AI-assisted research summary: For credit unions, net income is defined as financial statement income minus specified subtractions, with reserve withdrawals included in taxable income when withdrawn or reduced.
(a) With respect to credit unions only, net income means financial statement income which is the final net income amount, total revenue less total expenses, calculated for financial statement purposes and reported to the Internal Revenue Service as a tax exempt organization and to the Alabama Credit Union Administration (ACUA) or other government regulatory authority as appropriate, less the subtractions specified in subsection (b) and as allocated and apportioned to Alabama according to rules adopted by the Department of Revenue pursuant to Section 40-16-4. (b) Subtractions. The following items shall be subtracted from financial statement income for purposes of computing the net income of a credit union under this chapter: (1) Dividends received from other credit unions and credit union service organizations as defined by federal law and the regulations of the National Credit Union Administration. (2) Reasonable additions to regular reserves as defined by the Capital Preservation Plan approved by each credit union’s Board of Directors annually and accepted by the ACUA pursuant to ACUA regulations pertaining to Capital Preservation Plans. Upon withdrawal or reduction of such reserves the amount withdrawn or reduced shall be included in the calculation of taxable income for the tax year in which the withdrawal occurs. Provided that, direct transfers between reserve accounts, including the allowance for loan losses, that are not included in the calculation of net income shall not be includible in the calculation of taxable income. (c) Nothing in this section shall be construed to allow: (1) Any item to be deducted more than once. (2) A deduction for any item that is excluded from income. (3) Any item to be included in the Alabama net income of more than one taxpayer. (d) No assessments of Financial Institution Excise Tax shall be entered or issued and no refunds shall be granted or paid for tax years ending on or before January 1, 2021, to adjust the amounts subtracted from net income of credit unions for additions to reserves, as previously provided in this section. Further, such amount included in any assessment entered prior to January 1, 2021, shall be void and unenforceable and shall be withdrawn or dismissed with prejudice by the department, and any such refund petitions filed prior to January 1, 2021, shall be denied by the department.