Alabama Tax Law and Compliance

Individual Tax Returns

Click here for a page of links to brief articles answering questions you may have about your Alabama tax return.

Current Developments

Alabama Farmers Qualify for Tax Break Due to Drought

Alabama cattle farmers may be eligible for an extended period of time in which to reinvest the proceeds of livestock sales in order to avoid paying tax on the profits, if the sales were forced by drought conditions. Such sales are considered to be "involuntary conversions" under Internal Revenue Code Section 1033(e)(2), and farmers have up to four years to reinvest the proceeds in property that is "simlar or related in use" to the converted property. A reinvestment within the required period allows the farmer to defer reporting the gain on the sale while reducing the basis of the replacement property by the amount of the gain not reported. The Alabama Code adopts federal Section 1033 by reference, so its benefits will be available on the farmer's Alabama return also. More...

Six Alabama Counties Get Favorable Tax Credit Designation

Six Alabama counties (Butler, Dallas, Macon, Perry, Sumter, and Wilcox) have been designated as "Rural Renewal Counties" by the Internal Revenue Service. The significance of the designation is that employers may be eligible for a credit of up to 40% of the wages paid to employees who are residents of the six counties and who begin work for the employer after May 27, 2007. The employer does not have to be located in the rural renewal county to claim the credit.

The credit, referred to as the "Work Opportunity Tax Credit", is provided by Section 51 of the Internal Revenue Code. Eligible employees include persons who are between the ages of 18 and 39. The six Alabama counties were selected, along with rural counties from 31 other states, because they experienced a net decline in population between the years of 1990 - 1994 and 1995 - 1999. Employers who think they may have eligible employees should contact their tax advisor immediately, since there is a "pre-screening" form (Form 8850) that must be completed within 28 days of the employee beginning work.

Alabama S Corp Rules Hold Double Taxation Trap

Under the Alabama Code, it is possible for income earned by Alabama S corporations in other states to be taxed twice, once in the other state when it is earned, and again in Alabama when it is distributed to the shareholders. More...

Legislature Fails To Block "United Appeal" Scheme

One of the wackier aspects of the Alabama Tax Code is the way exemptions from sales and use taxes are handed out. Under Alabama Administrative Code Section 810-6-5-.16, churches and other not-for-profit agencies are not exempt from sales and use taxes on their purchases (or sales) of tangible personal property unless their exemption has been established by a special act of the Legislature. This leads to some bizarre passages in the Code,such as the ones that grant sales tax exemptions to the Wesco Girls Softball Team in Madison County and the Southeast Livestock Exposition in Montgomery. More...

Congress, President Agree on Minimum Wage, Small Business Tax Changes

Alabama Joins Multistate Tax Shelter Compliance Program

Alabama Revenue Commissioner Tom Surtees announced on June 1, 2007 that the Department of Revenue has joined with 20 other states in a voluntary compliance program aimed at abusive tax shelters. Under the program, which is operated under the auspices of the Multistate Tax Commission (MTC), Alabama taxpayers who have claimed benefits from abusive tax shelters on returns filed for periods beginning before January 1, 2006 have until October 1, 2007 to file an amended return and pay any additional tax due without penalty. More...