Revenue Department Issues Initial Guidelines for Tax Paid Limitation for Tax Years 2013-2017

The Alabama Department of Revenue has issued an initial guidance on certain taxes previously paid to other states by Alabama residents under recently enacted HB 384 that was backed by the Business Council of Alabama.

The ADOR’s website posted a notice at the request of the Alabama Society of CPAs and others on behalf of individuals owning interest in pass-through entities and who have been interested in the Moody litigation, the Day litigation, and HB 384 by Rep. Rod Scott, D-Fairfield.

Governor Kay Ivey signed the bipartisan HB 384 as Act 2018-465. It removes the adjusted gross income limit previously imposed under the ADOR’s Rule No. 810-3-21-.03 on the calculation of the credit for tax paid to other jurisdictions for the 2013 through 2017 tax years.

For tax years 2013 through 2016, amended returns seeking refunds under Section 2 of Act 2018-465 must be filed by the earlier of the expiration of the period in which to file a refund petition under Ala. Code 1975, Section 40-2A-7, or June 30, 2018, which is a Saturday.

Refund claims must be filed using paper returns mailed to Compliance Unit, P.O. Box of 327447, Montgomery, AL 36132-7447.

For amended returns that have already been filed seeking refunds related to this issue, even those claims that the ADOR has previously denied, taxpayers need not take any additional action other than to reference the amended return. The ADOR is in the process of reviewing and releasing refunds that had previously been held over this issue.

Taxpayers who received notices for failing to apply the limit to the credit for tax paid do not need to respond further to the notices. However, taxpayers who had an overpayment/refund reduced for failing to apply the limit will need to file an amended return to reverse the ADOR’s adjustment and reclaim the additional refund previously offset by the ADOR.

Finally, in addition to the filing of returns, the ADOR suggests that taxpayers and preparers file a separate schedule that lists by taxpayer and by tax year each return filed with an Act 2018-465 issue, including returns filed prior to the issuance of this guidance.

This schedule should be filed via email addressed to These lists will allow the Department to verify that it has reviewed and appropriately processed all returns with an Act 2018-465 issue. The list should include the taxpayer’s name, SSN (last four digits), tax year, and date amended.

The ADOR also is updating its systems and instructing tax preparation software providers to remove this limitation from software programming for the 2017 tax year. This change should have been communicated to software providers by April 6.

The ADOR recommends that taxpayers and preparers wait until their filing system of choice is updated before filing 2017 returns with a credit for tax paid issue. If their system is not updated by the original filing deadline, we suggest they consider filing with an extension.

Alabama offers an automatic six-month filing extension. Should taxpayers or preparers choose to file returns before systems are updated and to manually override the limit, the ADOR said it will attempt to process the return routinely without the limitation. However, the ADOR said it cannot assure that the steps taxpayers or preparers take to override the limit will not result in the return being stopped in the ADOR’s system for review.