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;

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