Form Et-1 Instructions - Financial Institution Excise Tax

bama Financial Institution Excise Tax or any taxes taken as a credit on line 33a. The

federal income tax deduction or (refund) from line 12, Schedule M on page 4.

federal income tax deduction must be taken only on line 28, not line 12.

The federal income tax (FIT) paid may be deducted only to the extent that it is ap-

LINE 13. Enter the amount of interest incurred during the year, in accordance with

plicable to the financial institution’s income earned in the State of Alabama. Any al-

Internal Revenue Code §§163, 264 and 265.

location which is necessary shall be determined by applying the ratio of the taxpayer’s

LINE 14 – Contributions. Enter the amount claimed as the charitable contribu-

income in Alabama, before any federal income tax deduction or net operating loss

tion deduction, as allowed by Section 40-16-1(2), Code of Alabama 1975. The char-

(NOL) deduction, from the financial business to the total company income, before

itable contribution deduction is limited to 5% of net income without benefit of the

any federal income tax deduction or NOL deduction. In the case of corporations, the

charitable contribution deduction. The charitable contribution limitation is computed

FIT deduction shall be apportioned on the same basis as provided by Alabama De-

at the group member level, when a consolidated Alabama Form ET-1C is filed by a

partment of Revenue Regulation Number 810-3-35-.01, except that such tax must

qualified corporate group.

be paid during the taxable year.

LINE 15. Enter the amount claimed as depreciation. Depreciation will be com-

LINE 29 – Alabama Income before Net Operating Loss (NOL). Enter the

puted as directed in Alabama Department of Revenue, Regulation Number 810-3-

amount resulting from subtracting line 28 (Federal Income Tax Deduction (Refund))

15-.05, Depreciation, Amortization, and Section 179 Expense, which states: “…there

from line 27 (Alabama Income before Federal Income Tax Deduction).

shall be allowed as a depreciation deduction a reasonable allowance for the ex-

LINE 30 – Alabama NOL Deduction. Enter the Alabama NOL deduction (not to

haustion, wear and tear…in accordance with 26 U.S.C. §§167 and 168…intangible

exceed taxable income). A net operating loss is the excess of allowable deductions

assets which are used in a trade or business or held for the production of income

over the gross income of a taxpayer during a taxable year. Attach a supporting sched-

may be amortized in accordance with 26 U.S.C. §197…A deduction is allowable for

ule showing the amount of NOL incurred for each period and the amount of such loss

the amortization of start-up expenditures in accordance with 26 U.S.C. §195, …a tax-

absorbed in each period. If a NOL originates during a year that a consolidated Ala-

payer may elect to treat the cost of any section 179 property as an expense which is

bama Form ET-1 is filed, the NOL originated must be attributed to the group member

not chargeable to a capital account in accordance with 26 U.S.C. §179.

or members incurring the loss. Subsequent carry back or carryforward of the net op-

Decoupling from the Federal Economic Stimulus Act of 2008. Act Number

erating loss must still be member-specific. The NOL incurred by one group member

2008-549, passed by the Alabama Legislature during the first 2008 Special Session,

must never be used to offset the income of another group member.

decoupled Alabama financial institutions excise tax laws from the bonus deprecia-

A net operating loss for a financial institution will be carried back two years, then

tion and the additional Section 179 expense provisions of the Federal Economic Stim-

forward to the eight succeeding taxable years in chronological order. The law re-

ulus Act of 2008. Include any difference in gain attributable to differences in

garding computing and applying net operating loss carrybacks and carryovers is sim-

depreciation (Economic Stimulus Act of 2008) that would increase Alabama taxable

ilar to federal income tax law concerning net operating losses. Federal rules and

income. Alabama financial institutions excise tax laws will continue to be tied to the

decisions will be considered by the Alabama Department of Revenue in these matters.

federal depreciation rules without consideration of the changes implemented by the

LINE 31 – Alabama Taxable Income. Enter the result of subtracting line 30 (Ala-

Economic Stimulus Act of 2008.

bama NOL Deduction) from line 29 (Alabama Income before Net Operating Loss).

LINE 16. Enter the deduction for advertising.

LINE 32 – Financial Institution Excise Tax. Enter the amount of tax due by

LINE 17. Enter the deduction for pension, profit sharing plans, etc.

multiplying line 31 (Alabama Taxable Income) by the rate of 6.5%, as specified in

LINE 18 – Dividends Deduction. Enter the amount claimed as the dividends re-

Section 40-16-4, Code of Alabama 1975.

ceived deduction allowed by Section 40-16-1(2)(g), Code of Alabama 1975. In order

LINE 33a – Less Taxes Used as Credits. Enter the amount of taxes used as

to qualify, these amounts must be either (1) paid by a corporation organized and ex-

credits against the Financial Institution Excise Tax, and complete Schedule F, Taxes

isting under the laws of the State of Alabama, or (2) dividends in liquidation paid from

Used as Credits, on page 2).

capital. Please also note, Section 40-16-1(2)(i) and (j) allows savings and loan as-

There may be taken as a direct credit against the Alabama Financial Institutions

sociations and credit unions a deduction for amounts paid out as dividends on with-

Excise Tax the amount of taxes (other than the Financial Institution Excise Tax and

drawable shares.

certain license taxes) levied on the financial institution by the State of Alabama or its

LINE 19. Enter the amount of deductions, determined in accordance with federal

political subdivisions. Any tax payment claimed as a direct credit against the Finan-

Internal Revenue Code Section 162, not previously deducted on lines 7 through 18.

cial Institutions Excise Tax may not be also taken as a deduction on line 12.

Please provide an explanation of the different types and amounts of deduc-

The taxes which may currently be claimed as credits rather than as deduc-

tions claimed on line 19.

tions are:

LINE 20 – Total Deductions. Enter the total of the deductions claimed on lines

1. State, county and city sales and use taxes paid on tangible personal property

7 through 19.

purchased and paid for by the financial institution for its consumption;

LINE 21 – Adjusted Total Income or (Loss). Subtract line 20 (Total Deductions)

2. State utility taxes paid on telephone, electrical power, gas or water;

from line 6 (Total Income).

3. Rental or leasing taxes paid directly to the State of Alabama for the privilege

LINE 22 – Net Nonbusiness (Income) or Loss. Enter the net nonbusiness in-

of leasing tangible personal property to others within the State of Alabama.

come or (loss) from line 2, Column E, Schedule K on page 2. Net nonbusiness income

Credits will not be allowed for any taxes not levied directly on the financial

is entered as a negative amount in computing total apportionable income. Net non-

institution. Examples of such indirect taxes are:

business expense or loss is entered as a positive amount in computing total appor-

1. State, county or city sales or use taxes on items purchased for resale such as

tionable income.

checks, promotional items or equipment;

LINE 23 – Apportionable Income. Enter the sum of line 21 (Adjusted Total In-

2. Gross receipts taxes levied on the seller;

come or (Loss) and line 22 (Net Nonbusiness (Income) or Loss).

3. Rental or leasing taxes paid to others;

LINE 24 – Alabama Apportionment Factor. Enter the percentage from line 26,

4. Federal taxes of any nature; and

Schedule L on page 4.

5. Taxes paid to contractors or others on equipment attached to real property or

LINE 25 – Income Apportioned to Alabama. Enter the result from multiplying

in the construction of buildings, etc.

line 23 (Apportionable Income) by line 24 (Alabama Apportionment Factor).

LINE 33b. Capital Tax Credit: Sections 40-18-190 through 40-18-203 provide for

LINE 26 – Net Nonbusiness Income or (Loss) Allocated to this State. Enter

a tax credit against Alabama income tax with respect to income generated by or aris-

the net nonbusiness income or (loss) from line 2, Column F, Schedule K on page 4.

ing out of a qualifying project undertaken by certain existing businesses and certain

Net nonbusiness income is entered as a positive amount in computing Alabama Tax-

new businesses to be located in the state. A statement of intent to invest in a quali-

able Income, and net nonbusiness expense or loss is entered as a negative amount.

fying project must be filed prior to the qualifying project being placed in service and

LINE 27 – Alabama Income before Federal Income Tax Deduction. Enter the

must be approved by the Alabama Department of Revenue prior to the project entity

sum of line 25 (Income Apportioned to Alabama) and line 26 (Net Nonbusiness In-

taking the credit. The allowable credit is up to 5 percent of the qualifying project's al-

come or (Loss) Allocated to this State).

lowable capital costs for each of 20 years. The amount of credit that can be claimed

LINE 28 – Federal Income Tax Deduction (Refund). Enter the amount of the

in any year is limited to the tax liability generated by or arising out of the qualifying

Form Et-1 Instructions - Financial Institution Excise Tax - 2012 Page 3

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