Changes in Alabama’s procedures have made the VDA application process more complex and time-consuming. Start early following the new steps and accurately answering the questions to reduce challenges, particularly when dealing with mergers and acquisitions where toggle answers of yes or no may not be applicable.

Alabama has made significant changes to the state’s voluntary disclosure agreement (VDA) program, including the requirement for a separate bulk filer applicant account number and a nexus determination letter before applying for a voluntary disclosure. These changes add more steps and time to the process. Yet more time will be needed to understand the true implications and how the state will respond to their applications. 

Background

In August 2023, Alabama made significant changes to their voluntary disclosure process, creating some new obstacles and challenges in the state’s application process. Among the changes, they replaced the separate VDA portal with My Alabama Taxes, an online portal for businesses. 

Instead of using the old VDA portal, taxpayers must use a separate bulk filer applicant account number. We’ve encountered this requirement with a firm that already files income tax returns. The application process for the account number is quick, but it adds more waiting time since the information is sent by mail. Once you have the account number, you can log in and manage multiple voluntary disclosure accounts and nexus questionnaires. 

Additionally, Alabama now requires a nexus determination letter before you can apply for a voluntary disclosure. The process involves filling out a specific form through My Alabama Taxes, which lacks flexibility. After submitting the form, it can take up to 30 days to receive the nexus determination letter. 

The Takeaway

These changes in Alabama’s procedures have made the application process more complex and time-consuming. It’s important to carefully follow the new steps and answer the questions on the form accurately. We have encountered challenges when dealing with mergers and acquisitions, as the yes/no options may not be applicable. It remains to be seen how the state will respond to the nexus questionnaires and the information provided. 

We will keep you updated on any further developments and the state’s response to the nexus determination requests. Alabama may ask additional clarifying questions, similar to New Jersey’s fact pattern form. As always, we appreciate your attention to these tax issues and will continue to provide updates on these topics. 

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