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 these exemption categories:

• Real Estate Investment Trust (REIT): Must not be a captive REIT and must certify that it will owe no taxes 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: Must have prior written approval and elect to make a composite payment on behalf of its nonresident members’ shares of Alabama-sourced taxable income.
• Capital credit exemption: Must have only Alabama-sourced income derived from the capital project and 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.

Each category has certifications that the member must satisfy.

What you'll need

Have the following information and paperwork 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 authorized signer’s signature, date, printed name, and title.
• For a pre-approved tiered structure exemption, the prior written approval. A copy must be attached each year.
• For a continuing REIT election, a copy of the original affidavit to attach to future years’ returns.

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 complete the signature area on page 2.
3. Return the completed form to the requesting entity.
4. Attach a copy to the entity’s composite and income tax return each year.

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

Common mistakes

• Missing the signature: The form directs the member to check the applicable box and sign on page 2.
• Forgetting annual elections: Exempt organizations, insurance company members, capital credit claimants, and C corporations with losses must make an annual election.
• Omitting copies in later years: A REIT election is required only once, but copies of the original affidavit should accompany future years’ returns.
• Omitting tiered-structure approval: Prior written approval is required, and a copy must be attached each year.
• Leaving the affidavit off the entity’s returns: A copy should be attached to the entity’s composite and income tax return each year.

Questions people ask

Does a REIT need to make a new election every year?

No. The REIT election is required only once. Copies of the original affidavit should be attached to future years’ returns.

Can a captive REIT use the REIT exemption box?

No. The form says the member must not be a captive REIT under Alabama Code §40-18-1.

Does this form remove estimated income tax payment requirements?

The REIT and C corporation with losses certifications expressly state that the member will make estimated income tax payments if required.

Can I authorize the Department of Revenue to discuss this form with the entity or preparer?

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

Official sources

• https://www.revenue.alabama.gov/wp-content/uploads/2026/01/25schnrc.pdf