HB140 Alabama 2021 Session

Summary

Primary Sponsor

Craig LipscombRepresentative

Republican

Session

Regular Session 2021

Title

Credit Unions, financial institution excise tax, taxable income, calculation, reserve for losses deleted, assessment and refunds further provided for tax years prior to 1-1-2020, Act 2019-284, 2019 Reg. Sess., am'd; Sec. 40-16-1.3 am'd.

Summary

Clarifies how Alabama taxes credit unions' taxable income and updates reserve and refund rules.

What This Bill Does

The bill defines net income for credit unions as financial statement income minus specific subtractions and allocates it to Alabama under Department of Revenue rules. It adds subtractions such as dividends from other credit unions and credit union service organizations, and reasonable additions to reserves for losses, bad debts, and extraordinary expenses, with withdrawals from these reserves included in taxable income for the year of withdrawal. It prohibits double deductions, ensures items aren’t counted for more than one taxpayer, and restricts retroactive adjustments by withholding pre-2021 assessments/refunds; it also sets the effective date for these changes.

Who It Affects

• Credit unions operating in Alabama, whose taxable income for the financial institution excise tax will be calculated using the new net income definition and reserve rules.
• Alabama's Department of Revenue and the Alabama Credit Union Administration (ACUA), which administer and enforce the tax calculations, allocations, and any associated assessments or refunds.

Key Provisions

• Net income for credit unions is the final financial statement net income (total revenue minus total expenses) as reported to the IRS and to ACUA, minus specified subtractions and allocated to Alabama per DR rules.
• Subtractions include dividends received from other credit unions and credit union service organizations, and reasonable additions to reserves for losses, bad debts, and extraordinary expenses; withdrawals or reductions of such reserves are included in taxable income in the year of withdrawal; direct transfers between reserve accounts not included in net income are not taxable.
• Prohibits items being deducted more than once, deducting items excluded from income, or including the same item for more than one taxpayer.
• No assessments or refunds for tax years ending on or before January 1, 2021 to adjust reserve-related subtractions; prior assessments or refunds affecting these amounts are void or denied.
• The act becomes operative for tax years beginning after December 31, 2020, with an effective date of January 1, 2021.

AI-generated summary using openai/gpt-5-nano on Feb 22, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Banks and Banking