DOR Held to '98 Law, Amended Return OK

In an Administrative Law Division opinion released on December 19, 2003 (Robert and Nancy Bishop, Docket Number 03-583), the taxpayers invoked a 1998 revision in the law that was not reflected in the Department of Revenue's regulations, and were successful in arguing that they should be allowed to amend their 2000 Alabama income tax return to properly reflect income earned in another state along with the credit for taxes paid in that state.

Mr. and Mrs. Bishop lived in Milport, Alabama during the 2000 tax year. Mr. Bishop worked in Alabama, while Mrs. Bishop was employed in Mississippi. They filed Alabama Form 40A ("Short Form") for the tax year reporting only their Alabama income, and they also filed a Mississippi return reporting the income earned and taxes withheld in that state. The Mississippi return reported total Mississippi tax of $435. When the DOR investigated a federal report that Mr. and Mrs. Bishop had omitted some interest and dividend income from their 2000 return, the Department discovered that the Bishops had not reported their Mississippi income on their Alabama return. (Form 40A does not provide any mechanism for reporting out of state income or for claiming the credit for taxes paid in another state.) The taxpayers submitted an amended return in May of 2003 reporting the Mississippi income and claiming the credit for taxes paid in that state. The amended return showed a balance due of $194, which was paid with the return.

Department of Revenue Position

The DOR rejected the amended return on the grounds that the election to file a short form was irrevocable under Regulations 810-3-81-.01(2). The Department's position was that the taxpayers could not now decide to file the "long form" in order to claim the credit for taxes paid in another state.

Administrative Law Division Opinion

The Administrative Law Judge acknowledged the language in the Regulations cited by the Department; but he noted that the Regulation had not been amended to reflect the action of the Legislature in 1998. Act 98-502 repealed the irrevocability of the short form election, and current Alabama law now permits just such an amended return as was filed by the taxpayers. Unless there is some other grounds for rejecting the amended return, the DOR must accept it as filed, and allow the credit for Mississippi tax paid.

This page last updated 1/11/04

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