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S.A.L.T. Select Developments: Alabama

Baker Donelson's S.A.L.T. Select Developments will identify important state and local tax developments from Alabama.

State and local taxes impact almost every taxpayer. S.A.L.T developments in any one jurisdiction can be frequent and sometimes confusing. Where multiple jurisdictions are involved, staying current with state and local tax developments can be overwhelming for any taxpayer.

To assist you with staying current on a periodic basis, Baker Donelson's S.A.L.T. Select Developments will identify one or more recent state and local tax developments from Alabama.

October 2022

Suspension of Certain Requirements Resulting from Hurricane Ian: On September 28, 2022, the Alabama Department of Revenue (Department) issued two Executive Orders temporarily suspending certain requirements because of the state of emergency resulting from Hurricane Ian. The first Order temporarily suspended the requirements associated with the International Registration Plan (IRP) and International Fuel Tax Agreement (IFTA) for any motor vehicle engaged in interstate disaster relief efforts which will be traveling through the State of Alabama as part of the disaster relief. The Department made it clear that nothing should be construed to allow a vehicle to operate in Alabama without valid registration and insurance from its base state, nor should it be construed to allow any vehicle to exceed weight limits posted for bridges and like structures, among other requirements. The second Executive Order temporarily suspended the licensing requirements associated with the Alabama Terminal Excise Tax for motor fuel exporters, importers, or transporters supporting disaster relief efforts by engaging in the export of motor fuel from Alabama to other states impacted by Hurricane Ian. The Department states in this Order that nothing shall be construed to permit any waiver of additional requirements under the Alabama Terminal Excise Tax, including the requirement for suppliers to collect and remit the destination state tax, among other requirements. Both Orders are effective until 30 days after signing. More information can be found here and here.

September 2022

Annual Wholesale Oil License Fee Return: On September 6, 2022, the Alabama Department of Revenue (Department) posted an announcement that the annual wholesale oil license fee return is due October 14, 2022, for the periods of October 1, 2021, through September 30, 2022. The Department noted in this announcement that if a company was issued a Supplier License, a Permissive Supplier License, or an Importer License by the Department, then the Return must be submitted. The Department also noted that electronic filing is mandatory, and that all Returns must be filed through My Alabama Taxes at https://myalabamataxes.alabama.gov. Further, the announcement noted that any wholesale or license fee liability exceeding $750 must be paid electronically and that the company must log into its account between October 1, 2022, and October 14, 2022, to submit the required Return and payment. More information can be found here.

August 2022

August Rule Hearing Public Notice: The Alabama Department of Revenue (Department) recently published a Public Notice announcing that the Department will hold rule hearings on August 9, 2022, via web conference. The hearings will begin at 1:30 p.m. CST and will cover a wide variety of Alabama taxes and related issues, including an amendment to: Rule 810-3-39-.02, dealing with the extension of time for filing a corporation return; Rule 810-3-43-.01, dealing with the availability, claiming, and transferability of the rail credits; Rule 810-6-2-.27, dealing with gold, coin, and bullion; Rule 810-6-3-.42.02, dealing with sales to nonresidents; among various other Rules to be addressed at the hearing. The Notice states that to participate in the upcoming web conference public hearing, interested parties should contact the Department’s Tax Policy and Governmental Affairs Division at taxpolicy@revenue.alabama.gov or 334-242-1380 to obtain the appropriate sign-in information. The Notice further stated that rule actions are needed to comply with recent law changes, new guidelines, or procedures. Further, the Notice provides that copies of a proposed rule may be downloaded from the website, where all rulemaking hearings conducted by the Department are posted. More information can be found here.

Alabama Tax Tribunal Ruling on Add-Back Statute: In Pfizer, Inc. v. Department of Revenue (Ala. Tax Trib. Docket No 18-236-JP, July 28, 2022), the Alabama Tax Tribunal ruled in favor of the taxpayer regarding the deductibility of interest paid to a foreign affiliate. Under Alabama's "add-back" statute, Alabama Code Section 40-18-35(b), certain intangible expenses and interest payments paid to a related person are not deductible for Alabama corporate income tax purposes. However, an exception permits the deduction "to the extent the corporation shows … that the corresponding item of income was in the same taxable year … subject to a tax based on or measured by the related member's net income by a foreign nation which has in force an income tax treaty with the United States, if the recipient was a 'resident' of the foreign nation." In Pfizer, the Alabama Department of Revenue disallowed the deduction for interest paid to an affiliate based in Ireland, arguing that the amount was not "subject to a tax" in Ireland due to a similar payment and deduction of interest by the Irish affiliate to a Luxembourg affiliate. The Tribunal found that the subsequent payment and deduction of the interest to the Luxembourg affiliate did not cause the add-back of the interest paid to the Irish affiliate. In doing so, the Tribunal distinguished the decision of the Alabama Court of Civil Appeals in Surtees v. VFJ Ventures, Inc., 8 So.3d 950 (Ala. Civ. App. 2008). A link to the Pfizer decision is here.

June 2022

Extension of Time for Election to be Taxed at Entity Level: On June 17, 2022, the Alabama Department of Revenue (Department) issued a press release extending the due date for the filing of the election to be taxed at the entity level for certain pass-through entities to August 15, 2022. The Department stated in this release that this extension is being provided because a number of taxpayers failed to file the required election by the original due date but either made estimated payments or filed required returns as if the election had been made. This entity-level tax election, according to the release, is being implemented for the first time for the 2021 tax year, so the Department wanted to help those who showed an intention to make the election but erroneously failed to do so. Accordingly, the release stated that the Department will recognize elections to be taxed at the entity level that are filed using My Alabama Taxes no later than August 15, 2022, as elections validly made by the due date for those pass-through entities, provided that: (i) the entity timely files the required entity and member tax returns; (ii) the entity timely makes the electing pass-through entity extension payment; or (iii) the entity made an entity-level tax payment prior to the due date of the respective return. The release further states that taxpayers meeting these requirements may access My Alabama Taxes to make the election for the 2021 tax year from July 1, 2022, until August 15, 2022. Contact information is provided in the release for those seeking guidance. More information can be found here.

May 2022

Sales Tax Exemption Extended for Certain Aircraft Refurbishing Parts: On May 12, 2022, the Alabama Department of Revenue (Department) published a Notice advising the tax exemption for the gross receipts from the sale of parts, components, and systems for refurbishing certain aircraft, which was scheduled to expire May 30, 2022, was extended by a 2021 legislative Act without an expiration date; however, the Department also noted that certain legislation in 2022 reinstated the expiration date such that the exemption is available to sales made through May 30, 2030, on contracts or projects entered into on or before May 30, 2027. More information can be found here.

April 2022

New 1099-K Filing Requirement: The Alabama Department of Revenue (Department) published a news release on April 6, 2022, entitled "New 1099-K Filing Requirement." In this release, the Department stated reporting that entities required to file form 1099-K Information Returns with the Internal Revenue Service must also file with the Department a duplicate of the Information Returns or a duplicate of all Information Returns related to taxpayers or participating payees with an Alabama address. The release goes on to state that, pursuant to a certain 2017 legislative enactment in Alabama, those settlement entities, third-party settlement organizations, electronic payment facilitators, and third parties acting on behalf of payment settlement entities are required to file duplicate federal form 1099-K Information Returns with the Department within 30 days of the IRS filing due date. The release goes on to state that 2021 1099-K Information Returns will be due on or before May 2, 2022. Further, the release provides that interested parties can visit the Department's website in order to file the Form 1099-K electronically; and such parties can contact the Department with questions regarding this requirement. More information can be found here.

March 2022

Further Guidance as to Pass-Through Entity Elections: The Alabama Department of Revenue (Department) has adopted Rule 810-3-36-.01, effective February 13, 2022, providing more guidance with respect to the election available for Alabama S-corporations and Subchapter K entities for purposes of paying the Alabama income tax at the entity level (Electing PTEs). The statutory authorization for this election was enacted during 2021 and the Department previously issued certain guidance regarding the election's availability (see our April 13, 2021 publication). Rule 810-3-36-.01 provides that an Electing PTE does not include a single member limited liability company, estates, trusts, a business trust, and disregarded entities, except in the capacity as an owner, member, partner, or shareholder of the Electing PTE. Further, the Rule addresses the determination of taxable income for purposes of the Electing PTE, as well as the requirements for such an election. With respect to the requirements, the Rule provides the Electing PTE must make the election on Form PTE-E, Pass-Through Entity Election Form, and must submit the Form electronically to the Department via My Alabama Taxes (MAT) on or before the 15th day of the third month following the close of the tax year for which the entity elects to be taxed as an Electing PTE. The Rule states such election is binding for the year on which it is approved and all subsequent tax years until a request to revoke the election is made. The Rule also sets forth certain transition requirements when an entity is transitioning to an Electing PTE.

February 2022

Motor Vehicle Registration Deadlines Extended Due to COVID-19: The Alabama Department of Revenue (Department) published a notification on January 12, 2022 that relief was being provided to those who cannot register their vehicles or renew registrations because of license issuing office closures resulting from the spread of COVID-19. The Department stated registrants in counties where the county license issuing office closure during normal business results in the registrants having no access to make transactions, the deadlines to renew 2022 motor vehicle registrations on vehicles are extended to the last business day of the subsequent month that registrations are otherwise due. Further, the Department stated this extension applies to vehicle owners in all counties where the county courthouse or other license plate issuing offices and tax collection offices are closed for the entire month the registrations are originally due. More information can be found here.

January 2022

Sales Tax Account Renewals: The Alabama Department of Revenue (Department) issued an announcement reminding taxpayers that Administrative Rule 810-6-5-.01.01 requires annual renewals of the following tax account licenses: sales tax, rental tax, sellers use tax, lodging tax, utility gross receipts tax, and simplified sellers use tax. The Department stated that the renewal process must be completed on an annual basis in order to generate a new tax license for the upcoming year. The business information must be verified and updated as necessary on an annual basis each November-December. A link to renew the tax account license is set forth in the announcement. More information can be found here.

October 2021

Guidance Regarding Pass-Through Entity Tax Election: On October 19, 2021, the Alabama Department of Revenue (Department) issued guidance regarding the Alabama Electing Pass-Through Entity Tax Act which allows Alabama S-Corporations and Subchapter K entities to elect to pay Alabama income tax at the entity level. According to this guidance, entities making this election must submit Form PTE-E via My Alabama Taxes (MAT) at myalabamataxes.alabama.gov; and that Form PTE-E is expected to go live in January. Further, this guidance states that to prepare for this new process, all pass-through entities that choose this election must be registered to use MAT and must submit the Form PTE-E through MAT prior to the 15th day of the third month following the close of that tax year for which the entity elects to be treated as an electing pass-through entity. The guidance then sets forth information that is available to sign up for MAT. Further, and with respect to a new entity without a Department taxpayer account, the guidance provides that a new taxpayer/account registration application is required to be completed using MAT, and provides some guidance with respect to such registration process. The guidance also provides contact information if assistance is needed. More information can be found here.

September 2021

Proposed Guidance on SALT Cap Workaround: Alabama is among a number of states that have legislated a workaround of the state and local tax (SALT) cap contained in the 2017 federal tax act for pass-through business entities. The Alabama Department of Revenue (Department) has proposed guidance for the Alabama SALT cap workaround, Proposed Regulation 810-3-36-.01, Electing Pass-Through Entity Returns. The Department has scheduled the Proposed Regulation for a public hearing in early October. The Proposed Regulation provides, among many other things, that eligible S Corporations and Subchapter K Entities, a “Pass-Through Entity,” may electronically elect the workaround by filing Form PTE-E, Pass-Through Entity Election Form, on or before the fifteenth day of the third month following the close of the tax year for which the election is to be effective. The election is binding for the year it becomes effective and all subsequent tax years, until revoked by the taxpayer using the same method as electing such treatment. The election is available for taxable years beginning on or after January 1, 2021. The effect of the election is to provide a tax credit, not subject to the SALT cap, as calculated per the prescribed methodology in the Proposed Regulation, to the owners of a Pass-Through Entity, in exchange for an entity-level tax payment. The owners of the Pass-Through Entity, of course, must file an Alabama income tax return to report their pro rata or distributive share of the Pass-Through Entity's income and claim the tax credit for their pro rata or distributive share of the Alabama income tax paid by the Pass-Through Entity. The election may not eliminate or exempt any owner from the elective treatment.

August 2021

Exclusion for Sales Tax on IT Services Delivered In State: In Revenue Ruling 2021-001, the Alabama Department of Revenue (Department) ruled that additional information technology services related to manufacturing software which is delivered remotely by a company with no physical presence in the United States to a customer located in Alabama is not subject to sales tax on invoices for the services so long as the nontaxable services are separately stated on all invoices and do not involve the transfer of computer software. Those requested additional information technology services consisted of hot line support in case of malfunctions or functional questions, suggestion/handouts for additional training, error analysis, weak point analysis, MS Windows update pre-tests, and hosting of test facilities, all of which would be provided from the provider's remote location outside the United States. The provider would conduct regular in-person meetings within Alabama every six months. Revenue Ruling 2021-001 is consistent with the Department's previous positions about separately invoiced services, as opposed to software.

Excise Tax on Financial Institutions: On August 5, 2021, the Department issued a press release addressing the 2019 law imposing a requirement on financial institutions for making quarterly estimated payments of the annual tax liability for the tax years beginning after December 31, 2019. As stated in this release, to account for the transition from the previous post-payment system for financial institutions, the Department was authorized to wave both penalties and interest linked to unintentional underpayments of estimated tax occurring within the first two applicable tax years. If a financial institution suspects that it may have been or may be billed for underpaying the 2020 estimated tax payments, that financial institution should file a Request for Waiver of Penalty (Form PWR) with the Department. That Form PWR, as noted in the release, may be included within the 2020 Financial Institution Excise Tax Return that has yet to be filed, because of the extended due date, as well as the 2021 Return. The Department noted in the release that penalties and interest will be waived resulting from underpayments of estimated tax payments that were not attributed to an intentional disregard of the law. More information can be found here.

July 2021

Sales Tax On Aircraft Parts: On June 16, 2021, the Alabama Department of Revenue (Department) issued a Notice to all sellers making retail sales of aircraft parts, stating in essence that the exemption enacted in 2012 which was set to expire May 30, 2022, has been extended as a result of the 2021 Legislature removing that sunset provision. This sales and use tax exemption applies to aircraft parts, components, and systems for refurbishing certain aircraft according to Alabama law. The Department states in this Notice that questions regarding the Notice or the sale of aircraft parts should be directed to the Sales and Use Tax Division at the address set forth in the Notice. More information can be found here.

June 2021

Single Sales Factor: Earlier this year, Governor Ivey signed Act 2021-1 into law, which provides in part that "All business income shall be apportioned to this state by multiplying the income by the sales factor". This Act removes both the property factor and the payroll factor from the formula used to apportion business income to Alabama. The "sales factor" is defined as a fraction, the numerator of which is the total sales of the taxpayer in Alabama during the tax period, and the denominator of which is the total sales of the taxpayer everywhere during the tax period. This change to use a single sales factor is effective for tax years beginning on or after January 1, 2021. The Alabama Department of Revenue updated its frequently asked questions to address this new single sales factor. More information can be found here.

May 2021

Coal Severance Tax Extended: The Alabama Department of Revenue (Department) published a Notice dated April 19, 2021 stating that Governor Ivey signed Act Number 2021-120 on April 1, 2021, pursuant to which the coal severance tax which was due to expire on October 1, 2021, is extended until October 1, 2031. The Notice states that the total tax levied on coal severed in Alabama remains at $0.335 per ton. Further, and pursuant to the provisions of this Act, the Notice states that the term "loaded for shipping" was included related to coal severance, and that such term means coal that is severed from a mine located in one county and then loaded for shipping in another county. According to the Notice, and effective with the September 2021 coal severance tax return, which is due no later than October 20, 2021, indication must be made as to whether coal is being severed in one county and loaded for shipping in another county. The Department's Notice also directed that the MyAlabamaTaxes account is to be used in filing the coal severance tax return and remitting the tax by the due date. More information may be found here.

April 2021

Extension to May 17: On March 18, 2021, the Alabama Department of Revenue (Department) issued guidance with respect to the income tax filing deadlines in light of the IRS issuing IR-2021-59, which provided that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021 to May 17, 2021. The Department's guidance stated that Alabama provides an automatic extension of up to six months to file Alabama income tax returns wherever there is a corresponding federal extension, and that Alabama taxpayers will not need to request an extension to file Alabama returns without a late-filing penalty through the extended federal due date. The guidance then stated that the Department will automatically waive, without request, late-payment penalties for payments remitted by May 17, 2021; however, the Department is not authorized to waive interest, and any interest accruing from April 15 through the actual payment date will be due. In this guidance, the Department encourages taxpayers to make their payments for the 2020 tax year as soon as possible to avoid the accrual of interest beyond April 15. More information can be found here.

Estimated Payment Guidance for Electing PTEs: On April 2, 2021, the Department issued guidance relative to the Alabama Electing Pass-Through Entity Tax Act (Act). The purpose of this Act is to allow Alabama S-Corporations and Subchapter K entities to elect to pay Alabama income tax at the entity level (Electing PTEs). As noted in this guidance, Electing PTEs must notify the Department any time during the tax year but no later than the 15th day of the third month following the close of the tax year for which the entity elects to be taxed as an Electing PTE. Entities making this election, according to the guidance, including those that anticipate making this election for 2021 tax year, may be required to begin making estimated payments on April 15, 2021. The guidance then provides information as to whether, when and how estimated payments should be made by the Electing PTEs. The Departments stated that additional guidance regarding the election process, returns, and related matters will be issued prior to the 2021 filing season. More information can be found here.

March 2021

Updates Reported – On February 24, 2021, the Alabama Department of Revenue issued a press release offering tax relief to Alabama taxpayers who reside in or have a business located within a federally declared disaster area where damage was caused by recent winter storms. According to the release, the tax relief measures offered by the Department mirror the IRS measures in the same declared disaster areas. Also according to the release, Alabama taxpayers residing in these areas designated as disaster areas by the federal government have until June 15, 2021, to file tax returns due on or after February 11, 2021 and before June 15, 2021; and that penalty relief will be provided during the extension period. Affected taxpayers filing for Individual Income Tax, Corporate Income Tax, Pass-through Entities, Business Privilege Tax, or Withholding Tax may submit a penalty waiver request using the Department's applicable form. The release also provided that a list of the eligible localities can be found on the IRS link within the press release. More information can be found here.

February 2021

Updates Reported – On February 5, 2021, the Alabama Department of Revenue posted certain 2021 Tax Filing Tips for the upcoming Tax Season 2021. According to this posting, that season begins on February 12, and the filing deadline is April 15, 2021. The tips and suggestions in this posting are designed to help taxpayers file returns safely and get refunds as quickly as possible. Those tips and suggestions within this posting include various security topics for taxpayers and employers, as well as several topics pertinent to seeking refunds.

Additionally, on February 12, 2021, Governor Ivey signed House Bill 170 which continues for the 2021 tax year the exclusion from Alabama individual income taxation any tax credits or advance refund amounts received under certain COVID-related relief measures enacted by the U.S. Congress; and House Bill 192 which allows a jobs tax credit against utility taxes under certain conditions for incentivized companies engaged in pharmaceutical, biomedical, medical technology or medical supply manufacturing or related activities. More information can be found here and here.

January 2021

Updates Reported – On January 6, 2021, the Alabama Department of Revenue issued guidance to implement the tax relief measures included in the December 11, 2020 Supplemental Emergency Proclamation of Governor Ivey. The guidance addresses many areas of Alabama income taxation relating to the federal CARES Act and related federal legislation, including state grants funded by the federal legislation. It includes guidance for Alabama individual income tax, employers, corporate income tax and financial institution taxpayers.

In part, the guidance provides that, in calculating their 2020 Alabama income tax liability, taxpayers may deduct expenses paid with PPP loan amounts that have been forgiven or for which the taxpayer reasonably expects to receive forgiveness even if the taxpayer has not applied for forgiveness of the loan by the end of the 2020 tax year.

The full text of the guidance can be found here.

December 2020

Updates Reported – On December 11, 2020, Governor Ivey signed a Proclamation stating that the current conditions warrant implementation of additional extraordinary measures and relief during the State public health emergency now in effect so as to guard public health and protect human life. Based on the foregoing, the Governor proclaimed and directed various actions, such as:

  1. Determining that even though Congress excluded various benefits under the CARES Act from taxation at the federal level, these benefits could become taxable for some Alabama taxpayers under existing Alabama tax law, and, as a result, the Proclamation provides that tax credits, advance refund amounts, or other direct benefits a taxpayer receives under the federal CARES Act, as it now exists, are hereby deemed excluded from Alabama income taxation as well as from all calculations in determining a taxpayer's federal income tax deduction for Alabama income tax purposes, and also providing that the Commissioner of the Alabama Department of Revenue shall use all available legal authorities to revise those portions of the applicable tax return forms and instructions in a way necessary to effectuate this relief.
     
  2. Any amount of cancellation-of-indebtedness income resulting from a loan forgiven pursuant to Section 1106 of the CARES Act, as it now exists, is hereby deemed excluded from the calculation of Alabama income taxes and the calculation of financial institution excise taxes to the same extent as such amount is exempted from federal income taxes by the CARES Act, and from all calculations in determining a taxpayer's federal income tax deduction under Alabama law, and the Commissioner shall revise those portions of the applicable tax returns and forms in a way necessary to effectuate the foregoing relief.
     
  3. The amount of any cancellation-of-indebtedness income resulting from a loan forgiven pursuant to Section 1106 of the CARES Act shall only be considered for Alabama tax purposes in determining the deductibility of otherwise deductible expenses, such as payroll, utilities, mortgage interest and rent, allowed to be paid with exempt funds to the same extent as such expenses are deductible in calculating federal income tax.
     
  4. For reasons similar to those referenced above justifying the proclaimed actions relative to the Alabama income tax, the sunset date for the Alabama Jobs Act Tax Credit is extended from December 31, 2020 to the earlier of (1) the enactment of a bill to extend the tax credits under that Act or (2) the last day of the first regular session of the Legislature following the issuance of this Proclamation, and that the sunset date for the Growing Alabama Tax Credit shall be the earlier of (1) enactment of a bill to extend the Growing Alabama Tax Credit or (2) the last day of the first regular session of the Legislature following the issuance of this Proclamation.

More information can be found here.

November 2020

Updates Reported – The Alabama Department of Revenue has announced that beginning November 1, 2020, businesses that hold Alabama Sales Tax, Rental Tax, Sellers Use Tax, Lodgings Tax, Simplified Sellers Use Tax and/or Utility Gross Receipts Tax account(s) will be required to renew those tax licenses annually for the next year. The Department states that one renewal process will update all the required licenses for an entity. The Department notes several FAQs regarding this tax license renewal process, addressing various issues. For example, the Department states that the link to renew a tax license will be available in the My Alabama Taxes (MAT) account where tax returns are filed, beginning on November 1 of each year; and a taxpayer will have until December 31, within which to renew the tax license for the following year. Also, by way of example, the Department notes that a tax license is separate from a business license. Further, the Department states that there is no cost for the renewal of the Alabama Tax License. More information can be found here.

October 2020

Updates Reported – On October 7, 2020, the Alabama Department of Revenue issued Memorandum 2020-007 addressing the assigned renewal month for new International Registration Plan (IRP) registrations. The Memorandum states that in order to ensure that IRP registrations are evenly staggered throughout the registration year, all new IRP accounts will be assigned the renewal month of February and ad valorem taxes for these accounts should be collected through February 28 of each year. Further, the Memorandum noted that ad valorem tax must be collected for each IRP registered vehicle through the end of the renewal month assigned to the IRP account, and referred to Memorandum 2014-19 for more related information. According to this newly issued Memorandum, the month of February will be the default assigned renewal month for new IRP accounts during the period November 1, 2020 through October 31, 2021. The Memorandum states that if there are questions, contact may be made with the Department as set forth in the Memorandum. More information can be found here.

September 2020

Coronavirus Tax Payment and Return Filing Responsibilities (September 30) – Updates Reported: The Alabama Department of Revenue issued a Notice, dated on August 26, 2020, addressing a secondary supplemental privilege assessment to be imposed monthly for each bed in a nursing facility. According to the Notice, the Alabama Legislature passed, and the Governor signed, Act No. 2020-147, which imposes this supplemental privilege assessment at an annual rate of $327.48, or $27.29 a month, for each bed in such a facility. This amount will increase the total annual nursing facility rate from $4,429.32 to $4,756.80, or $396.40 per month per bed. This change was effective September 1, 2020. The Notice also states that the first tax return on which such changes will be applicable will be the nursing facility tax return for the month of September 2020, which is due on or before October 20, 2020. These returns are required to be filed and paid electronically using the My Alabama Taxes Filing System. According to the Notice, questions regarding this supplemental privilege assessment should be addressed to Ms. Nichelle Norris at the Alabama Department of Revenue, Sales and Use Tax Division, P.O. Box 327790, Montgomery, AL 36132-7790. More information can be found here.

August 2020

Coronavirus Tax Payment and Return Filing Responsibilities (August 20) – Updates Reported: On August 3, 2020, the Alabama Department of Revenue issued a Notice entitled Gasoline and Undyed Diesel Fuel Excise Tax Law Changes. As stated in this Notice, Governor Ivey signed on March 12, 2019 a law known as the Rebuild Alabama Act (Act). That Act contains various fuel tax rate changes and filing requirements that take place on October 1, 2020. As also referenced in the Notice, and effective October 1, the gasoline and undyed diesel excise taxes will be increased pursuant to the Act by 2¢ per gallon to 26¢ per gallon for gasoline and 27¢ per gallon for undyed diesel. Further, any wholesale distributor holding motor fuel in inventory outside of the bulk transfer/terminal system on the effective date of each tax increase under the Act will be liable for the additional excise tax. The foregoing does not include product located at a retail service station. The Notice provides that a floor-stocks tax return must be filed and the tax paid on or before the last day of the third month following the tax increase. A new floor-stocks return can be accessed on the Department's forms webpage. According to the Notice, this form must be filed manually with the Department at the address in the Notice, and the floor-stocks tax return and payment for the tax increase effective October 1 is due on or before February 1, 2021. More information can be found here.

July 2020

Coronavirus Tax Payment and Return Filing Responsibilities (July 27) – Updates Reported: The July 17, 2020 deadline as announced by the Alabama Department of Revenue in its June 9 Order for purposes of obtaining annual registration and renewal of vehicles with respect to the months of March through June 2020, where the county license plate issuing official's office was closed at any time during that period, has now been extended to July 31, 2020. That same July 31 extension also applies to motor vehicle registrations and renewals for vehicles registered pursuant to the International Registration Plan where the official's office was closed any time during that period; and, further, penalties associated with the motor vehicle registration and renewals extended to July 31, 2020 will not be charged until August 3, 2020. More information can be found here.

June 2020

Coronavirus Tax Payment and Return Filing Responsibilities (June 25) – Updates Reported: The Alabama Department of Revenue issued an order on June 9, 2020 extending the deadline until July 17, 2020 for purposes of obtaining annual registration and renewal of vehicles with respect to the months of March through June for registrants in counties where the county license plate issuing official's office was closed at any time during the month of May or June 2020 due to COVID-19. The order states that this extension includes the registration of vehicles purchased or otherwise acquired where the registration requirement imposed by Alabama law falls during the period of March 17 through July 17, 2020. Further, the order states that this extension applies to motor vehicle registrations and renewals for vehicles registered pursuant to the International Registration Plan when the ad valorem tax was due in a county where the issuing official's office was closed anytime during May or June 2020 because of the virus. Further, penalty charges associated with motor vehicle registrations and renewals extended to July 17 will not be charged until July 20, 2020; and penalty charges associated with motor vehicle property tax payments extended to July 17 will not be charged until July 20. More information can be found here.

Coronavirus Tax Payment and Return Filing Responsibilities (June 2) – Updates Reported: The Alabama Department of Revenue has announced, pursuant to an ADOR Operational Update as of May 12, 2020, that the Department will not change withholding requirements for businesses based on an employee's temporary telework location within Alabama that is necessitated by the pandemic and related federal or state measures to control the COVID-19 spread. In that regard, the Update stated that the Department will not consider temporary changes in an employee's physical work location during periods in which temporary telework requirements are in place due to the pandemic to impose nexus or alter apportionment income for any business. More information can be found here.

May 2020

Coronavirus Tax Payment and Return Filing Responsibilities (May 8) – Further Updates Reported: On May 4, 2020, the Commissioner of the Alabama Department of Revenue issued an Order extending through June 19, 2020 the time for obtaining March, April and May 2020 motor vehicle registrations and paying property taxes on vehicles. Further, the Order states that this extension includes the registration of vehicles purchased or otherwise acquired whereby the 20-day registration requirement falls during the period of March 17 through June 19, 2020. This extension also applies to motor vehicle registration and renewals for vehicles registered pursuant to the International Registration Plan. According to the Order, penalty charges associated with motor vehicle registrations and renewals and motor vehicle property tax payments extended to June 19, 2020 will not be charged until June 22, 2020. More information can be found here.

April 2020

Coronavirus Tax Payment and Return Filing Responsibilities (April 16) – Further Updates Reported: On April 10, 2020, the Alabama Department of Revenue announced that the period for certain tax relief related to income and other taxes has been updated. Taxpayers can defer state income tax payments due on or after April 1, 2020 and before July 15, 2020, to July 15, 2020, without penalties and interest, regardless of the amount owed. This deferment applies to all taxpayers, including individuals, trusts and estates, corporations, and other non-corporate tax filers.

Other taxes included in the deadline extension are corporate income tax, the Financial Institution Excise Tax (FIET), and the Business Privilege Tax (BPT).

Taxpayers do not need to file any additional forms or call the Alabama Department of Revenue to qualify for this automatic state tax filing and payment relief. Individual taxpayers who need additional time to file beyond the July 15 deadline can request a filing extension through the usual methods.

A copy of the updated order of the Commissioner of Revenue can be found here.

Coronavirus Tax Payment and Return Filing Responsibilities (April 3) – Further Updates Reported: In a press release updated April 1, the Alabama Department of Revenue made several announcements regarding taxpayer relief orders previously issued. For instance, the Department reiterated that it is: (i) waving state sales tax late payment penalties both for small retail businesses (monthly retail sales during the previous calendar year averaged $62,500 or less) and taxpayers currently registered with the Department as engaging in NAICS Sector 72 business activities (which includes businesses preparing meals, snacks and beverages for immediate consumption); and (ii) waiving state late payment penalties for lodgings taxes. The Department noted that this relief applies to state sales and lodging taxpayers who are unable to timely pay their February, March and April 2020 sales and lodging tax liabilities, but does not provide a waiver or extend normal filing requirements. The Department stated that these taxpayers may file their monthly sales and lodging tax returns for February, March and April 2020 reporting periods without paying the state sales and lodging taxes reported as due and late payment penalties will be waived for these taxpayers through June 1, 2020. The Department noted that this relief only applies to state sales and lodging tax liabilities, and that this relief is automatic for small retailers and Section 72 businesses who file their February, March and April 2020 sales tax returns. The Department did note, however, that similar sales tax relief may be available on a case-by-case basis to other businesses significantly impacted by COVID-19 and the preventative measures taken to prevent its spread within Alabama. The Department set forth various FAQs and other information within this updated press release. More information can be found here.

March 2020

Coronavirus Tax Payment and Return Filing Responsibilities (March 25) - Due Date Changes Reported: On March 23, 2020, the Governor of the State of Alabama signed a supplemental State of Emergency Order allowing the Alabama Department of Revenue to extend state filings until July 15, 2020. Thereafter, the Commissioner posted and later updated an Executive Order providing that any person with a state individual income tax or corporate income tax payment, a financial institution excise tax payment, or a business privilege tax payment due on April 15, 2020, or a return for any of the foregoing taxes due on April 15, such payment and return due date shall be automatically postponed to July 15. The Order further states that there is no limitation on the amount of the payment that may be so postponed. This relief is available only with respect to payments due on April 15 for the state income tax (including payments of tax on self-employment income), for estimated state income tax for the taxpayer's 2020 taxable year, for the financial institution excise tax for the 2020 form year, and for the business privilege tax for the 2020 form year, and with respect to returns due on April 15 for the foregoing taxes. The Order states that no extension is provided for the payment or deposit for any other type of state tax, or for the filing of any other state informational return. The relief granted under the Order essentially provides that there will be no interest, penalty, or additions to tax for the failure to file these identified taxes by July 15, 2020, but that interest, penalties and additions to tax will begin to accrue on July 16, 2020. More information can be found here.

Coronavirus Tax Payment and Return Filing Responsibilities (March 19) - No Broad Changes Reported: Pursuant to an Order of the Commissioner issued March 16, the Department is suspending temporarily the requirements associated with the International Registration Plan (IRP) and the International Fuel Tax Agreement (IFTA) for motor vehicles engaged in any interstate emergency relief efforts which will be traveling through the State of Alabama as a part of the emergency relief. Further, pursuant to a separate Order also issued March 16, the Commissioner stated that with respect to Alabama's motor vehicle registration laws and property tax laws regarding the annual registration and renewal of vehicles during the month of March, the registration deadline has been extended through April 15. More information can be found here and here.

Tax Relief/Flood Victims: The Alabama Department of Revenue is offering tax relief to Alabama taxpayers who have been affected by recent flooding across Alabama. The relief comes in response to the emergency declaration made by Governor Kay Ivey on February 18, 2020. ADOR will grant filing extensions to taxpayers directly affected by flooding caused by February 2020 storms. Affected Alabama taxpayers in all 67 counties have until April 30, 2020 to file tax returns due on or after February 18, 2020, and before April 30, 2020. Penalty relief will be provided during the extension period. Taxpayers seeking this Alabama tax relief should write "Flooding Relief – 2020" in red ink on any state paper return/report which relies on this filing extension relief. Affected taxpayers filing electronically should contact ADOR for filing guidance.

The Order of the Commissioner of Revenue describing these actions can be found here.

February 2020

Tax Impact from Federal Legislation: The Joint Legislative Task Force on the Tax Cuts and Jobs Act co-chaired by state Senator Daniel J. Roberts and State representative J. Daniel Garrett has issued a report dated February 18, 2020. The Task Force was charged with studying the fiscal impact of the TJCA on corporate income tax in the state. The Task Force found that multiple changes in the TJCA have the net effect of increasing corporate taxable income of Alabama businesses. Among other issues, the report specifically addresses and makes recommendations relating to the TJCA's provisions regarding limits on business interest deductions, global intangible low-taxed income, taxation of state and local economic development incentives, the state and local tax deduction cap, and the effects of the federal corporate rate changes and Alabama's federal income tax deduction. Implementing legislation was not included with the report, however, but will need to be drafted and introduced.

November 2019

Sales and Use Taxes: Alabama's Simplified Seller's Use Tax (SSUT) system has reportedly been quite successful with more than 1,900 remote sellers participating in the program. The SSUT provides remote sellers with one return for state and local jurisdictions and one overall eight percent tax rate. As of January) 1, 2019, the related Marketplace Facilitator law went into effect, which stipulated that the responsibility for collecting and remitting simplified sellers use tax, or reporting such sales, for online purchases by customers in Alabama falls on the company supporting the marketplace rather than on the individual sellers. According to the Department of Revenue's published Monthly Abstract, collections under the SSUT were approximately $203 million for the fiscal year ending September 30, 2019. For more information regarding the collections, see the following.

October 2019

Sales Tax: Under the Alabama Simplified Sellers Use Tax Remittance Act, eligible remote sellers can collect, report and remit a flat eight percent sellers use tax, regardless of the actual combined state, county and local tax rate that might otherwise be applicable. The regulations under the Simplified Sellers Use Tax have recently been amended to expand the ways a remote seller can inform a purchaser that the tax had been collected and was to be remitted on the purchaser's behalf to include confirmation by email, a notice on a seller's website or other means approved by the Department of Revenue to provide reasonable notice to the customer. Click here for more information on the foregoing amendment.

September 2019

Business Income Tax: On September 4, 2019, the Alabama Department of Revenue announced that it is providing relief from late-filing penalties for certain corporate taxpayers who are encountering difficulties meeting October state filing deadlines for Alabama corporate income tax returns while trying to also file their federal returns by the October federal deadline. The Department cited as the reason for such relief as taxpayer challenges in compliance resulting from the complexity associated with the continued implementation of the Tax Cuts and Jobs Act.

Relief is not automatic, however. Requests for relief must be submitted in writing and will be considered on a case-by-case basis. The Department will consider whether the circumstances described by taxpayers sufficiently establish reasonable cause to grant penalty relief for late filing. Affected returns must be filed by November 15, 2019. Refer to the Department's press release for more details.

August 2019

Online Filing Option for Local Fuel Excise Taxes: To help alleviate compliance burdens for local fuel excise taxes, beginning September 3, 2019, taxpayers who are required to file and remit payment for local gasoline and diesel fuel excise taxes may gain access to a new online service provided by the Alabama Department of Revenue: the voluntary Motor Fuel Single Point System. Any local gasoline and diesel fuel excise taxpayer that would like to use the voluntary system must register for a Motor Fuel Single Point account. Account registration begins in September and taxpayers will be able to use the system to file returns and remit payments beginning November 1, 2019.

July 2019

Sales Tax: The Alabama Department of Revenue announced on June 19, 2019 that it is undertaking a review of its sales tax regulations regarding the taxability of computer software in light of the recent decision of the Alabama Supreme Court in Ex parte Russell County Community Hospital, LLC, decided on May 17, 2019. This case concludes that software is taxable under the Alabama sales tax, but also states that payments for the separately stated services that may attend the sale of software are not taxable.

June 2019

Incentives: On June 6, 2019, the Alabama Incentives Modernization Act was enacted. The Act updates the existing tax incentive regime for rural portions of the state by extending benefits to rural projects generating at least five jobs and extending the investment tax credit under the Alabama Jobs Act to 15 years without qualification. The Act also allows banks and insurance companies to purchase and use tax credits created under the Alabama Jobs Act; enhances the incentives available to high-tech companies under the Alabama Jobs Act to companies creating at least five jobs and allows the investment tax credit calculation to include operating costs as well as capital costs; and provides for reductions in capital gain taxes for investments in opportunity zone funds investing predominantly in Alabama in a manner similar to federal opportunity zones.

For more information about state and local tax developments in Alabama, please contact:

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