' tax credits shall be ap-
as follows:
plied only to the state portion of the tax liability and shall not offset or reduce the Fi-
“…(1) FINANCIAL INSTITUTION. Any person, firm, corporation and any legal
nancial Institution Excise tax distribution pursuant to Section 40-16-6, Code of
entity whatsoever doing business in this state as a national banking association,
Alabama 1975.
Loans and Credit Card Receivables Sourcing. Act Number 2017-165 passed
bank, banking association, trust company, industrial or other loan company or build-
or person employing moneyed capital coming into competition with the busi-
ing and loan association, and such term shall likewise include any other institution
the Alabama Legislature during the 2017 Regular Session. The act amends Section
ness of national banks, and shall apply to such person or institution regardless of
40-16-4 of the Code of Alabama 1975, relating to financial institutions with income
taxed within and outside of the state. The act states that if such rules allocate and
what business form and whether or not incorporated, whether of issue or not, and
apportion the net income of the financial institution based on its property in the state,
Section 40-16-4, Statute Imposing the
by whatsoever authority existing…”
loans and credit card receivables shall be considered part of the financial institution’s
Alabama Financial Institution Excise Tax.
property in the state and shall be sourced to the state using the same sourcing meth-
ods as the departments uses to allocate and apportion a financial institution’s interest
receipts from related loans and credit card receivables. The act specify that the ap-
Section 40-16-4, Code of Alabama 1975, imposes an excise tax on financial in-
portionment formula would be applicable to all tax years beginning on or after Jan-
stitutions, specifically, Section 40-16-4(a)(1) states:
uary 1, 2017.
“…Every such financial institution engaging in any of the following businesses:
Federal Income Tax (FIT) Deduction. Alabama Rule 810-3-35-.01 removes
(i) Banking;
methods 1552(a)(2) and 1552(a)(3) in computing the FIT Deduction. For tax years
(ii) Conducting the business of a financial institution as defined in this
beginning on or after August 29, 2016, corporate taxpayers must use the 1552(a)(1)
chapter;
method to determine the amount of applicable FIT Deduction. See Alabama Rule
(iii) Conducting a credit card business through the issuance of credit cards
810-3-35-.01 for additional information.
(iv) Conducting a business employing moneyed capital coming into
to Alabama residents or businesses; or
AMT Check the Box Option. In computing the Federal Income Tax (FIT) De-
competition with the business of national banks
duction, taxpayers must specify whether they paid Alternative Minimum Tax (AMT).
If so, taxpayers must use Alternative Minimum Taxable Income (AMTI) to determine
General Information for
the corporation’s portion of federal income taxes paid.
shall pay to the state annually for each taxable year an excise tax measured by its
Financial Institutions.
net income allocated and apportioned for the taxable year at the rate of six and one-
Activities Not Meeting the
half percent of the net income…”
Definition of Financial Institution.
Alabama Form ET-1 must be filed by taxpayers meeting the definition of finan-
cial institution (as defined in Section 40-16-1, Code of Alabama 1975) which are
16-4, Code of Alabama 1975. See Section 40-16-1, Definition of Financial Insti-
Simply lending money does not qualify a taxpayer as a financial institution, as
doing business in Alabama by engaging in the businesses specified in Section 40-
tution and Section 40-16-4, Statute Imposing the Alabama Financial Institution
the term is defined in Section 40-16-1, Code of Alabama 1975. Also, the results of
Excise Tax, below.
court cases over the years have indicated that “employing moneyed capital coming
into competition with the business of national banks” means the competition with the
national banks must be serious in nature and the capital employed in the competi-
According to Section 40-16-5, Code of Alabama 1975, the Financial Institution
tion must be substantial and similar in size when compared to the capitalization of
Excise Tax is assessed for the privilege of engaging in the business of a financial
the national banks. Therefore, generally, small loan companies, personal loan com-
institution in the State of Alabama for the current State Tax Year (the current calen-
panies, payday loan companies, check cashing companies, title loan companies,
dar year – referred to in these instructions as the Excise Tax Year), and the tax is
cash advance companies, pawn shops and companies providing solely mortgage
assessed in the current Excise Tax Year.
origination services (as opposed to issuing and holding the mortgages) are not con-
The Alabama Department of Revenue administers the Alabama Financial Insti-
sidered to be “employing moneyed capital coming into competition with the busi-
tution Excise Tax. The Alabama Banking Department regulates all state-chartered
ness of national banks” nor are they considered to be a “financial institution” for
banks, trust companies, and various providers of consumer credit.
purposes of the Alabama Financial Institution Excise Tax Law.
Form ET-1 is an annual return due on April 15th of each excise tax year. The Fi-
For purposes of the Alabama Financial Institution Excise Tax, performance of any
nancial Institution Excise Tax is payable on or before April 15th of the excise tax
one of the following activities, by a person, firm, corporation, or legal entity doing
year. The Alabama Taxable Income, computed and reported on the form, is for the
business in the State of Alabama, will not necessarily qualify the taxpayer as a fi-
last taxable year of the financial institution ended prior to April 1, of the excise tax
nancial institution, as the term is specified in Section 40-16-1, Code of Alabama
year. If April 15 falls on a Saturday, Sunday, or state holiday, the return and payment
1975:
will be due the following business day.
Example: The 2018 Alabama Form ET-1 is due on April 15, 2018. Payment of
1. Those activities required to be licensed under the Alabama Small Loan Act
– Title 5, Chapter 18, Code of Alabama 1975;
the tax liability shown on the 2018 Form ET-1 allows the taxpayer to engage in the
business of being a financial institution in the State of Alabama for the 2018 calen-
2. Those activities required to be licensed under the Deferred Presentment
dar year. If the taxpayer is a calendar year taxpayer, the Alabama Taxable Income
Services Act – Title 5, Chapter 18A, Code of Alabama 1975, concerning what are
1
computed and shown on the 2018 Form ET-1 is based on the operations of the 2017
sometimes known as payday loans;
2018
ET-1
I
F
T
P
NSTRUCTIONS
OR
HE
REPARATION OF
A
D
R
FORM
LABAMA
EPARTMENT OF
EVENUE
Financial Institution Excise Tax
INSTRUCTIONS
Alabama Financial Institution Excise Tax law, rules, forms and instructions are available
on the Alabama Department of Revenue’s website at www.revenue.alabama.gov.
What’s New for 2017
Section 40-16-1, Definition of
calendar year.
Financial Institution.
Credit Limitation. Act Number 2016-280 passed the Alabama Legislature dur-
ing the 2016 Regular Session. The act provides that tax credits may only be used
to offset the state portion of the tax liability. For tax credits enacted beginning on or
Section 40-16-1, Code of Alabama 1975, defines the term “financial institution”
after January 1, 2016, financial institution excise taxpayers' tax credits shall be ap-
as follows:
plied only to the state portion of the tax liability and shall not offset or reduce the Fi-
“…(1) FINANCIAL INSTITUTION. Any person, firm, corporation and any legal
nancial Institution Excise tax distribution pursuant to Section 40-16-6, Code of
entity whatsoever doing business in this state as a national banking association,
Alabama 1975.
Loans and Credit Card Receivables Sourcing. Act Number 2017-165 passed
bank, banking association, trust company, industrial or other loan company or build-
or person employing moneyed capital coming into competition with the busi-
ing and loan association, and such term shall likewise include any other institution
the Alabama Legislature during the 2017 Regular Session. The act amends Section
ness of national banks, and shall apply to such person or institution regardless of
40-16-4 of the Code of Alabama 1975, relating to financial institutions with income
taxed within and outside of the state. The act states that if such rules allocate and
what business form and whether or not incorporated, whether of issue or not, and
apportion the net income of the financial institution based on its property in the state,
Section 40-16-4, Statute Imposing the
by whatsoever authority existing…”
loans and credit card receivables shall be considered part of the financial institution’s
Alabama Financial Institution Excise Tax.
property in the state and shall be sourced to the state using the same sourcing meth-
ods as the departments uses to allocate and apportion a financial institution’s interest
receipts from related loans and credit card receivables. The act specify that the ap-
Section 40-16-4, Code of Alabama 1975, imposes an excise tax on financial in-
portionment formula would be applicable to all tax years beginning on or after Jan-
stitutions, specifically, Section 40-16-4(a)(1) states:
uary 1, 2017.
“…Every such financial institution engaging in any of the following businesses:
Federal Income Tax (FIT) Deduction. Alabama Rule 810-3-35-.01 removes
(i) Banking;
methods 1552(a)(2) and 1552(a)(3) in computing the FIT Deduction. For tax years
(ii) Conducting the business of a financial institution as defined in this
beginning on or after August 29, 2016, corporate taxpayers must use the 1552(a)(1)
chapter;
method to determine the amount of applicable FIT Deduction. See Alabama Rule
(iii) Conducting a credit card business through the issuance of credit cards
810-3-35-.01 for additional information.
(iv) Conducting a business employing moneyed capital coming into
to Alabama residents or businesses; or
AMT Check the Box Option. In computing the Federal Income Tax (FIT) De-
competition with the business of national banks
duction, taxpayers must specify whether they paid Alternative Minimum Tax (AMT).
If so, taxpayers must use Alternative Minimum Taxable Income (AMTI) to determine
General Information for
the corporation’s portion of federal income taxes paid.
shall pay to the state annually for each taxable year an excise tax measured by its
Financial Institutions.
net income allocated and apportioned for the taxable year at the rate of six and one-
Activities Not Meeting the
half percent of the net income…”
Definition of Financial Institution.
Alabama Form ET-1 must be filed by taxpayers meeting the definition of finan-
cial institution (as defined in Section 40-16-1, Code of Alabama 1975) which are
16-4, Code of Alabama 1975. See Section 40-16-1, Definition of Financial Insti-
Simply lending money does not qualify a taxpayer as a financial institution, as
doing business in Alabama by engaging in the businesses specified in Section 40-
tution and Section 40-16-4, Statute Imposing the Alabama Financial Institution
the term is defined in Section 40-16-1, Code of Alabama 1975. Also, the results of
Excise Tax, below.
court cases over the years have indicated that “employing moneyed capital coming
into competition with the business of national banks” means the competition with the
national banks must be serious in nature and the capital employed in the competi-
According to Section 40-16-5, Code of Alabama 1975, the Financial Institution
tion must be substantial and similar in size when compared to the capitalization of
Excise Tax is assessed for the privilege of engaging in the business of a financial
the national banks. Therefore, generally, small loan companies, personal loan com-
institution in the State of Alabama for the current State Tax Year (the current calen-
panies, payday loan companies, check cashing companies, title loan companies,
dar year – referred to in these instructions as the Excise Tax Year), and the tax is
cash advance companies, pawn shops and companies providing solely mortgage
assessed in the current Excise Tax Year.
origination services (as opposed to issuing and holding the mortgages) are not con-
The Alabama Department of Revenue administers the Alabama Financial Insti-
sidered to be “employing moneyed capital coming into competition with the busi-
tution Excise Tax. The Alabama Banking Department regulates all state-chartered
ness of national banks” nor are they considered to be a “financial institution” for
banks, trust companies, and various providers of consumer credit.
purposes of the Alabama Financial Institution Excise Tax Law.
Form ET-1 is an annual return due on April 15th of each excise tax year. The Fi-
For purposes of the Alabama Financial Institution Excise Tax, performance of any
nancial Institution Excise Tax is payable on or before April 15th of the excise tax
one of the following activities, by a person, firm, corporation, or legal entity doing
year. The Alabama Taxable Income, computed and reported on the form, is for the
business in the State of Alabama, will not necessarily qualify the taxpayer as a fi-
last taxable year of the financial institution ended prior to April 1, of the excise tax
nancial institution, as the term is specified in Section 40-16-1, Code of Alabama
year. If April 15 falls on a Saturday, Sunday, or state holiday, the return and payment
1975:
will be due the following business day.
Example: The 2018 Alabama Form ET-1 is due on April 15, 2018. Payment of
1. Those activities required to be licensed under the Alabama Small Loan Act
– Title 5, Chapter 18, Code of Alabama 1975;
the tax liability shown on the 2018 Form ET-1 allows the taxpayer to engage in the
business of being a financial institution in the State of Alabama for the 2018 calen-
2. Those activities required to be licensed under the Deferred Presentment
dar year. If the taxpayer is a calendar year taxpayer, the Alabama Taxable Income
Services Act – Title 5, Chapter 18A, Code of Alabama 1975, concerning what are
1
computed and shown on the 2018 Form ET-1 is based on the operations of the 2017
sometimes known as payday loans;
tax return must be attached. Failure to attach the complete federal return and
3. Those activities required to be licensed under the Alabama Consumer Credit
supporting schedules may result in the imposition of delinquent penalties. If
Act – Title 5, Chapter 19, Code of Alabama 1975;
4. Those activities required to be licensed under the Alabama Pawnshop Act –
the taxpayer was included in a consolidated federal corporate income tax return, at-
Title 5, Chapter 19A, Code of Alabama 1975; and,
tach a signed copy of the consolidated return along with the accompanying spread-
sheets showing the taxpayer’s share of the federal affiliated group’s: taxable income,
5. Those activities required to be licensed under the Mortgage Brokers Li-
schedule M-1, M-2, and M-3 adjustments, Schedule D, Schedule UTP, Form 8886,
censing Act – Title 5, Chapter 25, Code of Alabama 1975.
Form 4797, and balance sheet information.
Please refer to each of the above-named laws to identify those entities which
At the top, left-hand corner of page 1 check all applicable boxes if filing an initial,
may be exempt from the licensing requirements of the laws (generally banks are ex-
final, amended return or address change. NOTE: Amended return filings should pro-
empt from the licensing requirements).
vide a detailed explanation for filing amended return, supporting documentation to val-
Example: If the taxpayer is a bank and the bank also performs in the State of
idate amended changes, and computation of additional amount due or refund due.
Alabama those activities required to be licensed under the Alabama Consumer
At the top, right-hand corner of page 1 check the appropriate box indicating a
Credit Act, the taxpayer would meet the definition of “financial institution” specified
calendar-year, fiscal-year, or short-year return. Fill in the blanks indicating the be-
by Section 40-16-1, Code of Alabama 1975, because it is a bank and banks are
ginning and ending dates of the tax period if the return is for a fiscal year or a short
specifically included in the definition. But, if the taxpayer is a limited liability company
year.
and performs in the State of Alabama only those activities required to be licensed
In the top, center block of page 1 enter the taxpayer’s federal business code
under the Alabama Consumer Credit Act, the taxpayer would not meet the defini-
number, its federal employer identification number (FEIN), and its name and mail-
tion of “financial institution” as specified in Section 40-16-1, Code of Alabama 1975.
ing address (with complete zip code). Below the address enter the state of incor-
The taxpayer would be subject to the provisions of the Alabama income tax law,
Annual Consolidated Filing Election and Fee.
poration, date of incorporation, the date the taxpayer qualified to do business in
not the provisions of the Alabama Financial Institution Excise Tax law.
Alabama, and the nature of business being conducted in Alabama.
If this corporation is included in a consolidated federal income tax return, check
Please see instructions for Form ET-1C for information concerning the filing of
the block, and enter the name and FEIN of the common parent corporation.
a consolidated financial institution excise tax return.
If a notification of Final IRS change is attached to the return, check the box.
In order for a qualified corporate group to be eligible to file a consolidated return,
If the taxpayer is filing an Alabama Business Privilege Tax return, check the box
the financial institution members must meet the ownership and filing requirement,
and enter the FEIN used on the Form CPT (business privilege tax return). If the
Extension to File Alabama Form ET-1.
specified in Section 40-16-3, Code of Alabama 1975.
taxpayer does not file a business privilege tax return, do not check the box, leave
the FEIN field blank, and attach a statement to the return explaining why the tax-
payer does not file.
Alabama Form ET-8, Application for Extension of Time for Filing Alabama Fi-
Check the appropriate filing status. ONLY ONE BOX can be checked for the
nancial Institution Excise Return, may be used to request an extension for either 3
corporation’s filing status.
Filing status 1 through 3. Check one of the boxes for filing status 1 through 3
months or 6 months. If requesting a three (3) month extension, 50% of the esti-
mated tax due must be remitted with the extension request on or before April 15th.
if the taxpayer will not file as part of a consolidated Alabama financial excise return.
The balance plus interest must be remitted with the return when filed on or before
Filing status 1, Corporation operating only in Alabama, should be used by taxpay-
July 15th. If requesting a six (6) month extension, the entire estimated tax due must
ers with 100% Alabama activities. Filing status 2, Multistate corporation, is avail-
fore October 15th. Taxpayers who request extension of time to file Alabama
be remitted with the extension request by April 15th. The return will be due on or be-
able as an option to taxpayer whose business activity in Alabama is represented by
Form ET-1 are required to remit Alabama Form ET-8 electronically and any
the apportionment percentage (has operations in Alabama and one or more states).
payments of $750 or more electronically.
Filing status 3, Separate (Direct) Accounting, should only be used by taxpayers that
Payment of Tax
have received prior permission from the Alabama Commissioner of Revenue.
Filing status 4, Proforma return, should be used only by those taxpayers
who have elected to file as part of a consolidated group for Alabama pur-
poses. Taxpayers with a valid election to file as part of a consolidated Alabama re-
The total amount of the excise tax liability for the period is due on or before the
unextended due date of the return. If the return is to be filed under extension, any
turn must mark Filing Status 4 and include the return with Form ET -1 C in order for
liability due should be remitted no later than the original due date of the return.
each company’s return to process correctly. Taxpayers should not check the box for
Section 41-1-20 requires electronic payments for all single business tax pay-
filing status 1 through 3 if they are part of a consolidated filing. In addition to check-
ments of $750 or more. Substantial penalties will be assessed for noncompliance.
ing Filing status 4, Schedule L must be completed by the entity whose business ac-
Payments of $750 or more must be made electronically. Non-electronic payments
tivity in Alabama is represented by the apportionment percentage (has operations
must be remitted with Form FIE-V. DO NOT MAIL FORM FIE-V IF THE PAYMENT
in Alabama and one or more states). Taxpayers with 100% Alabama activities should
IS REMITTED ELECTRONICALLY.
not complete Schedule L. Schedule K should be completed if the taxpayer has re-
Electronic Payment Options available:
ceived prior permission from the Commissioner of Revenue to report utilizing the
• My Alabama Taxes (MAT) – Taxpayers who have an account with the Ala-
Separate (Direct) Accounting. Items reported on Schedule K are excluded from ap-
bama Department of Revenue may register and make electronic payments using
portionable income and are allocated either to Alabama or to another state. See
MAT. Visit the Department’s website at www.revenue.alabama.gov (click the MAT
Rule 810-27-1-4-.01. Please see our website at www.revenue.alabama.gov for in-
icon on the home page).
structions on filing a Consolidated Financial Institution Excise Tax Return.
• ACH Credit – Taxpayers making electronic payments via ACH Credit must be
BE SURE TO FILL OUT ALL APPLICABLE LINES ON PAGE 1 even if detailed
pre-approved by ADOR. To register, complete and submit Form EFT: 001 entitled
schedules are attached. Failure to properly complete the return may result in delin-
EFT Authorization Agreement Form. Visit our website at www.revenue. alabama. gov
Complete lines 1 through 31, and attach detailed schedules as needed.
quent and/or frivolous return penalties.
for additional information.
Technical assistance with making a payment using ACH Credit, call the
Section 40-16-1, Code of Alabama 1975, defines net income for a taxable year
toll free hotline (1-877-256-2447) from 8:00 a.m. through 5:00 p.m. (Central
(net income is referred to as Alabama Taxable Income on the Alabama Form ET-1).
Standard Time).
Section 40-16-4, Code of Alabama 1975, requires the allocation and appor-
Preparation Instructions.
tionment of the net income (taxable income) for a taxable year.
Make check or money order payable to: Alabama Department of Revenue
The Alabama Financial Institution Excise Tax law and the following Alabama
Department of Revenue Rules are available on the Alabama Department of Rev-
Required Attachments. For the Financial Institution Excise Tax return to be
enue website (www.revenue. alabama. gov):
considered complete, a complete signed copy of the applicable federal income
2
Number 810-9-1-.01
Definitions
tangible assets which are used in a trade or business or held for the production of
income may be amortized in accordance with 26 U.S.C. §197…A deduction is al-
Number 810-9-1-.02
Returns
lowable for the amortization of start-up expenditures in accordance with 26 U.S.C.
Number 810-9-1-.03
Refund Claims
§195, …a taxpayer may elect to treat the cost of any Section 179 property as an ex-
Number 810-9-1-.04
Credits Against the Tax
pense which is not chargeable to a capital account in accordance with 26 U.S.C.
Number 810-9-1-.05
Apportionment and Allocation of Net Income of Financial
Decoupling from the Federal Economic Stimulus Act of 2008. Act Number
§179.”
Institutions (For Tax Years Prior to 01/01/2017)
Number 810-9-1-.05
Apportionment and Allocation of Net Income of Financial
2008-549, passed by the Alabama Legislature during the first 2008 Special Ses-
Institutions (For Tax Years 01/01/2017 and Forward)
sion, decoupled Alabama financial institution excise tax laws from the bonus de-
LINE 1 – Interest and Dividends. Enter the amount of interest and dividend
preciation and the additional Section 179 expense provisions of the Federal
Economic Stimulus Act of 2008. Include any difference in gain attributable to dif-
income from:
ferences in depreciation (Economic Stimulus Act of 2008) that would increase Ala-
a. Loans and Discounts
bama taxable income. Alabama financial institution excise tax laws will continue to
b. Obligations of the United States Government
be tied to the federal depreciation rules without consideration of the changes im-
LINE 2 – Dividend Income. Enter the amount of dividend income. Include
c. Obligations of State and Political Subdivisions
plemented by the Economic Stimulus Act of 2008.
LINE 16 – Advertising. Enter the deduction for advertising.
LINE 17 – Pension, Profit Sharing Plans, Etc. Enter the deduction for pen-
gross dividend income on this line, even if the taxpayer is entitled to a correspon-
ding Dividends Received Deduction (which would be properly deducted on line 18).
LINE 3 – Rental Income. Enter the amount of rental income.
sion, profit sharing plans, etc.
LINE 18 – Dividends Deduction. Enter the amount claimed as the dividends
LINE 4 – Gain or (Loss) on Sales of Assets. Enter the gain or (loss) on sale
received deduction allowed by Section 40-16-1(2)(g), Code of Alabama 1975. In
LINE 5 – Other Income. Enter the amount of other income, not previously in-
of assets.
order to qualify, these amounts must be either (1) paid by a corporation organized
cluded in lines 1-4 above. Provide a schedule showing the different sources
and existing under the laws of the State of Alabama, or (2) dividends in liquidation
and amounts totaling the amount entered on line 5.
paid from capital. Please also note, Section 40-16-1(2)(i) and (j) allows savings and
LINE 6 – Total Income. Total the amounts entered on lines 1 through 5, and
loan associations and credit unions a deduction for amounts paid out as dividends
on withdrawable shares.
LINE 19 – Other Deductions. Enter the amount of deductions, determined in
enter the total on line 6.
LINE 7 – Compensation of Officers.
Enter the amount of officer
ducted on lines 7 through 18. Please provide an explanation of the different
accordance with federal Internal Revenue Code Section 162, not previously de-
LINE 8 – Salaries and Wages of Employees. Enter the amount of salaries and
compensation.
types and amounts of deductions claimed on line 19.
LINE 20 – Total Deductions. Enter the total of the deductions claimed on lines
wages.
LINE 9 – Repairs. Enter the amount of repairs.
LINE 10 – Bad Debt. Enter the amount of the bad debts deduction, and attach
7 through 19.
LINE 21 – Adjusted Total Income or (Loss). Subtract line 20 (Total Deduc-
a schedule if the Reserve Method is used. Section 40-16-1(2)(e), Code of Alabama
tions) from line 6 (Total Income).
1975, provides for the deduction of bad debt by the direct charge off method. Sec-
LINE 22 – Net Nonbusiness (Income) or Loss. Enter the net nonbusiness in-
tion 40-16-1(2)(h), Code of Alabama 1975, provides for a reasonable deduction of
bad debts using the reserve method, in the discretion of the Department of Revenue.
come or (loss) from line 2, Column E, Schedule K on page 2. Net nonbusiness in-
The requirements of appropriate regulatory authorities and regulations and rulings
come is entered as a negative amount in computing total apportionable income.
of the Internal Revenue Service will be considered. Any adjustment to the deduc-
Net nonbusiness expense or loss is entered as a positive amount in computing total
tions or provisions for the reserve for bad debts by the federal Internal Revenue
apportionable income.
LINE 23 – Apportionable Income. Enter the sum of line 21 (Adjusted Total In-
Service must be made to similar deductions on the Alabama Financial Institution Ex-
cise Tax returns. The adjustment will be made in the current year by increasing or
come or (Loss) and line 22 (Net Nonbusiness (Income) or Loss).
LINE 24 – Alabama Apportionment Factor. Enter the percentage from line
decreasing the applicable deduction, so that in all cases the reserve balances will
be identical for federal income tax and Alabama Financial Institution Excise Tax pur-
26, Schedule L on page 4.
LINE 25 – Income Apportioned to Alabama. Enter the result from multiply-
poses. Taxpayers using the direct charge off method or the reserve method must,
when requested in writing by the Alabama Department of Revenue, provide a sched-
ing line 23 (Apportionable Income) by line 24 (Alabama Apportionment Factor).
LINE 26 – Net Nonbusiness Income or (Loss) Allocated to this State. Enter
ule detailing the amounts charged off – identifying each loan for which a bad debt
deduction is claimed.
LINE 11 – Rent. Enter the amount of rent expense incurred.
the net nonbusiness income or (loss) from line 2, Column F, Schedule K on page
LINE 12 – Taxes. Enter the actual amount of taxes paid in 2017, and complete
4. Net nonbusiness income is entered as a positive amount in computing Alabama
Taxable Income, and net nonbusiness expense or loss is entered as a negative
Schedule E on page 2. Taxes are deductible only in the year paid and only when
amount.
LINE 27 – Alabama Income before Federal Income Tax Deduction. Enter the
levied on the taxpayer claiming the deduction. Do not include any payment for the
Alabama Financial Institution Excise Tax or any taxes taken as a credit on line 33a.
sum of line 25 (Income Apportioned to Alabama) and line 26 (Net Nonbusiness In-
LINE 13 – Interest. Enter the amount of interest incurred during the year, in ac-
The federal income tax deduction must be taken only on line 28, not line 12.
come or (Loss) Allocated to this State).
LINE 28 – Federal Income Tax Deduction (Refund). Enter the amount of the
LINE 14 – Contributions. Enter the amount claimed as the charitable contri-
cordance with Internal Revenue Code §§163, 264 and 265.
federal income tax deduction or (refund) from line 12, Schedule M on page 4.
The federal income tax (FIT) paid may be deducted only to the extent that it is
bution deduction, as allowed by Section 40-16-1(2), Code of Alabama 1975. The
applicable to the financial institution’s income earned in the State of Alabama. Any
charitable contribution deduction is limited to 5% of net income without benefit of the
allocation which is necessary shall be determined by applying the ratio of the tax-
charitable contribution deduction. The charitable contribution limitation is computed
payer’s income in Alabama, before any federal income tax deduction or net oper-
at the group member level, when a consolidated Alabama Form ET-1C is filed by a
ating loss (NOL) deduction, from the financial business to the total company income,
LINE 15 – Depreciation. Enter the amount claimed as depreciation. Deprecia-
qualified corporate group.
before any federal income tax deduction or NOL deduction. In the case of corpora-
tions, the FIT deduction shall be apportioned on the same basis as provided by Ala-
tion will be computed as directed in Alabama Department of Revenue, Rule Number
bama Department of Revenue Rule Number 810-3-35-.01, except that such tax
810-3-15-.05, Depreciation, Amortization, and Section 179 Expense, which states:
must be paid during the taxable year.
LINE 29 – Alabama Income before Net Operating Loss (NOL). Enter the
“…there shall be allowed as a depreciation deduction a reasonable allowance for
the exhaustion, wear and tear…in accordance with 26 U.S.C. §§167 and 168…in-
3
operating loss being claimed in the current year may have been utilized.
amount resulting from subtracting line 28 (Federal Income Tax Deduction (Refund))
Schedule E – Taxes Deducted. Enter the required information for the taxes ac-
from line 27 (Alabama Income before Federal Income Tax Deduction).
LINE 30 – Alabama NOL Deduction. Enter the Alabama NOL deduction (not
tually paid during the taxable year. The total amount for Schedule E must agree with
the amount entered on line 12, page 1. Attach additional schedules as needed.
SIGNATURE. The Alabama Form ET-1 must be signed by an authorized offi-
to exceed taxable income). A net operating loss is the excess of allowable deduc-
tions over the gross income of a taxpayer during a taxable year. Attach a support-
ing schedule showing the amount of NOL incurred for each period and the amount
cer of the corporation. Enter the date signed and the title of the person whose sig-
nature is affixed.
PAID PREPARER AUTHORIZATION. Above the return signature area is a
of such loss absorbed in each period. If a NOL originates during a year that a con-
solidated Alabama Form ET-1 is filed, the NOL originated must be attributed to the
group member or members incurring the loss. Subsequent carry back or carryfor-
check box which can be used to authorize the Alabama Department of Revenue to
ward of the net operating loss must still be member-specific. The NOL incurred by
is identified in the Paid Preparer’s Use Only section of the return. To represent the
discuss the Alabama Form ET-1 and its attachments with the paid preparer – who
taxpayer before the Alabama Department of Revenue for tax matters related
one group member must never be used to offset the income of another group
member.
to the return, this box must be checked.
PAID PREPARER INFORMATION. Anyone who is paid to prepare the Ala-
A net operating loss for a financial institution will be carried back two years, then
forward to the eight succeeding taxable years in chronological order. The law re-
bama Form ET-1 must sign and provide the information requested in the Paid Pre-
garding computing and applying net operating loss carrybacks and carryovers is
parer’s Use Only section of the Form ET-1. The signature can be made in hand, by
similar to federal income tax law concerning net operating losses. Federal rules and
rubber stamp, by mechanical device, or a computer software program. Paid pre-
decisions will be considered by the Alabama Department of Revenue in these
parers must provide the taxpayer with a copy of the prepared return. Enter the tax-
matters.
LINE 31 – Alabama Taxable Income. Enter the result of subtracting line 30
payer’s representative to contact for information concerning the return along with the
contact person’s email address and telephone number. If the paid preparer will rep-
(Alabama NOL Deduction) from line 29 (Alabama Income before Net Operating
resent the taxpayer for tax matters related to the return, the authorization box on the
LINE 32 – Financial Institution Excise Tax. Enter the amount of tax due by
Loss).
return must be checked in addition to being notated in this section.
Mail Return, Payment and Voucher to:
multiplying line 31 (Alabama Taxable Income) by the rate of 6.5%, as specified in
Section 40-16-4, Code of Alabama 1975.
Alabama Department of Revenue
LINE 33a – Credits (Schedule EC). Enter the amount of credits against the Fi-
FIET Unit
nancial Institution Excise Tax. Schedule EC must be completed if you are claim-
P. O. Box 327439
ing a business credit. Refer to Schedule EC instructions for additional information
Montgomery, AL 36132-7439
on available credits.
Any questions concerning the preparation of the Alabama Form ET-1 should be
LINE 33b – Extension Payment (ET-8). Enter the amount of any tax remitted
directed to the Corporate Compliance Section at (334) 242-1200.
as an extension payment with Form ET-8.
Alabama Financial Institution Excise Tax law, rules, forms and instructions are
LINE 33c – Additional Payments. Enter the amount of any additional tax
available
on
the Alabama
Department
of
Revenue’s
website
at
remitted.
www.revenue.alabama.gov.
Schedule K – Allocation of Nonbusiness Income, Loss, and Expense.
LINE 33d – Total Credits and Payments. Enter the total credits and payments
LINE 34 – Penalty. Enter the total late filing and late payment penalties, as
claimed on lines 33a, 33b, and 33c.
Enter on Schedule K all items of nonbusiness income, nonbusiness loss, and non-
business expense. These items are excluded from apportionable income and are al-
specified in Section 40-2A-11, Code of Alabama 1975. The late filing penalty for an
Rule Number 810-9-1-.05, Apportionment and Allocation of Net Income of Fi-
located either to Alabama or to another state. See Alabama Department of Revenue
Alabama Financial Institution Excise Tax return is 10% of the tax shown due with the
nancial Institutions, for a discussion of the classification of income and expense
return or $50, whichever is greater. The late payment penalty is equal to 1% of the
amount of tax shown due on the return for each month the tax is unpaid – not to ex-
into business and nonbusiness categories and the assignment of nonbusiness items
ceed 25% of the tax amount shown due on the return.
LINE 35 – Interest from April 15 to Date of Payment. Enter the amount of in-
to specific jurisdictions.
Beside the line number in Schedule K, enter the item description.
terest due on the amount of any tax due remitted after April 15. Compute the inter-
In Column A enter the total amount of gross income or loss to be excluded from
est using IRS rates from April 15 of the excise tax year until the date of payment. The
apportionable income.
Alabama interest rate is the same as provided for in IRC Section 6621.
LINE 36 – Total Payment Due/(Refund Due). Subtract line 33d from the sum
In Column B enter the amount of gross income or loss allocable to Alabama.
of lines 32, 34 and 35, and enter the amount here. A negative amount represents
Enter total nonbusiness expense in Column C and any nonbusiness expense al-
an overpayment.
locable to Alabama in Column D. Nonbusiness expense may exceed nonbusiness
ELECTRONIC PAYMENT INDICATOR. Check the box if the payment shown
income and in fact may exist when there is no nonbusiness income.
due on this return was made electronically. Payments of $750 or more must be
Subtract Column C from Column A, and enter the remainder in Column E. Sub-
Schedule A – Distribution Data. Taxpayers conducting business in Alabama
tract Column D from Column B, and enter the remainder in Column F.
made electronically.
Add the amounts in Columns E and F, and enter the totals on line 2. Carry the
are required to provide the percentage of their total business conducted in this state
total of Column E to page 1, line 22. Carry the total of Column F to page 1, line 26.
Schedule L – Alabama Apportionment Factor. The financial institution’s busi-
by the amount of business conducted in each county and municipality. This infor-
mation is captured in Schedule A, and is used to determine how monies collected
ness activity in Alabama is represented by the Alabama Apportionment Factor, which
ceipts factor. See Alabama Department of Revenue Rule Number 810-9-1-.05, Ap-
will be distributed for the tax year.
is computed as the average of: the property factor; the payroll factor; and, the re-
portionment and Allocation of Net Income of Financial Institutions, for detailed
A financial institution that does not maintain an office in Alabama, but is subject
to tax, is not required to complete Schedule A, other than checking the box to indi-
Schedule B – Alabama Net Operating Loss Carryforward Calculation. Net
cate that no such office exists in Alabama.
instructions regarding the items to be included in the numerator and the denomina-
tor of each of these factors.
operating losses will be carried back two years from the year of the loss, and then
For purposes of the Alabama Financial Institution Excise Tax, “business income”
carried forward for eight years. Net operating losses must be carried back or forward
is income arising from transactions and activity in the regular course of the tax-
set the income over the ten year period in chronological order. Taxpayers claim-
only on the account of the member which incurs the loss and must be used to off-
payer’s trade or business and includes income from tangible and intangible property
ing an NOL for a tax period that is more than six years old must attach a copy
if the acquisition, management, and disposition of the property constitute integral
of the Form ET-1 (page 1 only). This includes any tax periods where the net
parts of the taxpayer’s regular trade or business operations. In essence, all income
4
which arises from the conduct of trade or business operations of a taxpayer is busi-
LINE 11. Enter in the appropriate columns the receipts from lease or rental of
ness income. For purposes of administering the Alabama Financial Institution Ex-
cise Tax, the income of the taxpayer is business income unless clearly classifiable
real property.
LINE 12. Enter in the appropriate columns the receipts from lease or rental of
as nonbusiness income, and nonbusiness income means all income other than busi-
Property Factor:
ness income.
LINE 13. Enter in the appropriate columns the amounts of interest from loans
tangible personal property.
For purposes of computing the property factor, real and tangible personal prop-
LINE 14. Enter in the appropriate columns the amounts of interest from loans
secured by real property.
erty mean, respectively, property on which the taxpayer may claim depreciation for
federal income tax purposes, or property to which the taxpayer holds legal title and
not secured by real property.
LINE 15. Enter in the appropriate columns the net gains from the sale of loans.
on which no other person may claim depreciation for federal income tax purposes
LINE 16. Enter in the appropriate columns the amounts of interest from credit
(or could claim depreciation if subject to federal income tax). Real and tangible per-
sonal property do not include coin, currency, or property acquired in lieu of or pur-
LINE 17. Enter in the appropriate columns the net gains from the sale of credit
card receivables and fees charged to card holders.
suant to a foreclosure.
For purposes of computing the property factor, loans include any extension of
card receivables.
LINE 18. Enter in the appropriate columns the amounts of credit card issuer’s
credit resulting from direct negotiations between the taxpayer and its customer, or
the purchase, in whole or in part, of such extension of credit from another or both.
reimbursement fees.
LINE 19. Enter in the appropriate columns receipts from merchant discount.
Loans include participation, syndications, and leases treated as loans for federal
LINE 20. Enter in the appropriate columns the amounts of loan servicing fees
income tax purposes. Loans are valued at their outstanding principal balance, with-
out regard to any reserve for bad debts. Credit card receivables are valued at their
LINE 21. Enter in the appropriate columns the amounts of loan servicing fees
from loans secured by real property.
outstanding principal balance, without regard to any reserve for bad debts.
In the appropriate rows and columns, enter the amounts (at cost, unless stated
from loans not secured by real property.
LINE 22. Enter in the appropriate columns the amounts of interest, dividends,
otherwise) of property available for use in the production of business income, in Ala-
bama at the beginning of the taxable year, in Alabama at the end of the taxable year,
LINE 23. Enter in the appropriate columns the receipts of sales of tangible per-
net gains, and other income from investment and trading assets and activities.
in total for the taxpayer at the beginning of the taxable year, and in total for the tax-
payer at the end of the taxable year, for:
LINE 24. Enter in the appropriate columns the amounts of other business re-
sonal property.
– Loan and credit card receivables,
– Premises and fixed assets,
ceipts, identify the nature and amounts of the different types of receipts, and provide
– Other real estate owned, and
LINE 25a – Total Alabama Receipts. Total the amounts entered in the Ala-
how the receipts are reported on the federal income tax return.
– Other real and tangible personal property.
LINE 5 – Totals. Enter in each column the totals of lines 1 through 4.
LINE 6 – Average Value. Enter in the appropriate column the average value
bama column for lines 11 through 24.
LINE 25b – Total Receipts Everywhere. Total the amounts entered in the
of property in Alabama and Everywhere. Compute the average by totaling the be-
LINE 25c – Alabama Receipts Factor. Divide the amount on line 25a (Total
Everywhere column for lines 11 through 24.
ginning amounts and ending amounts, for the Alabama columns and the Every-
where columns, and then dividing each by 2.
LINE 7 – Annual Rental Expense. In the Alabama and Everywhere Beginning
Alabama Receipts) by the amount on line 25b (Total Receipts Everywhere), and
enter the percentage on line 25c.
LINE 26 – Alabama Apportionment Factor. Divide by 3 (if all 3 factors are uti-
of Year columns, enter the amount of expense for the rental of real or tangible per-
sonal property used in the production of business income. Annualize for short-pe-
lized) the sum of percentages on line 9 (Alabama Property Factor), line 10c (Ala-
riod returns. For both the Alabama column and the Everywhere column, multiply
bama Payroll Factor), and line 25c (Alabama Receipts Factor). Enter the resulting
the annual rental expense by 8, and enter the result in the appropriate Alabama End
Schedule M – Federal Income Tax. This schedule should be used to com-
percentage here and on line 24, page 1.
of Year column or Everywhere End of Year column. The amounts entered in the End
of Year columns represent the capitalized rental value.
LINE 8a – Total Average Property for Alabama. Add the amounts on lines 6
pute the amount of the financial institution's federal income tax deduction allowable
for (apportioned to) Alabama and to offset that deduction with the amount of any re-
LINE 8b – Total Average Property Everywhere. Add the amounts on lines 6
and 7 in the Alabama End of Year column.
Financial Institutions filing a consolidated federal return must complete
fund received in the taxable year.
lines 1-12 of this schedule. Financial Institution's filing separate company fed-
and 7 in the Everywhere End of Year column.
LINE 9 – Alabama Property Factor. Divide the amount on line 8a (Total Av-
eral returns should complete lines 6-12 of this schedule only. Lines 1-5 are
used to compute the amount of the consolidated federal tax attributable to
erage Property for Alabama) by the amount on line 8b (Total Average Property
the company filing Form ET-1.
Payroll Factor:
Everywhere), and enter the percentage on line 9.
If the financial institution is a member of an affiliated group which files a con-
used is the 1552(a)(1) method. The Department no longer accepts the 1552(a)(2)
In computing the payroll factor include wages, salaries, commissions and any
solidated federal return, the approved election made under IRC §1552 that must be
or 1552(a)(3) methods for calculating the federal income tax deduction. In
other form of remuneration paid to employees (including officers of corporations)
for personal services that are included in such employee’s gross income under the
federal Internal Revenue Code. In the case of employees not subject to the federal
using 1552(a)(1), provide a copy of the corporation's federal income tax workpa-
Internal Revenue Code (e.g., those employed in foreign countries), the determina-
pers showing the members of the consolidated federal group. The workpapers
positive amounts only. Losses should be entered as a $0.00. The total federal in-
tion of whether such payments would constitute gross income to such employees
should include the member's share of federal taxable income (line 30 of Form 1120),
under the federal Internal Revenue Code shall be made as though such employees
were subject to the federal Internal Revenue Code.
LINE 10a. Enter in the Alabama column, the amount of wages, salaries and
come tax from this workpaper should be the amount reported on Line 2 of this
schedule.
other compensation paid to employees for the production of business income in
Mark the appropriate box to indicate if the Alternative Minimum Tax (AMT) was
Alabama.
LINE 10b. Enter in the Everywhere column, the total amount of wages, salaries,
paid for the current year. If AMT was paid, use Alternative Minimum Taxation Income
(AMTI) to determine lines 1 and 2 or line 6 below.
LINE 1. Enter the financial institution's separate federal taxable income/tax from
and other compensation the taxpayer paid to employees for the production of busi-
LINE 10c – Alabama Payroll Factor. Divide the amount on line 10a by the
LINE 2. Enter the group's total positive federal taxable income – See Rule 810-
ness income.
line 30 or 31 of the proforma 1120.
amount in line 10b and enter the percentage on line 10c.
3-35-.01(1)(b)3.
LINE 3. Divide the financial institution's separate federal taxable income as
5
Receipts Factor:

Download Instructions for Form Et-1 - Financial Institution Excise Tax 2018

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