In Alabama and several other states, the computation of "taxable income" begins with federal taxable income but then requires various additions and subtractions peculiar to each state's taxing regime. Alabama, like many other states, requires corporate taxpayers to "add back" otherwise deductible interest and intangible expenses paid to or incurred with respect to related members. It was under this statute that Alabama denied VFJ a deduction for the arms-length royalties paid to Lee and Wrangler. The Court of Civil Appeals rejected the findings of the circuit court and denied the royalty deductions claimed by VFJ. The trial court concluded that to require VFJ to add back the royalty amounts paid to Lee and Wrangler in computing its Alabama taxable income would effectively convert an expense into income and thereby subject it again to taxation -- once in North Carolina and a second time in Alabama.