Alabama ~ Corporate Income Tax: Dividends Received Deduction from REIT Permitted

CCH Tax Day Report

The financial institution taxpayer was allowed to deduct dividends it received from a majority-owned real estate investment trust (REIT) subsidiary on its Alabama financial institution excise tax (FIET) returns, during the years in issue, even though the REIT subsidiary was allowed to deduct its dividends paid to the financial institution for income tax purposes. The Department of Revenue argued that in effect, the same income would be deducted twice and therefore no state-level tax would be imposed. However, the court noted that the Legislature could have amended the law so as to exclude from the deduction dividends paid by corporate REITS organized and exiting under Alabama law.

Ameris Bank v. Alabama Department of Revenue, Alabama Tax Tribunal, No. BIT. 16-255, February 9, 2017, ¶201-898

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