Schedule NRC-Exempt: Subchapter K Affidavit of Exemption by Nonresident (Revision 2023-04)

Who files this form

A nonresident member completes Schedule NRC-Exempt to certify exemption from Alabama Code §40-18-24.2. The form lists six exemption categories:

• Real Estate Investment Trust (REIT): Must not be a captive REIT under Alabama Code §40-18-1 and must certify that no taxes will be owed because of the dividends paid deduction.
• Exempt organization: Its share of Alabama-sourced taxable income must not result in unrelated business taxable income.
• Insurance company member: Must pay Alabama tax on its premium income and not be subject to Alabama income tax.
• Pre-approved tiered structure: Requires prior written approval. The member elects to remit a composite payment for its nonresident members’ shares of Alabama-sourced taxable income.
• Capital credit exemption: The member’s only Alabama-sourced income must come from the capital project, and it must expect the capital credit to fully offset its potential liability.
• C corporation with losses: Must have been in a loss position for the three most recent tax years and expect a loss for the current year.

The member must also make the certifications printed under the selected category.

What you'll need

Have the following information ready:

• The beginning and ending dates of the tax year.
• The nonresident member’s name, FEIN, telephone number, and address.
• The requesting entity’s name, FEIN, telephone number, and address.
• The signature, printed name, title, and signing date of the authorized person or persons.

For a pre-approved tiered structure exemption, a copy of the prior written approval must be attached each year. A copy of the affidavit must also be attached to the entity’s composite and income tax return each year.

How to file

1. Enter the tax-year dates and the information for the nonresident member and requesting entity.
2. Check the exemption box that applies and review its certifications.
3. Sign and date page 2, and print the authorized signer’s name and title.
4. Return the form to the requesting entity. The form’s general direction says to return it before the original due date of the entity’s return.
5. Attach a copy to the entity’s composite and income tax return each year.

For the pre-approved tiered structure exemption, provide the signed original to the requesting entity 30 days before the due date, without extension, for the entity’s income tax return. Attach a copy of the prior written approval each year.

The form does not provide a mailing address or e-filing instructions.

Common mistakes

• Leaving the exemption box or signature blank: The form directs the member to check the applicable box and sign page 2.
• Omitting the annual return attachment: A copy of the affidavit should be attached to the entity’s composite and income tax return each year.
• Overlooking annual elections: Exempt organizations, insurance company members, capital credit claimants, and C corporations with losses must make an annual election.
• Missing tiered-structure requirements: Prior written approval is required, a copy must be attached each year, and the signed original affidavit must reach the entity 30 days before its return due date, without extension.
• Forgetting future REIT attachments: The REIT election is required only once, but copies of the original affidavit should be attached to future years’ returns.

Questions people ask

Who receives the completed affidavit?

Return it to the entity requesting the exemption. A copy should be attached to that entity’s composite and income tax return each year.

Do I need to make a new election every year?

The form requires annual elections for exempt organizations, insurance company members, capital credit exemptions, and C corporations with losses. A REIT makes the election only once, with copies of the original affidavit attached to future years’ returns. The tiered structure exemption requires prior written approval and a copy of that approval attached each year.

Does claiming an exemption remove all estimated-payment requirements?

The REIT and C corporation with losses categories expressly require the member to make estimated income tax payments if required.

Can I authorize the Department of Revenue to discuss the form with others?

Yes. Page 2 has a checkbox authorizing a Department of Revenue representative to discuss the form with the entity requesting exemption and any preparer named on the form.

Official sources

• https://www.revenue.alabama.gov/wp-content/uploads/2025/01/24schnrc.pdf