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Additional Preliminary Guidance from ALDOR on Act 2021-1

On February 12, 2021, Governor Kay Ivey signed into law Act 2021-1. The following preliminary guidance is being providing in regard to Sections 7 and 8 of the act.

Section 7 - Brief Overview: Section 7 of the act decouples the state’s corporate income tax laws from the provisions of the federal Tax Cuts and Jobs Act of 2017 (TCJA) related to Global Intangible Low Taxed Income (GILTI) and related deductions. This section of the act is effective for tax periods beginning after December 31, 2017.

Frequently Asked Question: If this section applies to either my 2018 or 2019 return, should I file an amended return?

No. Section 11 of the act specifically states that no refunds will be granted or paid for tax years ending before January 1, 2020, related to the provisions of the act. As a result, no adjustments related to the decoupling from the federal GILTI provisions can be made to previously filed returns. No assessments will be issued, no refunds or credits will be granted, and no adjustment of any tax attributes such as Net Operating Losses can be made.

Section 8 – Brief Overview: Section 8 decouples the state from the provisions of the TCJA amending the IRC Section 118 related to the taxation of contributions of capital to corporations. This section is effective for contributions made on or after December 23, 2017. 

Frequently Asked Question: If this section applies to either my 2018 or 2019 return, should I file an amended return?

No. Section 11 of the act specifically states that no refunds will be granted or paid for tax years ending before January 1, 2020, related to the provisions of the act. As a result, no adjustments related to the decoupling from the federal changes to IRC Section 118 can be made to previously filed returns. No assessments will be issued, no refunds or credits will be granted, and no adjustment of any tax attributes such as Net Operating Losses can be made.

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