HB46

ENROLLED, An Act,

To require tax preparers to include their federal preparer tax identification number on Alabama income tax returns prepared; to provide penalties for violations; ensure that business privilege tax returns are due at the same time as the corresponding federal income tax return, for financial institutions the due date will correspond with the Alabama excise tax return due date; Section 12 of Act 99-665, as amended by Act 2000-705, is codified by this bill as part of Section 40-14A-22, these changes include, but are not limited to, codifying the maximum business privilege tax amount for a Real Estate Investment Trust (REIT); the name of the Taxpayer Advocate is being changed to the Taxpayer Assistance Officer, and allows for multiple Taxpayer Assistance Officers.

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:

Section 1. A new Article is hereby added to the Code of Alabama 1975, and shall be known and may be cited as the "Alabama Taxpayer Protection and Assistance Act."

Section 2. The Alabama Taxpayer Protection and Assistance Act is enacted to protect consumers by establishing a mechanism to ensure that qualified individuals provide tax preparation services in Alabama.

Section 3. When used in this act, the following terms shall have the following meanings:

(1) DEPARTMENT. The Alabama Department of Revenue.

(2) INCOME TAX RETURN PREPARER.

(a) A person who prepares for compensation, or who employs one or more persons to prepare for compensation, any income tax return or claim for refund, required to be filed pursuant to Title 40, Chapter 18, Code of Alabama 1975. The preparation of a substantial portion of a return or claim for refund shall be treated as the preparation of that return or claim for refund.

(b) A person is not an income tax preparer if all he or she solely performs the following duties:

1. furnishes typing, reproducing, or other mechanical assistance;

2. prepares returns or claims for refunds for the employer by whom he or she is regularly and continuously employed, or for an affiliate of that employer, including a subchapter K entity for which he or she prepares a return;

3. prepares as a fiduciary, returns or claims for refunds for any person; or

4. prepares claims for refunds for a taxpayer in response to any notice of deficiency issued to that taxpayer or in response to any waiver of restriction after the commencement of an audit of that taxpayer or of another taxpayer if a determination in the audit of the other taxpayer directly or indirectly affects the tax liability of the taxpayer whose claims he or she is preparing.

(3) PERSON. An individual, firm, proprietorship, association, corporation, or another entity.

(4) PTIN. Preparer Tax Identification Number issued by the Internal Revenue Service and referenced in Internal Revenue Service Notice 2011-6.

Section 4. No person may provide tax preparation services for Alabama income tax returns, unless an IRS issued Preparer Tax Identification Number is provided by such preparer when submitting a return and signing as a paid preparer.

Section 5. Duties of the Department.

(a) For taxable years beginning on or after January 1, 2018, the Department shall, by rule, require any income tax return preparer, as defined in this act, to include his or her PTIN on any tax return prepared by the income tax return preparer and filed under Title 40, Chapter 18, Code of Alabama 1975, or any claim for refund of tax imposed by Title 40, Chapter 18, Code of Alabama 1975.

(b) The Department shall develop and by rule implement a program using the PTIN as an oversight mechanism to assess returns, to identify high error rates, patterns of suspected fraud, and unsubstantiated basis for tax positions by income tax return preparers.

(c) The Department shall, by rule, establish formal and regular communication protocols with the Commissioner of the Internal Revenue Service to share and exchange PTIN information on income tax return preparers who are suspected of fraud, disciplined, or barred from filing tax returns with the Department or the Internal Revenue Service. The Department may, by rule, establish additional communication protocols with other states to exchange similar enforcement or discipline information.

Section 6. Enforcement.

(a) The Department may investigate the actions of any income tax return preparer filing Alabama income tax returns and may bar or suspend an income tax return preparer from filing returns with the Department for good cause, subject to the appeal rights under Chapter 2A of Title 40.

(b) In addition to all other penalties provided by law, any person violating this act by failing to provide his or her PTIN shall pay a civil penalty to the Department in the amount of $50 per offense, but not to exceed $25,000 per calendar year; however, no penalty shall be imposed if the failure is due to reasonable cause and not due to willful neglect, as determined by the Department.Section 7. Section 40-14A-22 is hereby amended as follows:

§40-14A-22.

"(a) Levy of tax. There is hereby levied an annual privilege tax on every corporation, limited liability entity, and disregarded entity doing business in Alabama, or organized, incorporated, qualified, or registered under the laws of Alabama. The tax shall accrue as of January 1 of every taxable year, or in the case of a taxpayer organized, incorporated, qualified, or registered during the year, or doing business in Alabama for the first time, as of the date the taxpayer is organized, incorporated, registered, or qualifies to do business, or begins to do business in Alabama, as the case may be. The taxpayer shall be liable for the tax levied by this article for each year beginning before the taxpayer has been dissolved or otherwise ceased to exist or has withdrawn or forfeited its qualification to do business in Alabama. The amount of the tax due shall be determined by multiplying the taxpayer's net worth in Alabama by the rate determined in subsection (b).

"(b) Rate of tax. For all taxable years of taxpayers that begin after December 31, 1999, the rate of tax shall be as set forth below.

If taxable income of the taxpayer is: at least but less than The tax rate shall be

$1 $0.25 per $1,000 $1 $200,000 $1.00 per $1,000 $200,000 $500,000 $1.25 per $1,000 $500,000 $2,500,000 $1.50 per $1,000 $2,500,000 $1.75 per $1,000

"(c) Minimum tax. Except as provided in subsection (f), the privilege tax levied by this article on certain corporations, business trusts, limited liability entities, and disregarded entities shall not be less than $100.

"(d) Maximum tax.

"(1) Except as provided in subdivision (2), the privilege tax levied by this article shall not exceed $15,250 for any taxpayer for the taxable year beginning January 1, 2000. For each taxable year thereafter, the maximum tax shall not exceed $15,000 for any taxpayer, except as provided in subdivision (2).

"(2) With respect to any (i) financial institution groups as defined in subsection (f) (1); (ii) insurance company that is subject to the premium taxes levied by Chapter 4A of Title 27; and (iii) corporation, company, limited liability entity, or association whose property is assessed for taxation pursuant to the provisions of Chapter 21 and is also obligated to serve the general public, but is not subject to the Alabama Corporate Income tax, the privilege tax levied by this article shall not exceed $3,000,000, for any taxpayer or, for a financial institution group, for the financial institution group as a whole each year except as provided in subsection (e).With respect to any real estate investment trust as defined in Chapter 13 of Title 10, the privilege tax levied by this article shall not exceed $500,000, for any taxpayer each year except as provided in subsection (e). The privilege tax levied by this article on any electing family limited liability entity shall not exceed $500.

"The privilege tax levied by this article on any corporation organized as a not-for-profit corporation that does not engage in any business other than holding title to property and paying the expenses thereof, including, without limitation, a property owners' association or a corporation organized solely to hold title to property on a temporary basis, shall not exceed $100.

"(e) Short taxable years. If any taxpayer's taxable year is less than 12 months because the taxpayer is incorporated or organized within the taxable year, or if any foreign corporation or foreign limited liability entity qualifies, registers, or begins to do business in this state within the taxable year or converts to a taxable year other than the calendar year, the amount of the tax levied by this article shall be determined in the manner specified in this article but apportioned to the short taxable year in same proportion as the number of days in the short taxable year bears to 365, but in no event less than $100 nor more than the applicable amount specified in subsection (d).

"(f) Minimum taxes for financial institution groups.

"(1) For purposes of this subsection, the following terms shall mean:

"a. Affiliated Group. (i) One or more chains of corporations or limited liability entities connected through the ownership of stock or ownership interests with a common parent which is a corporation or limited liability entity, but only if the common parent owns directly stock or ownership interests meeting the requirements of item (ii) in at least one of the other corporations or limited liability entities, and only if stock or ownership interests meeting the requirements of item (ii) in each of the corporations or limited liability entities (except the common parent) is owned directly by one or more of the other corporations or limited liability entities. (ii) The ownership of stock or ownership interests of any corporation or limited liability entity meets the requirements of this paragraph if it possesses at least 80 percent of the total voting power or capital and profits interest of the corporation or limited liability entity.

"b. Financial Institution. The meaning given in Section 40-16-1.

"c. Financial Institution Group. All taxpayers in an affiliated group where at least one member of the group is a financial institution that is subject to the provisions of Chapter 16. In the event a financial institution taxpayer is not a member of an affiliated group, that financial institution shall be treated as a financial institution group.

"(2) To the extent that the members of a financial institution group have different taxable years, the group shall be deemed, for purposes of the business privilege tax and corporate shares tax levied by Articles Article 2 and 3, to have a calendar taxable year.

"(3) Taxpayers who are members of a financial institution group shall complete their corporate shares tax and business privilege tax returns without regard to this subsection. Those taxpayers shall submit their returns together, and the minimum tax amount provided in subdivision (5) shall apply to the aggregate business privilege tax and corporate shares tax liability of the group. To the extent that the minimum amount provided in subdivision (5) applies to determine the liability of the group, each taxpayer which is a member of the group shall be liable for that portion of the group liability which is equal to the amount multiplied by the ratio of the taxpayer's liability without regard to this subsection over the liability of the group without regard to this subsection. Upon the annual election of the common parent, a financial institution group may file a single return, executed by the common parent of that financial institution group. The return shall be completed as if the financial institution group were a single taxpayer. Each member of the financial institution group shall be jointly and severally liable for the group's business privilege tax and corporate shares tax liabilities.

"(4) For the taxable year beginning January 1, 2000, the tax returns of all members of a financial institution group shall be due July 10, 2000. For taxable years beginning after December 31, 2000, the tax returns for all members of a financial institution group shall be due March 15 of the taxable year. The tax returns for all members of a financial institution group shall be due no later than the corresponding Alabama financial institution excise tax return due date. Extensions for filing these returns shall not be granted for more than six months. beyond September 15 of the taxable year. For the return due July 10, 2000, any corporate shares taxes and business privilege taxes accrued and paid by any member of the financial institution group before July 10, 2000, shall be applied against the minimum tax amount provided in subdivision (5).

"(5) For taxable years beginning on or after January 1, 2000, the minimum aggregate business privilege and corporate shares taxes tax levied by Articles Article 2 and 3 on all members of a financial institution group shall be:

"a. For financial institutions with total deposits inside Alabama of less than one billion dollars ($1,000,000,000) within that financial institution group, as reported to the FDIC, OTS, or the NCUSIF as of June 30 of the immediately preceding taxable year, the tax rate shall be $.125 per one thousand dollars ($1,000) of such deposits. For deposit rate purposes for all future periods, the deposits shall in no event be less than the deposits listed as of June 30, 1999.

"b. For financial institutions with total deposits inside Alabama of one billion dollars ($1,000,000,000) or greater up to and including six billion dollars ($6,000,000,000) within that financial institution group, as reported to the FDIC, OTS, or the NCUSIF as of June 30 of the immediately preceding taxable year, the tax rate shall be $.17 per one thousand dollars ($1,000) of such deposits. For deposit rate purposes for all future periods, the deposits shall in no event be less than the deposits listed as of June 30, 1999.

"c. For financial institutions with total deposits inside Alabama greater than six billion dollars ($6,000,000,000) within that financial institution group, as reported to the FDIC, OTS, or the NCUSIF as of June 30 of the immediately preceding taxable year, the tax rate shall be $.225 per one thousand dollars ($1,000) of such deposits. For deposit rate purposes for all future periods, the deposits shall in no event be less than the deposits listed as of June 30, 1999.

"d. Provided, however, that in the case of a financial institution group that, as of June 30, 1999, (i) had total deposits of less than one billion dollars ($1,000,000,000) and (ii) derived at least a majority of its deposits, as reported to FDIC, OTS, or NCUSIF, that were booked to one or more branches or offices located within Alabama from account holders whose addresses of record on the books of the financial institution group were outside the State of Alabama, the phrase "total deposits in Alabama," for purposes of calculating the minimum aggregate business privilege and shares tax levied by Articles Article 2 and 3 for all taxable years beginning on and after January 1, 2000, shall only include deposits of account holders whose addresses of record on the books of the financial institution group are inside the State of Alabama.

"e. In the event a financial institution group sells Alabama deposits to another financial institution group that reports those deposits in Alabama for purposes of Act 2000-705, those deposits shall not be taxed more than once pursuant to the provisions of Act 2000-705 in the same taxable year. The liability for such taxes shall be the responsibility of the purchaser, and the tax base for the selling group shall be adjusted accordingly.

"f. In the event an existing financial institution group reports deposits in any year less than 96.5 percent of the deposits reported as of June 30, 1999, the alternative minimum tax shall be based on the deposits reported as of June 30, 1999. In the event an existing financial institution group reports deposits in any year more than 96.5 percent of the deposits reported as of June 30, 1999, the alternative minimum tax shall be based on the deposits reported for that taxable year. For financial institutions coming into existence after June 30, 1999, the deposits upon which the alternative minimum tax is based shall not be less than the deposits reported the first full year that financial institution reported deposits to the FDIC, OTS, or NCUSIF."Section 8. Section 40-14A-25 is hereby amended as follows:

§40-14A-25.

"(a) Every taxpayer shall file a privilege tax return, which shall include the public record disclosures required by Section 10-2B-16.22, with the department for every taxable year for which it is subject to the tax levied by this article. A disregarded entity that is owned by an individual, general partnership, or other entity not subject to the tax levied by this article shall file a return and pay the tax levied on it by this article. Except as provided in Section 40-14A-22(f) (4), the return required by this section is due not no later than the corresponding federal income tax return as required to be filed as provided under federal law.March 15 of the taxable year for all taxpayers except limited liability entities for which the due date of the return shall be April 15 of the taxable year, or, in In the case of a taxpayer's initial return, 30 days two and one half months after the taxpayer comes into existence, qualifies or registers to do business, or commences doing business in Alabama as the case may be. For all taxable years beginning after December 31, 2000, a corporation shall file the return required by this section not later than two and one-half months after the beginning of the corporation's taxable year; a limited liability entity shall file the return required by this section not later than three and one-half months after the beginning of the limited liability entity's taxable year; and a A disregarded entity that is required to file a return by this section shall file the return not later than the time its owner is required to file its return. If a taxpayer is required to change its taxable year pursuant to the previous sentence, then it shall file a return for the short taxable year beginning January 1, 2001, and ending on the day before the beginning of its new taxable year, and the return shall be filed not no later than the corresponding federal income tax return as required to be filed as provided under federal law. two and one-half months, if a corporation, and three and one-half months, if a limited liability entity, after the beginning of its new taxable year. In cases where receivers, trustees in bankruptcy, or assignees are operating the property or business of taxpayers, those receivers, trustees, or assignees shall file returns for the taxpayers in the same manner and form as the taxpayers are required to file returns. Any tax due on the basis of returns filed by receivers, trustees, or assignees shall be collected in the same manner as if collected from the taxpayers for whose business or property they have custody and control. The department may grant a reasonable extension of time for filing returns under rules and regulations prescribed by the department. No extension shall be for more than six months.

"(b) The tax provided in this article shall be reported on forms and in the manner as prescribed by the department. The failure to receive a form from the department shall not relieve a taxpayer from liability for any tax, penalty, or interest otherwise due. The tax due, as reported, shall constitute an admitted liability for that amount. The department may compute and assess additional tax, penalty, and interest against a taxpayer as provided in Chapter 2A. Interest on overpayments of business privilege tax will be computed and paid in the manner provided in Section 40-1-44(b)(1)b.

"(c) A corporation that is a member of an Alabama affiliated group that has elected to file a consolidated return pursuant to Section 40-18-39 or Section 40-16-3(b), if it is subject to the tax imposed by this article, shall file a separate return reporting and paying tax on its net worth without regard to other members of the affiliated group."

Section 9. The Code Commissioner, pursuant to Section 29-7-8, Code of Alabama 1975, shall change all references to the Taxpayer Advocate in Title 40, Chapter 2A, to Taxpayer Assistance Officer or Taxpayer Assistance Officers.

Section 10. The Department shall adopt rules to assist with the implementation and enforcement of this act.

Section 11. If any part of this act is declared invalid or unconstitutional, that declaration shall not affect the part which remains.

Section 12. All laws or parts of laws which conflict with this act are hereby repealed.

Section 13. This act shall become effective for tax returns due on or after January 1, 2018, following its passage and approval by the Governor, or upon its otherwise becoming law.

Taxation

Tax Returns

Tax Preparers

Tax Assistance Officer