HB198 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

HB198 clarifies how credit unions calculate Alabama's financial institution excise tax by defining taxable income for credit unions and updating rules on reserves, assessments, and refunds.

What This Bill Does

It defines net income for credit unions as financial statement income minus specific subtractions, with amounts allocated and apportioned to Alabama under Department of Revenue rules. It adds subtractions for dividends received from other credit unions and CU service organizations, and for reasonable additions to reserves for losses, bad debts, and extraordinary expenses, including regular reserves under a Capital Preservation Plan; withdrawals or reductions of these reserves must be included in taxable income in the year of withdrawal. It prohibits double counting and ensures items are not deducted or counted for more than one taxpayer. It bars assessments or refunds for tax years ending before January 1, 2021 to adjust reserve additions, and voids any prior assessments related to such additions, with refunds petitions denied; the act becomes operative for tax years after December 31, 2020 and takes effect January 1, 2021.

Who It Affects

• Credit unions operating in Alabama, whose taxable income under the financial institution excise tax will be calculated under the clarified rules (including treatment of reserves and certain deductions).
• Alabama Department of Revenue and the Alabama Credit Union Administration (ACUA), which administer the tax, implement the new rules, and oversee related assessments and refunds.

Key Provisions

• Net income for credit unions is defined as financial statement income (final net income) minus specified subtractions, allocated and apportioned to Alabama according to Department of Revenue rules.
• Subtractions include (a) dividends received from other credit unions and CU service organizations, and (b) additions to reserves for losses, bad debts, and extraordinary expenses in lieu of traditional deductions, with reserves defined by a Capital Preservation Plan and subject to ACUA approval; withdrawals or reductions of reserves are included in taxable income in the year of withdrawal.
• Direct transfers between reserve accounts that are not included in net income are not included in taxable income.
• No item may be deducted more than once, no deduction for items excluded from income, and no item may be counted for more than one taxpayer.
• No assessments or refunds for tax years ending before January 1, 2021 to adjust reserve additions; prior assessments related to these additions are void and refunds denied.
• The act becomes operative for tax years beginning after December 31, 2020, with January 1, 2021 as the effective date.

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