SB202 Alabama 2016 Session

Summary

Primary Sponsor

Linda Coleman-MadisonSenator

Democrat

Session

Regular Session 2016

Title

Corporate income tax, combined reporting of income required, Secs. 40-18-36, 40-18-38, 40-18-38.1 added; Secs. 40-18-1, 40-18-30, 40-18-31, 40-18-39 am'd.

Summary

The bill would require Alabama corporate income taxpayers in unitary groups to file a single combined tax return, replacing separate-entity filings.

What This Bill Does

It changes the filing rule to require combined reporting for unitary businesses, meaning all related entities are taxed together based on a group income. It creates options such as a water's-edge election or an affiliated group election to determine which members' income are included. It also lays out how income is calculated and allocated, including rules for intercompany transactions, to reflect the unitary group’s true tax picture, with provisions for consolidated returns and transitions overseen by the Department of Revenue.

Who It Affects

• Alabama corporations that are part of a unitary business with related entities (affiliates), whose tax filings would shift from separate returns to a combined return and whose tax liability could change based on group income and apportionment.
• The Alabama Department of Revenue and tax regulators, who would administer the new combined reporting framework, election options (water's-edge and affiliated group), consolidated returns, and transition rules.

Key Provisions

• Requires combined reporting for unitary business groups, including income and apportionment factors for all members of the unitary group.
• Introduces definitions and structural changes (unitary business, affiliated group, water's-edge election, affiliated group election) and adds new code sections 40-18-36, 40-18-38, 40-18-38.1, and amends 40-18-39.
• Determines each member's share of business income apportioned to Alabama and sets rules for calculating the combined group's income, including handling of post-apportionment deductions, credits, and net operating losses.
• Eliminates intra-group dividends from the recipient's income and defers intercompany income within the group, with restoration rules when certain events occur.
• Water's-edge election allows selective inclusion of members' income and apportionment factors, with initiation, withdrawal, and a 10-year binding period.
• Affiliated group election allows treating all members of an Alabama affiliated group as a single combined group without the commissioner’s consent, for 10 years (renewable) with specific withdrawal/termination rules and an annual consolidation fee based on total assets.
• Alabama consolidated return option requires reporting by a common parent, arm's-length transactions, and outlines liability, reporting, and transition rules; includes provisions for fees and joint liability among group members.
• Effective for tax years beginning after December 31, 2014, with Department of Revenue authority to issue regulations to implement the new system.

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