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-.02 - Qualified Investment Partnerships

Current through Register Vol. 42, No. 9, June 28, 2024
(1) Definitions.
(a) Qualified Investment Partnership (QIP). A
			 partnership or other entity classified as a subchapter K entity, or a business
			 trust as defined in §
									40-18-1,
			 Code of Alabama 1975, that for a tax period which begins on or after January 1,
			 2009, meets the gross income and asset tests for a Qualified Investment
			 Partnership as prescribed by §
									40-18-24.2,
Code of Ala. 1975
; and, for which an authorized
			 officer, partner, member or manager of the entity has certified for the tax
			 period that the entity meets the gross income and asset tests. The proper form
			 of the QIP certification and the due date for filing the certification are
			 explained in this regulation.
1. The
			 following restrictions apply concerning entities eligible to be a QIP:
(i) There is a rebuttable presumption that an
			 entity is disqualified as a QIP as abusive when fifty percent (50%) or more of
			 the ownership interest or voting interest of an entity is owned or controlled,
			 directly or indirectly, by a corporation, as defined in §
											40-18-1,
Code of Ala. 1975
, or a controlled group of
			 corporations, as defined in  26 U.S.C. §
												1563, at any time during the tax
			 period. For purposes of this definition, own or control means to own or control
			 directly, indirectly, beneficially, or constructively fifty percent (50%) or
			 more of the voting power or value of an entity. The Department will review
			 written applications or requests to the Commissioner that this presumption not
			 be applied to a particular entity's situation on a case-by-case basis. If the
			 entity establishes that the distributive shares of the income attributed to and
			 owned by the corporate partner are being reported to Alabama for income tax
			 purposes by each of the owners having such interests, the presumption of abuse
			 in this section will have been rebutted.
(ii) An entity that is classified as a dealer
			 in qualifying investment security at any time during a tax period, shall not
			 qualify as a QIP for that tax period. An entity is a dealer in qualifying
			 investment securities if it regularly purchases qualifying investment
			 securities from or sells qualifying investment securities to customers in the
			 ordinary course of a trade or business or regularly offers to enter into,
			 assume, offset, assign or otherwise terminate positions in qualifying
			 investment securities with customers in the ordinary course of a trade or
			 business. The definition provided in  26 U.S.C. §
												475(c)  can also be relied
			 upon to determine if an entity shall be classified as a dealer in qualifying
			 investment securities.
(iii) An
			 entity that is a publicly-traded partnership that is taxed as a corporation for
			 Alabama income tax purposes at any time during the tax period cannot be a QIP
			 for that tax period.
(iv) A common
			 trust fund, as defined in  26 U.S.C. §
												584, cannot be a QIP.
(v) An unincorporated entity that has elected
			 out of the provisions of Subchapter K in accordance with  26 U.S.C. §
												761,at
			 any time during a tax period, cannot be a QIP for that tax period.
(vi) Any entity meeting the definition of a
			 Financial Institution under Section
			 40-16-1,
Code of Ala. 1975
, cannot be a QIP.