(a) In computing the net income of financial institutions subject to the tax imposed by this chapter, there shall be allowed, in addition to the deductions specified therein, a deduction for the sum of the net operating losses which may be carried forward to the taxable year for which the net income of the financial institution is being computed.
(1) The term "net operating loss" for the purposes of this chapter means the amount by which net income of the financial institution, before the deduction allowed by this section, with respect to a taxable year is less than zero. For purposes of this section, the financial institution’s net income shall be determined under this chapter applicable to the year in which the net operating loss arises.
(2) A net operating loss shall be carried forward to the earliest subsequent taxable year in which the financial institution has net income greater than zero, determined without taking into account the deduction allowed by this subsection. The amount of a net operating loss which may be carried to any later taxable year shall be the excess of the net operating loss over the sum of the amounts thereof deductible under this subsection in all the taxable years preceding this taxable year.
(3) If net operating losses arising in more than one taxable year can be carried forward to a taxable year of the financial institution, the net operating loss arising from the earliest of those years shall be deducted first.
(4) The net operating loss allowed by this section shall be limited to sources attributable to Alabama, as determined by applying the allocation and apportionment methodology in the year in which the loss arose pursuant to Section 40-16-4.
(5) A net operating loss may be carried forward and deducted only during the 15 consecutive tax years immediately following the tax year in which it arose.
(b) In the case of a financial institution classified as an acquiring corporation within the meaning of 26 U.S.C. § 381, or in the case of a financial institution classified as a new loss corporation within the meaning of 26 U.S.C. § 382, or in the case of the recognized built-in gains of a financial institution classified as a gain corporation within the meaning of 26 U.S.C. § 384, only the net operating losses as are allowable in accordance with 26 U.S.C. §§ 381, 382, and 384 shall be allowed as a deduction under this section. This subsection shall be applied before the limitations in the preceding subsection are applied.
(c) Net operating losses incurred by members of a qualified corporate group, as defined in Section 40-16-3(c), (including those net operating losses described in subsection (b)) shall be deducted in the following order:
(1) Net operating losses shall be carried forward only on account of the member which incurs the loss (including any prior year net operating losses allocated from the parent under subdivision (2), which subsequently became part of the member’s loss carryforward) and shall be deducted prior to consolidating any resulting taxable income with the other members’ income on the consolidated return under Section 40-16-3(b). Any remaining net operating losses of the member shall be carried forward in accordance with this section.
(2) Any current year net operating losses of the parent of a qualified corporate group, as defined in Section 40-16-3(c), shall be allocated among the other members of the qualified corporate group based on the percentage which the gross assets of each member of the qualified corporate group bears to the total gross assets of all members of the qualified corporate group, excluding the parent of a qualified corporate group, and shall be deducted prior to consolidating any resulting taxable income with the other members’ income on the consolidated return under Section 40-16-3(b). To the extent this loss described in the preceding sentence creates or increases a loss for a member, such loss becomes part of that member’s net operating loss carryforward from the year of such allocation.
Last modified: May 3, 2021