The Alabama Department of Revenue has announced here that it will waive penalties for taxpayers whose 2011 estimated tax payments were insufficient due to the change in the “gross income regulation” rule that became final on September 7, 2011, but is effective for the entire 2011 tax year.
Readers will recall that the changes were to the “gross income regulation,” actually three income tax regulations that previously allowed residents to apportion income from partnerships, limited liability companies, and s-corporations, and exclude non-Alabama source income from the tax base.
As a result of the amendment, those regulations now require Alabama resident taxpayers to include in their Alabama gross income their distributable share of partnership, limited liability company, and s-corporation income derived from both in-state and out-of-state activities.
Because the rule change became effective during the 2011 tax year, the Department will waive underestimation tax penalties on affected taxpayers who file their 2011 annual individual income tax return and are billed for underestimation tax penalties.
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