HB347 Alabama 2011 Session

Summary

Primary Sponsor

Artis McCampbellRepresentative

Democrat

Session

Regular Session 2011

Title

Corporate income tax, net operating loss may be carried forward and allowed as a deduction only by the corporation that sustained the loss, Sec. 40-18-35.1 am'd.

Summary

HB347 would limit net operating loss (NOL) deductions to the original loss-sustaining Alabama corporation, not to acquirers or surviving corporations after mergers.

What This Bill Does

If enacted, NOLs could be carried forward and deducted for up to 15 consecutive years, but only against Alabama-source income. When multiple NOLs exist, the earliest losses are deducted first. In mergers, only the surviving corporation that sustained the loss may carry forward and deduct the NOL; the NOL cannot be carried by the merged or acquiring entity. There is also a rule barring NOL deductions for tax years beginning in 2001, and the general restrictions that NOLs cannot be carried forward if the taxpayer changes its state of incorporation or is involved in consolidations.

Who It Affects

• Corporations that generated a net operating loss (NOL): can deduct the NOL only if they are the original loss owner, and only for Alabama-source income within a 15-year carryforward window.
• Acquiring corporations and surviving corporations after mergers: cannot carry forward or deduct NOLs from other entities; the loss-sustaining surviving corporation may deduct the NOL.
• Corporations that change their state of incorporation or undergo consolidations: NOLs may not be carried forward in these cases.
• All Alabama corporate taxpayers with NOLs: affected by the requirement that NOL deductions be Alabama-source and limited to the original loss owner.

Key Provisions

• The NOL deduction is allowed only for the corporation that sustained the loss.
• NOLs may be carried forward for up to 15 consecutive years and deducted against the earliest year with taxable income; when multiple NOLs exist, the earliest losses are deducted first.
• The NOL deduction is limited to income sourced to Alabama.
• In mergers, the NOL may be carried forward only by the loss-sustaining surviving corporation; the surviving entity that did not sustain the loss or an acquiring entity cannot carry the NOL.
• NOL deductions must conform to federal rules referenced (26 U.S.C. §§ 381, 382, 384) for certain merger scenarios, new loss corporations, or built-in gains.
• For tax years beginning in 2001, no NOL deduction is allowed; if any deduction is disallowed under this clause, its expiration date is extended by one year.

AI-generated summary using openai/gpt-5-nano on Feb 24, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Taxation