PER CURIAM.
We granted the petition of Sonat, Inc., for the writ of certiorari to review the judgment of the Court of Civil Appeals. The Jefferson Circuit Court had ordered the Alabama Department of Revenue (the "Department") to set aside its final assessment of Alabama corporate income tax against Sonat for the calendar year 1988 and to refund $12,153,702, plus interest, in Alabama corporate income tax collected from Sonat. The Court of Civil Appeals reversed that judgment. Alabama Dep't of Revenue v. Sonat, Inc., 752 So.2d 1206 (Ala.Civ.App.1997). We reverse the judgment of the Court of Civil Appeals and remand.
At issue is the interpretation of Ala. Code 1975, § 40-18-35(a)(14), which permits a corporation, in computing its net income, to deduct dividends received from certain affiliated corporations. For the tax year 1988, § 40-18-35(a)(14) provided in pertinent part:1
"(a) ... In computing the net income of foreign corporations doing business in this state subject to the tax imposed by section 40-18-31, there shall be allowed as deductions the items described in the following numbered subdivisions of this section, but only if, and to the extent that, such items are referable to or arise in connection with income of such corporations arising from sources within the State of Alabama.... Subject to the limitations contained in the preceding sentence, there shall be allowed as deductions in computing the net income of corporations:
". . . .
"(14) ... [T]he amounts received after December 31, 1968, as dividends, including liquidating dividends, ... from a corporation or any subsidiary corporation which is ... taxable under this chapter upon its net income ... if at the time of the receipt of such dividends the corporation receiving such dividends is the owner of stock in the corporation distributing such dividends:
"a. Possessing at least 50 percent of the total combined voting power of all classes of stock entitled to vote; and
"b. Constituting at least 50 percent of the total number of shares of all classes of stock other than classes of stock which are limited and preferred as to dividends."
Act No. 88-954, § 2, 1988 Ala. Acts (Second Extraordinary Session) 669, 677, 679-80 (applicable to all tax years or periods beginning after December 31, 1987). Sonat claims, in computing its net income for 1988 Alabama income-tax purposes, that it is entitled to deduct the dividend of $185,000,000 that it received in 1988 from its wholly owned subsidiary Sonat Offshore Drilling, Inc. ("SODI"). The Department contends that Sonat is not entitled to deduct this dividend and that the Court of Civil Appeals properly held that the trial court's allowance of Sonat's dividend deduction on the basis of § 40-18-35(a)(14) was erroneous.
The trial court's "Order and Opinion" explain the procedural history and facts of this case and the disposition in the trial court:
"ORDER AND OPINION
"This is a tax appeal involving the Alabama income tax imposed on foreign corporations by Ala.Code (1975) § 40-18-2 et seq. Sonat, Inc., a Delaware corporation (Taxpayer), filed this appeal pursuant to Ala.Code (1975) § 40-2A-7(b)(5)b., appealing from a final assessment of Alabama corporate income tax for calendar year 1988 in the amount of $12,153,702.00 entered by the Alabama Department of Revenue (the Department) on May 3, 1994. On May 26, 1994, the Taxpayer paid the amount of the assessment and the next day, May 27, 1994, timely filed a notice of appeal with the Clerk of this Court and with the Secretary of the Department. This case was tried ore tenus on July 1 and 2, 1996.
"ISSUE PRESENTED
"The issue presented to this Court is whether the Taxpayer was entitled to deduct the dividend it received in 1988 from its wholly owned subsidiary, Sonat Offshore Drilling, Inc. (SODI), in computing its Alabama net income.
"APPLICABLE STATUTES
"I.
"Ala.Code (1975) § 40-18-35(a)(14) provides that a corporation may deduct: [quoted, supra].
"II.
"Ala.Code (1975) § 40-18-2, specifically designates what entities are taxable:
"`... Persons and subjects taxable under this chapter are:
"`. . . .
"`(2) Every corporation domiciled in Alabama or licensed or qualified to transact business in Alabama; [or]
"`(3) Every corporation doing business in Alabama deriving income from sources within Alabama, including income from property located in Alabama.'
"III.
"`§ 40-18-31. Imposition of income tax on corporations.
"`A like tax is hereby levied and imposed upon every foreign corporation doing business in the state, which tax shall be assessed, collected and paid annually at the rate specified in this section, upon and with respect to the entire net income as herein defined, except as hereinafter provided, from property situated within this state and from business done and transacted within this state.'
"IV.
"`§ 40-18-33. Net income of corporations defined.
"`In the case of a corporation subject to the tax imposed by Section 40-18-31, the term `net income' means the gross income as defined in Section 40-18-34, less the deductions allowed by Section 40-18-35....'
"V.
"`§ 40-18-34. Gross income of corporations defined.
"`In the case of a foreign corporation, gross income includes only the gross income from sources within this state....'
"FINDINGS OF FACT
"AND
"CONCLUSIONS OF LAW
"In accordance with the Pre-Trial Order entered on May 24, 1996, the parties submitted a detailed Stipulation of Facts. That Stipulation is part of the record in these proceedings and has been considered by the Court along with the evidence which was submitted at the trial of this case.
"The Taxpayer is a Delaware corporation commercially domiciled in Birmingham, Alabama. During 1988 it was a holding company which acted through its subsidiary corporations in the production, storage, transmission and marketing of natural gas and oil field services. Sonat acquired complete ownership of SODI, a Delaware corporation, in 1978, and SODI immediately qualified to do business in Alabama. Each year since then it has remained qualified to do business in Alabama and has filed a foreign corporation franchise tax return and paid franchise tax to the State of Alabama.
"The parties stipulated in open court and the evidence shows that SODI was both qualified to transact business in Alabama and was `doing business' in Alabama at all times relevant to this litigation.
"SODI owned various components of Haworth modular office furniture or workstations which it used in its Houston, Texas offices. It replaced the Haworth units with Steelcase units and in 1981 SODI entered into a written lease whereby it leased a Haworth workstation to Southern Natural Gas Company (SNG), another Sonat subsidiary, for use in SNG's Birmingham offices. Since that time SNG has paid SODI $145 per month as rent for the leased workstation and each year SODI has filed an Alabama foreign corporation income tax return, paying Alabama income tax on the resulting net income. There is no dispute... that the equipment rental, after applicable depreciation deductions, was subject to Alabama income tax. The evidence shows that this is the only workstation which SODI has leased, although it does lease excess computer equipment.
"SODI's Alabama income tax returns show that the nature of its business is `contract oil and gas drilling' although none of that business is performed in Alabama. The only income that SODI has reported as being taxable in Alabama is the income from the SODI/SNG workstation lease which was reported as non-business income.
"In 1981, which was the year the SODI/SNG equipment lease was entered into, SODI paid its first dividend to Sonat and the annual dividends it has paid to its parent have been:
"1. 1981 $ 19,545,261.00
"2. 1982 $ 16,000,000.00
"3. 1983 $ 25,000,000.00
"4. 1984 $ 18,578,081.00
"5. 1985 $ 735,246.00
"6. 1988 $185,000,000.00
"In each of these years, including 1988, the year with which this litigation is concerned, Taxpayer has deducted these dividends from its gross income on its Alabama income tax returns.
"The Department allowed the dividend deduction for 1982, 1983, 1984, and 1985, after requesting additional information concerning the deduction from the Taxpayer. The Department contends that the returns for those years were subject only to a `desk audit,' not a more complete `records audit.' The Department argues that the approval of the deduction for the prior years was the result of the Department's prior erroneous interpretation of § 40-[18]-35(a)(14). Nevertheless, neither the applicable Regulation (Reg.810-3-35-.01(2)) regarding this section nor the `Instructions for the Preparation of State of Alabama Foreign Corporation Income Tax Returns' have been amended from 1988 through 1995 to reflect the new interpretation of the statute. The taxpayer acknowledges that the Department is not estopped from changing its position with regard to the propriety of the deduction of SODI dividends, but contends that the Department's prior approval of the deduction is entitled to be given great weight by this Court in addressing the issue presented in this litigation.
"In July 1992, the Department conducted a tax audit of Sonat and seventeen of its subsidiary corporations for the calendar years 1988, 1989, and 1990. On August 25, 1993, the Department disallowed the deduction of the 1988 SODI dividend on the basis that SODI had `no nexus in Alabama.' Ultimately, the final assessment was made, the penalty was waived, and the Taxpayer paid the assessment, as stated above.
"The Department no longer takes
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