Form 20c - Schedule Ab - Add-Back Form With Instructions

10 In order to qualify for the exemption presented in §40-18-35(b)(3), Line 9B must be greater than zero and an informed corporate officer must sign the

statement below, executed under penalty of perjury. With respect to the transaction(s) giving rise to the related member’s interest/intangible expenses

and costs, including both the direct interest/intangible expense transaction(s) between the taxpayer and the related member and any prior organization-

al restructuring transaction(s) that facilitated such direct interest/intangible expense transactions, tax avoidance (which included the avoidance of a

meaningful amount of Alabama tax) was not a principal motivating factor.

Signature ______________________________________________________________________________

Date ___________________________

Title ___________________________________________________________________________________

11 Determining Your Exempt Amount

Exempt Amount. Enter the greater of Lines 4G, 5A, 9A or 9B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(Enter this amount on Form 20C, Schedule A, Line 6b.)

THIS FORM MUST BE ATTACHED TO FORM 20C.

Instructions

Establishment of Qualification for §40-18-35(b) Exceptions

Pursuant to §40-18-35(b) and Regulation 810-3-35-.02, related

partner’s ownership percentage of the partnership.

member interest and/or intangible expenses must be added

back to the taxpayer’s apportionable income, unless the tax-

Section 4 – Exemption related to §40-18-35(b)(1)

payer “shows” or “establishes” that it satisfies an exception

described in §40-18-35-(b) and Reg. 810-3-35-.02. If the tax-

To verify that the related member intangible/interest expense

payer incurred related member intangible and/or interest

qualifies for the exception in §40-18-35(b)(1), please provide

expenses that were not added back to apportionable income

the following:

on its Alabama Corporate Income Tax Return, it must establish

that it satisfies an exception. The possible exceptions are list-

A. The jurisdiction(s) where the recipient related member is

ed below:

“subject to tax.” The recipient related member interest/

intangible income must be “subject to tax” on a post-

Section 4 – The recipient related member’s corresponding

allocation and apportionment basis in these jurisdic-

item of income was, post-allocation and apportionment subject

tions. A document listing the applicable jurisdictions may

to a tax on net income in Alabama or another state or a foreign

be attached if the space provided is not sufficient. Do not

nation (of which, the recipient related member is a resident)

include consolidated/combined return jurisdictions

which has in force an income tax treaty with the United States.

where intercompany expenses are eliminated or are

§40-18-35(b)(1).

offset.

Section 5 – The taxpayer establishes that the add-back of

B. The amount of expense the taxpayer paid to the recipient

interest and/or intangible expenses is unreasonable or the

related member, but is not required to add back pursuant to

Commissioner of Revenue and the taxpayer have agreed, in

§40-18-35(b)(1).

writing, to an Alternative Adjustment Agreement. §40-18-

35(b)(2).

C. If the recipient related member files in a jurisdiction where

Section 6 – The recipient related member is a) not primarily

intangible and/or interest income is allocated rather than

engaged in the acquisition, use, licensing, etc. of intangible

apportioned, enter the amount of intangible and/or interest

property or the financing of related entities and b) the underly-

income allocated to this jurisdiction.

ing transaction(s) giving rise to the related member

intangible/interest expenses did not have as a principal busi-

D. Subtract the intangible/interest income allocated by the

ness purpose the avoidance of Alabama tax. §40-18-35(b)(3).

recipient related member on Line 4C from the total amount

of interest and/or intangible expense paid by the taxpayer

General Instructions

on Line 4B.

1. A separate Schedule AB must be completed for each

E. Enter the sum of all recipient related member apportion-

recipient related member.

ment factors for the jurisdictions listed on Line 4A.

2. If a partnership makes interest/intangible payments to a

F. Multiply the sum of all apportionment factors on Line 4E by

related member, Form AB must be attached to each part-

the Adjusted Intangible/Interest Amount on Line 4D.

ner’s Form 20C.

3. For partnership purposes, to determine Lines 2A and

G. Add the amount allocated to jurisdiction(s) on Line 4C and

2B, multiply the total interest/intangible payment by the

the amount apportioned to jurisdiction(s) on Line 4F.

Form 20c - Schedule Ab - Add-Back Form With Instructions - 2005 Page 2

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