Ally Financial, Inc., and Ally Bank v. Alabama Department of Revenue

── Ally Financial, Inc., and Ally Bank v. Alabama Department of Revenue ── Court: Court of Civil Appeals of Alabama Date: April 10, 2026 Author: Christy Edwards Category: General Rel: April 10, 2026 Notice: This opinion is subject to formal revision before publication in the advance sheets of Southern Reporter. Readers are requested to notify the Reporter of Decisions, Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229-0650), of any typographical or other errors, in order that corrections may be made before the opinion is published in Southern Reporter. ALABAMA COURT OF CIVIL APPEALS OCTOBER TERM, 2025-2026 _________________________ CL-2025-0460 _________________________ Ally Financial, Inc., and Ally Bank v. Alabama Department of Revenue Appeal from Montgomery Circuit Court (CV-24-900997) EDWARDS, Judge. This appeal concerns whether Ally Financial, Inc. ("AFI"), and Ally Bank ("the bank") (collectively referred to as "the taxpayers") met the criteria to file Alabama Financial Institution Excise Tax ("FIET") returns CL-2025-0460 as a consolidated group in tax return years 2012 through 2020,1 pursuant to Ala. Code 1975, § 40-16-3(c). The Alabama Department of Revenue ("the Department") determined that the taxpayers were not eligible to file as a consolidated group for those tax return years, resulting in additional tax liability owed by the bank for tax return years 2012 through 2018 and the denial of refunds for tax return years 2019 and 2020. The taxpayers timely appealed to the Alabama Tax Tribunal ("the tax tribunal"), which upheld the Department's determination that the taxpayers failed to meet the requirements necessary to file a consolidated return in the tax return years at issue. The taxpayers timely appealed the decision of the tax tribunal to the Montgomery Circuit Court ("the circuit court"). By consent of the parties, the circuit court's review was upon the administrative record and transcript developed before the tax tribunal. The circuit court affirmed the decision of the tax tribunal. The 1All references to "tax return years" are to the calendar year in which the FIET return was required to be filed pursuant to Ala. Code 1975, § 40-16-3(a). The FIET return for each tax return year reports the tax based on net income from the prior taxable year. For example, an FIET return for the 2012 tax return year reports the tax based on net income from the tax year ending December 31, 2011. 2 CL-2025-0460 taxpayers now appeal the judgment of the circuit court. For the reasons set forth below, we affirm. Alabama law requires every financial institution, as that term is defined in Ala. Code 1975, § 40-16-1, to file an FIET return. § 40-16-3(a). Section 40-16-3(b) permits "qualified corporate groups" to file a single consolidated FIET return on behalf of the entire consolidated group. Filing on a consolidated basis allows certain losses, if any, to be allocated across the consolidated group, effectively offsetting income of the members of the group. Allocating losses in a consolidated return allows a parent and its subsidiaries in the group to offset one member's losses against another member's profits, thereby reducing the group's overall taxable income and allowing the immediate use of net operating losses. To be included in a consolidated group for purposes of filing an FIET return, a financial institution must satisfy both the ownership test and the filing test set forth in § 40-16-3(c)(1) and (2). In addition, financial institutions electing to file a consolidated FIET return are required to file certain forms with the Department. Relevant to this appeal, all members of a consolidated group must complete Form ET-1C, the common parent of the consolidated filing