Section 40-18-24.1

Composite return and payment by nonresident owner of subchapter K entity. THIS SECTION WAS ASSIGNED BY THE CODE COMMISSIONER. THIS SECTION HAS NOT BEEN CODIFIED BY THE LEGISLATURE.

(a) The Department of Revenue shall permit a subchapter K entity which has income apportioned to Alabama in accordance with Section 40-18-22 to file a composite return and to make a composite payment on behalf of some or all of its nonresident owners if there are one or more nonresident owners during any part of the taxable year. The Department of Revenue may permit composite returns and payments to be made by a subchapter K entity on behalf of its resident owners. The term "nonresident owner" shall mean for any taxable year a partner (with respect to a partnership) or a member (with respect to a limited liability company) who, in the case of an individual, is not a resident of Alabama during such taxable year, or which, in the case of an owner other than an individual, is not legally or commercially domiciled in Alabama during such taxable year, and the term "resident owner" shall mean a partner (with respect to a partnership) or a member (with respect to a limited liability company) who, in the case of an individual, is a resident of Alabama during such taxable year, or which, in the case of an owner other than an individual, is legally or commercially domiciled in Alabama during such taxable year.

(b) For purposes of this section, a "composite return" means an informational return similar in form to U.S. Treasury Department Schedule K-1 to Form 1065 containing information concerning one or more subchapter K entity owner's respective shares of income, deductions, and losses passed through to them by virtue of their status as owners of the subchapter K entity, any credit to which the owner is entitled to claim by virtue of the subchapter K entity's payment of tax on his, her, or its behalf pursuant to subsection (e), and containing such other information as the Department of Revenue shall prescribe. For purposes of this section, a "composite payment" means a remittance of tax by the subchapter K entity on behalf of the owner or owners to which the accompanying composite return relates, applying the highest marginal Alabama income tax rate applicable to C corporations if the nonresident owner is a corporation, and otherwise at the highest marginal Alabama income tax rate applicable to individuals, for the period in question.

(c) A subchapter K entity shall file with the Department of Revenue, in the form prescribed by the Department of Revenue, the agreement of each nonresident owner of the subchapter K entity either to file a return and to make timely payment of all taxes imposed by this chapter on the nonresident owner with respect to the income of the subchapter K entity apportioned to Alabama, or in the case of a nonresident owner that is a subchapter K entity or an Alabama S corporation, to comply with the requirements of this section or with the requirements of Section 40-18-176, whichever is applicable, with respect to its owners. In the case of a nonresident owner which is neither a subchapter K entity nor an Alabama S corporation, an agreement to be subject to personal jurisdiction in this state for purposes of the collection of unpaid income tax, together with related interest and penalties, from the nonresident owner shall also be filed with the Department of Revenue. If the subchapter K entity fails timely to file the agreements required by this subsection on behalf of each of its nonresident owners, then the subchapter K entity shall, at the times set forth in subsection (d) for the filing of the agreements, pay to this state on behalf of each nonresident owner in respect of whom or of which an agreement has not been timely filed an amount equal to the highest tax rate applicable to C corporations under this chapter if the nonresident owner is a corporation, and otherwise the highest tax rate applicable to individuals under this chapter, multiplied by the amount of the owner's distributive share of the net taxable income allocated and apportioned to Alabama, as reflected on the subchapter K entity's return for the period in question.

If the nonresident owner that has filed a consent pursuant to this section does not pay the tax due at the required time, the subchapter K entity shall pay such amount on behalf of the nonresident owner within 60 days after notice and demand from the department, which notice and demand shall not be valid if issued before the expiration of the time for filing (including extensions) of the nonresident owner's income tax return for the taxable years.

(d) The agreements required to be filed pursuant to subsection (c) shall be filed at the following times:

(1) At the time the annual return is required to be filed for the first taxable year for which the subchapter K entity becomes subject to this chapter, and

(2) At the time the annual return is required to be filed for any taxable year in which the subchapter K entity had a nonresident owner on whose behalf the agreement has not previously been filed.

(e) Any amount paid by a subchapter K entity to this state pursuant to subsection (a) or (c) shall be considered to be a payment by the owner on account of the income tax imposed on the owner for the year in question.

(Act 2001-1105, 4th Sp. Sess., p. 1169, §1.)