Alabama Tax Developments: 2011 Year in Review

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Our final Alabama SALT Bulletin of 2011 summarizes the major legislative, judicial, and administrative developments affecting Alabama taxpayers with respect to income, transaction and property taxes. The Spring 2011 legislative session produced several noteworthy tax bills, including an incentive designed to encourage foreign manufacturers to locate in Alabama, adoption of a double-weighted sales factor coupled with market sourcing for sales of intangibles and services, and the creation of the Alabama Streamlined Sales & Use Tax Commission. The courts decided several cases of importance during the year, including upholding a taxpayer’s calculation of its I.R.C. section 199 deduction on a separate company basis while, unfortunately, denying a retailer’s sales tax refund attributable to uncollectible private label credit card accounts. The final section of the Bulletin provides a few unofficial predictions regarding legislative tax proposals that we expect to be introduced in the 2012 regular session.

I. Income/Franchise Taxes

Act 2011-17 – Rejection of Business Privilege Tax (“BPT”) Regulation: sustained the Legislative Council’s unanimous decision to reject the Alabama Department of Revenue’s (“ADOR”) controversial regulation that attempted to repeal the statutory BPT deduction for the book value of a taxpayer’s investments in the equity of another business entity that’s also doing business in Alabama...

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