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Filing Status. Check the appropriate filing status. ONLY ONE BOX can be

to page 1, line 23.

checked. Filing status 1, Company operating only in Alabama. Filing status 2, Multi-

Schedule B – Allocation of Nonbusiness Income, Loss, and Expense

state company, is for taxpayers whose business activity in Alabama is represented by

The purpose of Schedule B is to report nonbusiness income, nonbusiness losses,

the apportionment percentage (has operations in Alabama and one or more states).

and nonbusiness expenses, as defined by Section 40-27-1, Code of Alabama 1975.

Filing status 3, Separate (Direct) Accounting, should only be used by taxpayers that

Nonbusiness items can be both nonseparately stated items and separately stated

are directly allocating income/loss and have received prior permission from the Ala-

items. Nonbusiness items are not subject to the multistate apportionment require-

bama Commissioner of Revenue or taxpayers that are only allocating nonbusiness

ments of Chapter 27, Title 40, Code of Alabama 1975, but are allocated directly to

items (Sch. B).

Alabama or another state, in accordance with the Multistate Tax Compact (Chapter 27,

Lines 1 – 21. Except for lines 8 and 21 which are totals, enter the amounts from

Title 40, Code of Alabama 1975).

the entity’s Federal Form 1065 on the corresponding Form 65 line. Attach all Federal

Do not complete Schedule B if the entity operates exclusively in Alabama.

Schedules.

Enter under the Nonseparately Stated Items heading on line 1a, line 1b, and

Line 22. Subtract Line 21 from Line 8.

line 1c a description of the nonseparately stated item.

Line 23. Enter the amount of Alabama Nonseparately Stated Reconciliations from

For each nonseparately stated item entered on line 1a, line 1b and line 1c:

Schedule A, Line 9.

1. Enter on Column A the total gross income (from all states – everywhere) from

Line 24. Add lines 22 and 23.

the item.

Line 25. Enter the amount of Income or Loss treated as Nonbusiness Income

2. Enter on Column B only the Alabama gross income from the item.

from Schedule B, Column E, line 1d. Enter a loss amount as a positive amount and

3. Enter on Column C the expenses related to the gross income (everywhere) en-

an income amount as a negative amount.

tered in Column A.

Line 26. Enter the sum of the amounts entered in line 24 and 25.

4. Enter on Column D only the expenses related to the Alabama gross income en-

Line 27. Enter the apportionment factor from Schedule C, line 27.

tered in Column B.

Line 28. Income or (Loss) Apportioned to Alabama. Multiply the amount in line 26

5. Enter on Column E the amount resulting from subtracting the expense amount

by the percentage in line 27.

in Column C from the gross income (everywhere) amount in Column A.

Line 29. Enter the amount from Schedule B, Column F, line 1d.

6. Enter on Column F the amount resulting from subtracting the Alabama expense

Line 30. Enter 100% of the health insurance premiums paid during the taxable

amount in Column D from the Alabama gross income amount in Column B.

year that qualify, under Act Number 2011-155, as health insurance premiums on qual-

Enter on Column E, line 1d, the sum of the amounts entered in Column E on line

ifying employees in connection with an employer-provided health insurance plan. At-

1a, line 1b, and line 1c. The amount entered in Column E, line 1d is the net amount

tach a computation of the amount entered on Line 30 to the return.

of nonseparately stated nonbusiness income items for all states (everywhere). The

Line 31. Enter the sum of the amounts entered in lines 28, 29, and 30. This

amount entered in Column E, line 1d is also entered on page 1, line 25. Please note

amount should also be entered on Schedule K, Line 1.

that when an amount is entered in page 1, line 25, income is entered as a negative

Schedule A-Nonseparately Stated Reconciliation Adjustments.

amount and losses are entered as a positive amount.

The Alabama income tax laws are similar, but not identical, to the federal income

Enter on Column F, line 1d, the sum of the amounts entered in Column F on line

tax laws. It is necessary to make certain adjustments to reconcile federal ordinary

1a, line 1b, and line 1c. The amount entered in Column F, line 1d is the net amount

business income (loss) to total income from all allocations computed in accordance

of nonseparately stated nonbusiness income items to be allocated only to Alabama.

with Alabama income tax laws and rules. Use Schedule A to reconcile such

The amount entered in Column F, line 1d is also entered on page 1, line 29.

differences.

Enter under the Separately Stated Items heading on line 1e, line 1f, and line

1g a description of the separately stated item.

Multistate entities must not use Schedule A to make adjustments for non-ap-

For each separately stated item entered on line 1e, line 1f and line 1g:

portionable (nonbusiness) items. Adjustments for these items must be made

1. Enter on Column A the total gross income (from all states – everywhere) from

on Schedule B.

the item.

Additions to Federal Taxable Income:

2. Enter on Column B only the Alabama gross income from the item.

3. Enter on Column C the expenses related to the gross income (everywhere) en-

Line 1. Addback otherwise deductible related member interest or intangible ex-

tered in Column A.

penses and costs except to the extent the corporation establishes that the expense

4. Enter on Column D only the expenses related to the Alabama gross income en-

satisfies an exception in Section 40-18-24.2. (Schedule PAB must be attached).

tered in Column B.

Line 2. Enter any gain attributable to property purchased and subject to the bonus

5. Enter on Column E the amount resulting from subtracting the expense amount

depreciation or additional 179 expense as allowed by the 2008 Federal Economic

in Column C from the gross income (everywhere) amount in Column A.

Stimulus Act.

6. Enter on Column F the amount resulting from subtracting the Alabama expense

Line 3. Other items required to be added back to federal taxable income to arrive

amount in Column D from the Alabama gross income amount in Column B.

at Alabama taxable income should be entered on this line. Attach supporting

Enter on Column B, line 1h, the sum of the amounts entered in Column B on line

documentation.

1e, line 1f, and line 1g. The amount entered in Column B, line 1h is also entered on

Line 4. Total the amounts reported on lines 1 through 3.

Schedule K, Line 12.

Deductions from Federal Taxable Income:

Enter on Column D, line 1h, the sum of the amounts entered in Column D on line

Line 5. Enter expenses not deductible on the federal income tax return due to an

1e, line 1f, and line 1g. The amount entered in Column D, line 1h is also entered on

election to claim a federal tax credit, i.e., jobs credit, etc.

Schedule K, Line 18.

Line 6. Enter any difference in the Federal recapture amount (reported on line 35,

Enter on Column E, line 1h, the sum of the amounts entered in Column E on line

Part IV, Form 4797) and the Alabama recapture amount due to the basis difference

1e, line 1f, and line 1g. The amount entered in Column E, line 1h is the net amount of

resulting from Alabama’s decoupling from the provisions of the 2008 Federal Eco-

separately stated nonbusiness income items for all states (everywhere).

nomic Stimulus Act or the additional Section 179 expense deduction having been

Enter on Column F, line 1h, the sum of the amounts entered in Column F on line

taken as allowed by the 2008 Federal Economic Stimulus Act. Identify the items of

1e, line 1f, and line 1g. The amount entered in Column F, line 1h is the net amount of

property on an attachment to the return.

separately stated nonbusiness income items to be allocated only to Alabama.

Line 7. Other items required to be added back to federal taxable income to arrive

Schedule C — Apportionment Factor Schedule

at Alabama taxable income should be entered on this line. Attach supporting

documentation.

Do not complete Schedule C if the entity operates exclusively in Alabama. Enter

100% on Schedule C, line 27.

Line 8. Sum the deductions reported on lines 5 through 7.

Line 9. Subtract line 8 from line 4 and enter the result on line 9. If line 8 is larger

The Alabama business activity of a partnership or limited liability company is rep-

than line 4 enclose the amount on line 9 in parentheses. Carry the amount on line 9

resented by its Alabama apportionment factor. With the exception of those special

Form 65 - Instructions - Partnership/limited Liability Company Return Of Income - 2016 Page 2

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