The Alabama Tax Tribunal held that a parent company could not use its losses to offset the income of a bank that it owned through an intermediate holding company for the purposes of the state’s Financial Institution Excise Tax (FIET). The applicable law allowed financial institution members of a commonly owned controlled group to file a consolidated return if each entity is a financial institution required to file an excise tax return in the state. The intermediate holding company did not do business in the state and was therefore not a “financial institution” eligible to file a consolidated return with the bank. Further, the intermediate holding company did not qualify under the alternative definition of a “financial institution” because it only owned the bank and was therefore not the parent of a “controlled group of corporations eligible to elect file a consolidated excise tax return.” The statute with the alternative definition of “financial institution” was subsequently amended to allow indirect ownership of a bank, but the amendment was not retroactive and therefore did not apply to the years at issue.

Ally Fin. v. State of Ala. Dep’t of Revenue, No. 20-659-LP, (Ala. Tax Trib. May 13, 2024).