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Tax Announcements Alabama – Corporate, Personal Income Taxes: Rule Adopted on Pass Through Entities The Alabama Department of Revenue has adopted a personal and corporate income tax rule on composite returns of pass-through entities. Effective for taxable years beginning on or after January 1, 2009, a pass-though entity is required to file a composite return and make composite payments on behalf of its nonresident owners or members if there are one or more nonresident owners or members at any time during the taxable year. For tax years beginning from January 1, 2009, through December 31, 2009, a pass-through entity may reduce the amount of its composite payment to the extent that the nonresident member made tax payments or estimated deposits to Alabama in regard to the nonresident member's income from the pass-through entity. Documentation of the composite payment reduction must be attached to the composite return. After January 1, 2010, nonresident consent agreements become ineffective for all future tax periods. In computing the amount of the composite payment, the pass-through entity must apply the maximum tax rate to each nonresident member's distributive share of income, to include both separately stated income and nonseparately stated income. Rule 810-2-32.2-.02, Alabama Department of Revenue, effective February 15, 2010
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