HB462 By Representative Martin RFD Ways and Means General Fund Rd 1 22-MAR-16

SYNOPSIS: Under current law, all entities doing business or registered to do business in Alabama, have an annual filing obligation for Business Privilege Tax. The Business Privilege Tax is calculated based on an entity’s net worth, apportioned to Alabama. There is a minimum of $100 Business Privilege Tax imposed annually on all entities subject to this tax. Currently, taxpayers have an annual maximum Business Privilege Tax due of $15,000.

In addition, under current law, the Business Privilege Tax due date for Financial Institutions is March 15. The Alabama Excise Tax return filed by financial institutions is due April 15. Taxpayers often need to extend the filing date of the Business Privilege Tax in order to have complete information not available until the Financial Institution Excise Tax return is completed. In addition, this bill ensures that all other entity types have corresponding due dates for both the Business Privilege Tax and the Alabama Income Tax return.

This bill will increase the annual maximum amount of Business Privilege Tax due from $15,000 to $24,500. Taxpayers that have less than $10,000 in Alabama taxable net worth will be relieved from their Business Privilege Tax filing obligation. In addition, the initial Business Privilege Tax return is eliminated. This bill updates the public information record filing requirements.

This bill amends the Business Privilege Tax due date for taxpayer’s subject to the Financial Institution Excise Tax from March 15, to provide for corresponding tax return due dates for financial institutions.

In addition, this bill modifies due dates for all entities to ensure that the Business Privilege Tax return is due at the same time as the Federal Income Tax return.

In addition, Section 12 of Act 99-665, as amended by Act 2000-705, is codified by this bill as part of Section 40-14A-22. Other technical corrections from these acts are also codified by this bill.

This bill repeals Section 40-14A-29 in its entirety to remove the requirement for an initial Business Privilege Tax return.

A BILL TO BE ENTITLED AN ACT

This bill will increase the annual maximum amount of Business Privilege Tax due from $15,000 to $24,500. Taxpayers that have less than $10,000 in Alabama taxable net worth will be relieved from their Business Privilege Tax filing obligation. In addition, the initial Business Privilege Tax return is eliminated. This bill updates the public information record filing requirements. This bill also amends the Business Privilege Tax due date for taxpayer’s subject to the Financial Institution Excise Tax from March 15, to provide for corresponding tax return due dates for financial institutions. Modifies due dates for all entities to ensure that the Business Privilege Tax return is due at the same time as the Federal Income Tax return. In addition, Section 12 of Act 99-665, as amended by Act 2000-705, is codified by this bill as part of Section 40-14A-22. This bill repeals Section 40-14A-29 in its entirety to remove the requirement for an initial Business Privilege Tax return.

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:Section 1. Sections 10A-2-16.22, 40-14A-22, and 40-14A-25, Code of Alabama 1975, are hereby amended to read as follows:

§10A-2-16.22.

"(a) Each domestic corporation, and each foreign corporation authorized to transact business in this state, shall deliver to the Secretary of State for filing an annual report that sets forth:

"(1) The name of the corporation and the state or other jurisdiction under whose law it is incorporated;

"(2) The address of its registered office and the name of its registered agent at that office in this state;

"(3) The address of its principal office including, in the case of a foreign corporation, the address of its principal office in the state or other jurisdiction under whose law it is incorporated;

"(4) The names and respective addresses of its president and secretary; and

"(5) A brief statement of the character of business in which it is actually engaged in this state.

"(b) Information in the annual report must be current as of the date the annual report is executed on behalf of the corporation.

"(c) The first annual report must be delivered to the Secretary of State between January 1 and March 15 of the year following the calendar year in which a domestic corporation was incorporated or a foreign corporation was authorized to transact business. Subsequent annual reports must be delivered to the Secretary of State between January 1 and March 15 of the following calendar years.

"(d) If an annual report does not contain the information required by this section, the Secretary of State shall promptly notify the reporting domestic or foreign corporation in writing and return the report to it for correction. If the report is corrected to contain the information required by this section and delivered to the Secretary of State within 30 days after the effective date of notice, it is deemed to be timely filed.

"(e) The public record information filed with the Department of Revenue, pursuant to Chapter 14A of Title 40 shall constitute and be accepted in lieu of the annual report required pursuant to this section, provided that a A ten dollar ($10) fee for the State of Alabama shall accompany the public record information filed by the corporation annually with the Department of Revenue Secretary of State. The fee for the annual report shall be deposited in the State Treasury to the credit of the Secretary of State Entity Fund as prescribed by Section 10A-1-4.31.

§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) Exemption.

"(1) For purposes of this section, Alabama taxable net worth will be computed in the manner prescribed by this Chapter.

"(2) All entities, subject to the tax levied in Title 40, Chapter 14A, with Alabama taxable net worth less than $10,000 are relieved from filing an annual Business Privilege Tax return and the associated tax liability.

"(c) (d) Minimum tax. Except as provided in subsection (f) (g), 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) (e) Maximum tax.

"(1) Except as provided in subdivision (2), the privilege tax levied by this article shall not exceed $15,250 $24,500 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) (g) (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) (f). 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) (f) 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 different 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) (e), unless exempted pursuant to subsection (c)(2).

"(f) (g) 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 in the same manner as the federal income tax return prescribed in 26 US Code § 6072. Extensions for filing these returns shall not be granted 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) for more than six months.

"(5) For taxable years beginning on or after January 1, 2000, the 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.

§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, except those exempt under Section 40-14A-22(c). 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)(g)(4), the return is due not later than 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 the case of a taxpayer's initial return, 30 days 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 in the same manner as the federal income tax return prescribed in 26 US Code § 6072; 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 in the same manner as the federal income tax return prescribed in 26 US Code § 6072; and 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 later than 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 2. Section 40-14A-29 is repealed in its entirety.

Section 3. All laws or parts of laws which conflict with this act are hereby repealed. Section 12 of Act 99-665, as amended by Act 2000-705, is not repealed by this act.

Section 4. This act shall become effective for all Business Privilege Tax returns due after December 31, 2016.