Schedule Qip-C Instructions - Qualified Investment Partnership Certification

7. Deposits and other obligations of banks and other financial institutions;

the nonresident individual must establish those losses by filing an Alabama individual

8. Stock and bond index securities, future contracts, derivative securities, war-

income tax return.

rants or options on securities, and, other similar financial securities and instruments;

The QIP Alabama income tax reporting requirements do not change the Alabama

9. And, other similar or related financial or investments contracts, instruments, or

income tax return filing requirements for business entities that own an interest in a QIP.

securities.

Status of Consent Agreements (Alabama

QIS Restrictions.

Schedule NRA) Previously Filed for

Subchapter K Entities.

The term “qualifying investment securities” does not include:

1. An investment in a captive REIT, as defined by §40-18-1.

Any consent agreements filed by a subchapter K entity, as defined in §40-18-1,

2. An interest in a partnership unless the partnership is a Qualified Investment

Code of Alabama 1975, for its nonresident members prior to the passage of the En-

Partnership, as defined in §40-24.2.

tertainment Industry Incentive Act of 2009 by the Alabama Legislature are void, effec-

3. Loans that are not debt securities.

tive for tax years beginning after December 31, 2009.

4. Deposits with a financial institution or bank that are not regulated by the United

Revenue Commissioner’s Authority to Correct

States government, a state, or by any other political subdivision thereof.

Tax Avoidance Efforts by Taxpayers.

A QIP Must File an Alabama

In order to correct the effect and result of a tax-avoidance or a tax abusive arrange-

Partnership Income Tax Return.

ment, or series of transactions, the Commissioner of Revenue shall have the author-

A QIP must file an annual Alabama partnership income tax return, properly report-

ity to distribute, apportion, or allocate the gross income of any pass-through entity,

ing the required K-1 information for each resident member and each nonresident mem-

QIP, or pass-through entity member in order to clearly, fairly, and equitably reflect the

ber, which held an interest in the QIP, at any time during the tax period.

income of any entity, pass-through entity, QIP, or QIP member, whose income may

A QIP must file an annual composite income tax return, as required by §40-18-

have been significantly distorted by the application of the tax-avoidance or tax abusive

24.2., if the QIP is required to make a composite payment for a nonresident member.

arrangement, or series of transactions. The Commissioner of Revenue may recast

The allocation and apportionment requirements set out in the Multi-state Tax Com-

QIP transactions if it is determined the transactions do not have a substantial busi-

pact, codified in Chapter 27, Title 40, Code of Alabama 1975, and all rules pertaining

ness purpose or it is determined that the form of the transactions yield results that

to such laws are applicable to Alabama income tax returns required to be filed Quali-

have the substance of tax-avoidance or tax abuse.

fied Investment Partnerships.

The Commissioner of Revenue may revoke an entity’s QIP status for one or more

Taxpayer Treatment of QIP Income.

tax periods if it is determined that the entity did not meet the QIP requirements for

those tax periods.

In accordance with §40-18-24.3, Code of Alabama 1975, a nonresident member of

General Instructions

a QIP will be exempt from Alabama income tax on its distributive share of QIP income

unless the nonresident member actively participates in the day-to-day management of

Page 1 – Heading. Please check the appropriate box indicating if the taxable year

the QIP or the QIP invests in the qualifying investment securities of an entity that is ma-

for the return is a calendar year, a short year or a fiscal year. Please provide the be-

jority owned by the nonresident member.

ginning date and the ending date of the taxable year, if the taxable year is other than

The term “majority owned” is defined in §40-18-24.3, and includes the attribution

a calendar year.

rules of 26 U.S.C. §318.

Page 1 – Line 1. Please enter the legal name of the partnership and the FEIN of

Income from a QIP is taxable to a nonresident member of the QIP if the income is

the partnership.

from investment activity that is interrelated with an Alabama trade or business in which

Page 1 – Line 2. Please enter the Average Qualifying Asset Percentage for the

the nonresident member owns an interest even if the primary activities of the trade or

Taxable Year from page 2, line 2n, of the return.

business are separate and distinct from the acts of acquiring, managing, or disposing

Page 1 – Line 3. Please enter the Qualifying Gross Income Percentage for the

of qualified investment securities.

Taxable year from page 2, line 3g, of the return.

Income from a QIP is taxable to a nonresident member of the QIP if any part of the

Page 1 – Lines 4 through 7. Please check the appropriate boxes and provide the

qualifying investment securities of the QIP are acquired with the working capital of an

name and tax ID number for the applicable nonresident owners or members. If more

Alabama trade or business in which the nonresident member owns an interest.

room is needed please provide the requested information as an attachment to the Ala-

A financial institution, as defined in §40-16-1, if a nonresident member of a QIP, is

bama partnership income tax return.

taxed on its distributive share of income from a QIP if it participates in the management

Page 1 – Signature Area. Please provide the signature and information

of the investment activities of the QIP; if it is engaged in a unitary business with another

requested.

taxpayer that participates in managing the investment activities of the QIP; or, if the fi-

Page 2 – Line 2. QIP Asset Test. Please provide the information for each column

nancial institution has income from Alabama sources.

as of the beginning of the taxable year and as of the end of each month of the taxable

A corporation, as defined in §40-18-1, if a nonresident member of a QIP, is taxed

year. The percentage required for line 2n is an average of the percentages entered

on its distributive share of income from a QIP if it participates in the management of

on Lines 2a through 2m. If quarterly figures are being used, complete line 2a begin-

the investment activities of the QIP; if it is engaged in a unitary business with another

ning of the year information, lines 2b through 2e one for each quarter and line 2n Av-

taxpayer that participates in managing the investment activities of the QIP; or, if the cor-

erage Qualifying Asset Percentage for the Taxable Year.

poration has income from Alabama sources.

Page 2 – Line 3. QIP Gross Income Test. Please enter the qualifying income for

Every nonresident member of a QIP that has Alabama source income must file an

the taxable year as requested on lines 3a through 3f. Please provide a total of the

Alabama income tax return and report the Alabama source income even if the income

qualifying income for the taxable year on line 3e. Please enter the gross income for

earned in Alabama is included on a composite return filed by the QIP, unless the mem-

the taxable year on line 3f. Please enter, as a percentage on Line 3g, the amount en-

ber is a non-resident individual who has no other Alabama source income. For a non-

tered on line 3e (Total Qualifying Income for the Taxable Year) divided by the amount

resident individual to have the benefit of any net operating losses generated by a QIP,

entered on line 3f (Gross Income for the Taxable Year).

Schedule Qip-C Instructions - Qualified Investment Partnership Certification - 2011 Page 2

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