Section 40-18-160 General Provisions

(a) An Alabama S corporation shall not be subject to the tax imposed by Section 40-18-31.

(b) For purposes of this chapter, an “Alabama S corporation” is a corporation:

(1) With respect to which an election under 26 U.S.C. §1362 is in effect; or

(2)a. With respect to which there is in effect an election under 26 U.S.C. §1361(b)(3) to treat such corporation as a qualified subchapter S subsidiary; and

b. All the stock of which is owned by an S corporation qualifying as an “Alabama S corporation” under subdivision (b)(1).

No corporation shall be an Alabama S corporation for any portion of a taxable year of the corporation during which an election under 26 U.S.C. §1362 or §1361(b)(3), whichever is applicable, is not in effect for federal income tax purposes. No corporation shall be an Alabama S corporation if it is a financial institution, as defined in Section 40-16-1.

(c) For purposes of this chapter, an “Alabama C corporation” means any corporation other than an Alabama S corporation.

(d) With respect to a qualified subchapter S subsidiary for which there is in effect an election under 26 U.S.C. § 1361 (b)(3), all of its assets, liabilities, and items of income, deductions, and credit shall be treated as assets, liabilities, and such items, as the case may be, of the Alabama S corporation owning the stock of the qualified subchapter S subsidiary.