Alabama Administrative Code › Title 810 - ALABAMA DEPARTMENT OF REVENUE › Chapter 810-3-24.2 - PASS-THROUGH ENTITY COMPOSITE RETURNS AND QUALIFIED INVESTMENT PARTNERSHIP (QIP) REQUIREMENTS › Section 810-3-24.2-.03 - Other Qualified Investment Partnership Matters

Current through Register Vol. 42, No. 9, June 28, 2024
(1) Every nonresident member of a Qualified
			 Investment Partnership (QIP) that has Alabama source income must file an
			 Alabama income tax return and report the Alabama source income even if the
			 income earned in Alabama is included on a composite return filed by the QIP,
			 unless the member is a nonresident individual who has no other Alabama source
			 income. For a nonresident individual to claim the benefit of any net operating
			 losses generated by a QIP, the nonresident individual must establish those
			 losses by filing an Alabama individual income tax return.
(2) The QIP Alabama income tax reporting
			 requirements do not change the Alabama income tax return filing requirements
			 for business entities.
(3) In
			 accordance with §
								40-18-24.3,
Code of Ala. 1975
, a nonresident member of a QIP will
			 be exempt from Alabama income tax on its distributive share of QIP income
			 unless the nonresident member actively participates in the day-to-day
			 management of the QIP or the QIP invests in the qualifying investment
			 securities of an entity that is majority owned by the nonresident member.
(a) The term "majority owned" is defined in
			 §
									40-18-24.3,
Code of Ala. 1975
, and includes the attribution rules
			 of  26 U.S.C. §
										318.
(b) Income
			 from a QIP is taxable to a nonresident member of the QIP if the income is from
			 investment activity that is interrelated with an Alabama trade or business in
			 which the nonresident member owns an interest even if the primary activities of
			 the trade or business are separate and distinct from the acts of acquiring,
			 managing, or disposing of qualified investment securities.
(c) Income from a QIP is taxable to a
			 nonresident member of the QIP if any part of the qualifying investment
			 securities of the QIP are acquired with the working capital of an Alabama trade
			 or business in which the nonresident member owns an interest.
(d) A financial institution, as defined in
			 §
									40-16-1,
Code of Ala. 1975
, if a nonresident member of a QIP,
			 is taxed on its distributive share of income from the QIP if it participates in
			 the management of the investment activities of the QIP; if it is engaged in a
			 unitary business with another taxpayer that participates in managing the
			 investment activities of the QIP; or, if the financial institution has income
			 from Alabama sources.
(e) A
			 corporation, as defined in §
									40-18-1,
Code of Ala. 1975
, if a nonresident member of a QIP,
			 is taxed on its distributive share of income from a QIP if it participates in
			 the management of the investment activities of the QIP; if it is engaged in a
			 unitary business with another taxpayer that participates in managing the
			 investment activities of the QIP; or, if the corporation has income from
			 Alabama sources.