Schedule PAB Example: Add-Back Form (2024)
Alabama · Alabama DOR · Used for tax years 2024
This completed example of Alabama Schedule PAB shows how to report intangible and interest expenses paid to related members and calculate the amount to add back on Form 65 or Form 20S. It includes calculations for exemptions, disallowed interest under IRC Section 163(j), and carr
Who files this form
Schedule PAB is the add-back form for Form 65 or Form 20S. It reports intangible and interest expenses paid to recipient related members and calculates the amount to add back.
Related members include corporations, associations, disregarded entities, and subchapter K entities. Disregarded entities and subchapter K entities are treated as related members separate from their owners. Complete a separate column for each recipient related member.
What you'll need
Have the information requested on the form ready:
- Your taxpayer name, FEIN, and tax period.
- Each recipient related member’s name and FEIN.
- Intangible and interest expenses paid to each related member.
- For applicable exemptions, the recipient’s taxing jurisdictions, apportionment percentages, allocated income, and receipt amounts.
- Interest expense disallowed under IRC Section 163(j) and Section 163(j) carryforward amounts.
The form does not list separate supporting documents to submit.
How to file
Attach Schedule PAB to Form 65 or Form 20S. The supplied text does not give a mailing address or e-filing instructions.
Subtract line 15 from line 14 and enter the difference on:
- Form 65, Schedule A, line 1; or
- Form 20S, Schedule A, line 2.
Common mistakes
- Leaving out a related member’s column. The form requires a column for each recipient related member.
- Treating certain entities as part of their owners. Disregarded entities and subchapter K entities are related members separate from their owners.
- Missing the exemption signature requirement. To qualify for the exemption under Sections 40-18-35(b)(3) and 40-18-24(e), line 10b must be greater than zero and an informed corporate officer must sign Schedule PAB under penalty of perjury.
- Not attaching the schedule. Schedule PAB must be attached to Form 65 or Form 20S.
Questions people ask
How do I calculate total expenses for each related member?
Add the intangible expenses on line 2 and the interest expenses on line 3. Enter the total on line 4.
How do I choose the exempt amount on line 11?
Enter the greatest amount from lines 5f, 6, 10a, or 10b.
How do I calculate the exempt portion of disallowed Section 163(j) interest?
For line 12a, divide line 11 by line 4, then multiply by line 12. For the non-exempt portion on line 12b, subtract line 12a from line 12.
What does the corporate officer’s signature certify?
For the exemption under Sections 40-18-35(b)(3) and 40-18-24(e), the signature certifies that tax avoidance was not a principal motivating factor in the transactions giving rise to the related member’s interest or intangible expenses and costs.