Section 40-16-11
Transition rules for Financial Institution Excise Tax Reform Act of 2019.
This section provides for transition rules for the implementation of the Financial Institution Excise Tax Reform Act of 2019.
(1) Act 2019-284 imposes for the first time a system of prepaid estimated tax payments patterned after the federal system and transitions the Financial Institution Excise Tax from the current post-payment system. To account for this transition, the Department of Revenue shall waive both penalties and interest attributable to underpayments of estimated tax payments occurring within the first two applicable tax years and not attributable to an intentional disregard of the law.
(2) Act 2019-284's conformity of the depreciation deduction allowed in the calculation of the tax due under this chapter with the corollary deduction allowed for federal income tax purposes, as well as the act's express rejection of the federal Tax Cuts and Jobs Act of 2017's (i) limitations on the deductibility of Federal Deposit Insurance Corporation premiums under 26 U.S.C. § 162(r), (ii) limitations on the deductibility of certain interest under 26 U.S.C. § 163(j), and (iii) inclusion of global intangible low-taxed income (GILTI) under 26 U.S.C. § 951A and deduction of foreign-derived intangible income and GILTI under 26 U.S.C. § 250, are merely a clarification of existing law and shall apply retroactively to all open tax years.
(3) The enactment of Section 40-16-10 extends the carryforward period for net operating losses to a maximum of fifteen tax years, while eliminating the financial institution's ability to carry back net operating losses to the prior two tax years. The fifteen tax year carryforward period shall only apply to net operating losses incurred in tax years beginning after December 31, 2019. The clarification of the ordering rules applicable to net operating losses provided by Section 40-16-10(c) shall apply to all open tax years.
(4) In addition to the deductions from federal taxable income provided by Section 40-16-1.2(b), subject to the limitation provided by Section 40-16-1.2(c), a financial institution may deduct the applicable percentage of dividend income from a Captive REIT if such dividend income would be deductible under 26 U.S.C. § 243 if received from an entity that is not a REIT, as defined in Section 40-18-1(27). For purposes of this subdivision, a "Captive REIT" shall include any REIT, as defined in Section 40-18-1(27), whose shares or certificates of beneficial interest are not regularly traded on an established securities market and are owned or controlled, at any time during the last half of the tax year, by an association taxable as a corporation that is not exempt from tax under 26 U.S.C. § 501(a) or a REIT, as defined in Section 40-18-1(27). For purposes of the definition of Captive REIT in this subdivision, own or control means to own or control directly, indirectly, beneficially, or constructively more than 50 percent of the voting power or value of an entity, applying the attribution rules of 26 U.S.C. § 318, as modified by 26 U.S.C. § 856(d)(5), in determining ownership and control. For purposes of this subdivision, the "applicable percentage" shall be: (i) One hundred percent for tax years beginning after December 31, 2019 and before January 1, 2021; (ii) Eighty percent for tax years beginning after December 31, 2020 and before January 1, 2022; (iii) Sixty percent for tax years beginning after December 31, 2021 and before January 1, 2023; (iv) Forty percent for tax years beginning after December 31, 2022 and before January 1, 2024; (v) Twenty percent for tax years beginning after December 31, 2023 and before January 1, 2025; and (vi) Zero percent for tax years beginning after December 31, 2024.
(5) Act 2019-284's distribution formula percentages, as stated in § 40-16-6, shall apply to the annual 2019 financial institution excise tax distribution.
(Act 2019-284, §3.)