Alabama Alabama Business Privilege Tax Return and Annual Report for Pass Through Entities Only - Instructions

Alabama Business Privilege Tax Return and Annual Report for Pass Through Entities Only - Instructions
PPT Instructions TY 2024_6-14-23_F
AlAbAmA DepArtment of revenue

FORM

PPT

INSTRUCTIONS

Alabama business privilege tax return
Instructions

Form PPT is to be filed by Pass-through Entities only.

2024

– For taxpayers doing business in Alabama and outside the State of
Alabama (multistate taxpayers), a copy of the Alabama apportionment schedule
(from Form 20S or Form 65 for the taxpayer’s determination period).

What’s New for 2024
The Alabama Secretary of State Corporation Annual Report (AL-CAR) and
Secretary of State fee are no longer required to be filed and paid with the
Alabama Department of Revenue. For taxable year 2024 and forward, the ALCAR and its related fee are required to be filed and paid through the Alabama
Secretary of State. Please visit the Alabama Secretary of State at
https://www.sos.alabama.gov/ for more information.

– Documentation to thoroughly support any exclusion or deduction claimed
in the computation of the taxpayer’s net worth.

Minimum Business Privilege Tax. Alabama Act 2022-252 amends
Section 40-14(A)-22. For taxable year 2024, taxpayers who would be subject to
the minimum tax of one hundred dollars ($100), do not have a filing requirement.

Act 2017-363 passed the Alabama Legislature during the 2017 Regular
Session. The act provides for the due dates of business privilege tax returns
to correspond to the due dates of federal income tax returns and provides for
payments to be made on the original due date of the return. For taxable year /
Form Year 2018 or after and determination periods beginning on or after
December 31, 2017, the due date of Alabama business privilege tax return for
pass through entities (S corporations, Limited Liability Entities, LLE taxed as S
corporation and disregarded entities) shall correspond to the due date of the
corresponding federal income tax returns as provided by federal law. The tax
liability is due at the due date of the original return.

– A copy of the balance sheet used to compute the taxpayer’s net worth, if
not provided with the copy of the federal tax return.

Due date for the Alabama Form PPT:

BUSINESS PRIVILEGE TAX PAYMENT
Payment of the total tax due must be received on or before the original due
date of the return. Form BPT-V must accompany all business privilege tax payments, unless payments are made electronically.

General Information – Filing Requirement
for Business Privilege Tax:

Mailing Address for the Form PPT:
If you are not making a payment, mail your return to:

Every corporation, limited liability entity, business trust, disregarded entity,
and real estate investment trust (REIT) that is doing business in Alabama or has
qualified with the Alabama Secretary of State to do business in Alabama is
required to file an Alabama Business Privilege Tax Return and Annual Report.

Alabama Department of Revenue
Business Privilege Tax Section
PO Box 327431
Montgomery, AL 36132-7431

S-corporations, limited liability entities, and disregarded entities must file
Alabama Form PPT.

If you are making a payment, mail your return, Form BPT-V, and payment
to:

C-corporations, financial institution groups, insurance companies, REITs,
and business trusts must file Alabama Form CPT. Limited liabilities taxed as
corporations for federal income tax purposes must also file Alabama Form CPT.

Alabama Department of Revenue
Business Privilege Tax Section
PO Box 327320
Montgomery, AL 36132-7320

“Limited liability entity (LLE)” is defined in Section 40-14A-1, Code of
Alabama 1975, as:

Determination Period Used to
Compute the Business Privilege Tax:

“…Any entity, other than a corporation, organized under the laws of this or
any other jurisdiction through which business may be conducted while offering
limited liability to the owners of the entity with respect to some or all of the obligations of the entity and which is taxable under subchapter K of the Code,
including, without limitation, limited liability companies, registered limited liability
partnerships, and limited partnerships…”

Taxable Year Information: Enter the beginning and ending date of the
determination period. The determination period is defined in Section 40-14A-1,
Code of Alabama 1975, as the taxpayer’s taxable year next preceding the taxpayer’s current taxable year (Generally, it is the taxable year that just ended).

“Corporation” is defined in Section 40-14A-1, Code of Alabama 1975, as:

The net worth computations required to compute the Alabama business
privilege tax for a business privilege taxable year are performed on information
extracted from the balance sheet prepared as of the last day of the determination period (Generally, the last day of the determination period is the last day of
the taxable year that just ended, and is the date of the balance sheet prepared
that coincides with the taxable year that just ended).

“…Any entity, including a limited liability company electing to be taxed as a
corporation for federal income tax purposes, through which business can be
conducted while offering limited liability to the owners of the entity with respect
to some or all of the obligations of the entity, other than a limited liability entity
or a disregarded entity…”

Line 1a. Calendar Year Indicator – Check this box if the taxpayer has a
December 31st tax year end. Then enter the determination period begin date in
the spaces provided.

“S-corporation” is defined in Section 40-14A-1, Code of Alabama 1975, as:
“… An S corporation defined under Section 40-18-160…”
Nexus. Act 2015-505 establishes a factor presence nexus standard for nonresident business activity. Substantial nexus in Alabama is established if any of
the following thresholds are exceeded during the tax period: $64,000 of property, $64,000 of payroll, $635,000 of sales, or 25% of total property, total payroll
or total sales.

Line 1b. Fiscal Year Indicator – Check this box if the taxpayer has a tax
year end date other than a calendar year end. Then enter the determination
period begin date and end date in the spaces provided.
Short Year – The taxpayer should file a short year return only if there is a
change in the tax year end (For example, the taxpayer converts from a calendar
year end to a fiscal year end). Do NOT file a short year return as a result of an
acquisition or merger. The entity will use the calendar year or fiscal year checkbox and complete the spaces provided for short year returns. Check the calendar

Required Attachments to the Alabama Form PPT:
– A copy of pages 1 through 4 of the federal tax Form 1120S or pages 1
through 5 of the federal tax Form 1065.
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year indicator if the entity’s determination period end date is 12/31/2023. Check
the fiscal year indicator if the entity’s determination period end date occurs in
2024 and enter the beginning and ending dates in the spaces provided.

Line 3i. Contact Person Concerning This Form – Enter the name of the
person who can answer questions concerning the preparation of this form.
Line 3j. Contact Person’s Phone Number – Enter the telephone number
of the person who can answer questions concerning the preparation of this
form.

EXAMPLES FOR ENTITIES CHANGING THEIR DETERMINATION PERIOD END DATE
COMPANY A changes from a calendar year end (12/31/2023) to a fiscal
year end (e.g. 03/31/2024). Company A should file the 2024 Business Privilege
Tax Return and report the determination period begin date as 01/01/2024 and
end date as 03/31/2024.

Return Information:

COMPANY B changes from a fiscal year end (e.g. 06/30/2023) to a calendar year end (12/31/2023). Company B should file the 2024 Business Privilege
Tax Return and report the determination period begin date as 07/01/2023 and
end date as 12/31/2023.

Line 4b. State of Incorporation or Organization – Enter the state in which
the entity was incorporated or organized.

Line 3k. Taxpayer’s E-mail Address – Enter the entity’s e-mail address.

Line 4a. Date of Incorporation or Organization – Enter the date the entity
was incorporated or organized.

Line 4c. County of Incorporation or Organization – Enter the county in
which the entity was incorporated or organized.

Privilege Tax Prorated for Short Taxable Years – The business privilege
tax is prorated when taxpayers have a short taxable year – See the instructions
for line 17, Part B, page 2, Form PPT.

Computation of Amount Due or Refund Due:
Line 5. Privilege Tax Due – Enter the amount from page 2, Part B, line 19
(Privilege Tax Due). The Alabama business privilege tax is due, in full, by the
original due date of the business privilege tax return, without consideration for
any filing extensions. There is no provision in the Alabama business privilege
tax law to allow an extension of time to pay the amount of tax due.

Line 1c. 52-53 Week Filer – Check this box if the company is a 52-53 week
filer. If this box is checked, the fiscal year box must also be checked. A 52-53
week tax year is a tax year that varies from 52 to 53 weeks but does not have
to end on the last day of the month.
Line 1d. Amended Return Indicator – Check this box if the return is an
amended return. Attach a full explanation for filing the amended return, supporting documentation for the changes, and a computation of the additional amount
due or the additional refund due.
Line 1e. No Alabama Factor Presence Nexus - Check this box if the taxpayer is a foreign entity (organized or formed outside the State of Alabama) and
does not meet the Alabama Factor Presence Nexus thresholds. The taxpayer
is required to submit attachments to include an apportionment factor schedule
and a statement to confirm no Alabama Factor Presence Nexus.

Line 6. Less: Privilege Tax Previously Paid for the Taxable Year – Enter
the amount of privilege tax previously paid for the taxable year (i.e., paid as an
automatic extension payment with a Form BPT-V by the original due date of the
return, but prior to the annual return’s filing on the extended due date of the
return). If the return is an amended return, enter the amount of business privilege tax shown paid for the taxable year on the originally-filed Alabama business privilege tax return. Do Not include previous year overpayments as privilege tax previously paid for the taxable year.

Type of Taxpayer:

Line 7. Net Privilege Tax Due – Subtract the amount on line 6 from the
amount on line 5.

Indicate the type of taxpayer by checking one of the boxes on line 2a
through line 2d.

Line 8. Penalty Due – Enter the total amount of the penalty for failure to
timely file the return and the penalty for failure to timely pay the tax shown due
on the return, as specified in Section 40-2A-11, Code of Alabama 1975. The
penalty for failure to timely file an Alabama business privilege tax return by the
due date is 10% of the tax shown due with the return or $50, whichever is
greater. The penalty for failure to timely pay the amount of tax shown due on an
Alabama business privilege tax return equals to 1% of the amount of tax shown
due on the return for each month the tax is unpaid – not to exceed 25% of the
amount shown due on the return.

Taxpayer Information:
Line 3a. Enter the legal name of the business entity. Do not enter the
owner’s name or “doing business as” name.
Line 3b. The taxpayer’s Federal Employer Identification Number (FEIN) is
required to complete Form CPT, Form PPT, and Form BPT-IN. Enter “applied
for” if an FEIN will be assigned to the taxpayer. Check the box (FEIN Not
Required) if an FEIN will not be assigned to the taxpayer. Single member limited liability companies should NOT use their owner’s FEIN or social security number.

Line 9. Interest Due – Enter the amount of interest due on any business
privilege tax unpaid as of the original due date of the business privilege tax
return. Section 40-1-44(a), Code of Alabama 1975, specifies the interest rate
to be used in computing the amount of interest due (Section 40-1-44 references
Internal Revenue Code Section 6621 for the interest rates to be used for
underpayments).

Line 3c. Street Address – Enter the taxpayer’s mailing address or street
address.
Line 3d. BPT Account Number – Enter the taxpayer’s BPT (Business
Privilege Tax) account number only if the taxpayer does not have an FEIN
(Federal Employer Identification Number). The account number is issued when
the account is opened and is provided in the notice advising the taxpayer of the
Business Privilege Tax liability. The account number is also provided in the letter notifying the taxpayer of a Sign-On ID and an Access Code for using the
electronic Funds Transfer (EFT) System. Contact the Business Privilege Tax
Section (334-242-1170, option 8) for any questions regarding the BPT account
number.

Line 10. Total Privilege Tax Due – Add the amounts shown on lines 7, 8,
and 9.
Line 11. Payment Due with Return – Enter the amount from line 10, but
only if the amount is positive.
Line 12. Amount to be Refunded to Taxpayer – Enter the amount from
line 10, but only if the amount is negative.
Line 13. Family LLE Election Indicator – Check the box if the Family LLE
Election Schedule is completed and attached. The Family Limited Liability
Election must be made annually on or before the due date, including extensions, of the return in accordance with Section 40-14A-1(h)(2), Code of
Alabama 1975. Failure to attach Schedule BPT-E and sign Page 1 of Form
PPT will result in the disallowance of the election. Single-member LLCs that are
treated as a disregarded entity for federal income tax purposes do not qualify
as an electing family limited liability entity, in accordance with Section 40-14A1(h), Code of Alabama 1975.

Line 3e. City – Enter the taxpayer’s city.
Line 3f. State – Enter the taxpayer’s state.
Line 3g. Zip Code – Enter the taxpayer’s 9-digit zip code.
Line 3h. Enter the taxpayer’s federal business code number. This number is
the North American Industry Classification System (NAICS) reported on the federal income tax return. The federal business code number (NAICS) is also located at www.census.gov or by contacting the U.S. Census Bureau (800-923-8282).
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How to Make EFT Payments:

not less than zero.

ACH Credit Method Payment:

Line 7. Enter the excess amount (the amount in excess of $500,000 for
each partner/member) of compensation, distributions or similar amounts paid to
(or accrued as a liability to) certain direct or indirect partners/members during
the determination period, as defined in Section 40-14A-23, Code of Alabama
1975. Section 40-14A-23(f), Code of Alabama 1975, should be referred to for
a more thorough explanation of this adjustment.

In order to pay the Alabama business privilege tax using EFT, (ACH Credit
Method Payment), the taxpayer must first be a registered EFT taxpayer. To register for EFT taxpayers must complete Form EFT: 001, EFT Authorization
Agreement Form, and submit it to the Alabama Department of Revenue’s EFT
Unit. Form EFT: 001 and instructions can be downloaded from the
Department’s website at www.revenue.alabama.gov/forms.

Line 8. Enter the gross amount of related party debt exceeding the total of
the amount entered on line 6, as required by Section 40-14A-23, Code of
Alabama 1975. This amount will be added to the amount on line 6 in arriving at
the taxpayer’s net worth. Related parties are defined in Section 40-14A-1, Code
of Alabama 1975, as any member of a controlled group of corporations as
defined by Internal Revenue Code Section 1563. The definition of related parties also includes any limited liability entity that would be a member of a controlled group if rules similar to Section 1563 were applied to limited liability entities. Note: The amount entered on line 8 must not be less than zero. Individual
shareholders are not considered related parties. Related party debt and related
party receivables are not netted in any circumstances. Exempt payables are
defined as stated in Section 40-14A-23(e)(2)(b), Code of Alabama 1975. They
include trade debt, accounts payable, or deposit liabilities to related parties that
are doing business in Alabama. Non-Exempt payables are all other related
party debts.

My Alabama Taxes Payment:
The Department of Revenue mails each newly incorporated/organized company a letter with a Sign On ID and Access Code to access My Alabama Taxes
for electronic payments. All existing companies are mailed Sign On ID and
Access Code letters. For more information or to make a payment, refer to the
website at www.revenue.alabama.gov or www.myalabamataxes.alabama.gov.

Instructions for Form PPT, Page 2
Line 1a. Enter the taxpayer’s Federal Employer Identification Number
(FEIN), if the taxpayer does not have an FEIN, enter the same information as is
entered on page 1, line 3b.
Line 1b. Enter the legal name of the business entity as shown on page 1,
line 3a.

Line 9. Total LLE Net Worth – Enter the sum of lines 6 through 8.

Line 1c. Determination Period End Date/Balance Sheet Date – The
Determination Period End Date is the date of the balance sheet from which the
net worth computations are made.

III. Disregarded Entities
Line 10. Enter the name and Federal Employer Identification Number
(FEIN) or Social Security Number (SSN) of the single member of the disregarded entity.

Part A – Net Worth Computation:
I. S-Corporations

Line 11. If the taxpayer is a disregarded entity that has as its single member
an entity that IS subject to the Alabama Business Privilege Tax, then the taxpayer is exempt from the privilege tax and the associated filing requirements.

Line 1. Enter the total amount of the taxpayer’s capital stock and additional
paid in capital, but not less than zero. The amount must not be reduced for any
treasury stock owned by the corporation.

Line 12. Disregarded Entity Net Worth Computation – If the taxpayer is
a disregarded entity that has as its single member a taxpayer that IS NOT subject to the Alabama business privilege tax, then the disregarded entity must
compute its own net worth, and pay the Alabama business privilege tax accordingly. Enter the amount the taxpayer’s assets exceed its liabilities, but not less
than zero. The name and FEIN/SSN of the single member must be provided on
line 10, or the form will be considered incomplete. A statement must be
attached to the business privilege tax return explaining why the owner is not
subject to the Alabama business privilege tax. Documentation of assets minus
liabilities must be provided.

Line 2. Enter the amount of retained earnings, but not less than zero.
Include any amounts designated for the payment of dividends until the amounts
are definitely and irrevocably placed to the credit of the stockholders, subject to
withdrawal on demand. The amount entered on line 2 must not be less than
zero.
Line 3. Enter the gross amount of related party debt exceeding the total of
the amounts entered on line 1 and line 2, as required by Section 40-14A-23,
Code of Alabama 1975. This amount will be added to the amounts on line 1
and line 2 in arriving at the taxpayer’s net worth. Related parties are defined in
Section 40-14A-1, Code of Alabama 1975, as any member of a controlled
group of corporations as defined by Internal Revenue Code Section 1563. The
definition of related parties also includes any limited liability entity that would be
a member of a controlled group if rules similar to Section 1563 were applied to
limited liability entities. Note: The amount entered on line 3 must not be less
than zero. Individual shareholders are not considered related parties. Related
party debt and related party receivables are not netted in any circumstances.
Exempt payables are defined as stated in Section 40-14A-23(e)(2)(b). They
include trade debt, accounts payable, or deposit liabilities to related parties that
are doing business in Alabama. Non-Exempt payables are all other related
party debts.

Disregarded entity owners that are not subject to the Alabama business
privilege tax include, but are not limited to: resident individual taxpayers; nonresident individual taxpayers; general partnerships; and, foreign business entities not doing business in the state of Alabama and not registered with the
Alabama Secretary of State’s Office to do business in the state of Alabama.
Line 13. Enter the gross amount of related party debt exceeding the amount
entered on line 12, as required by Section 40-14A-23, Code of Alabama 1975.
This amount will be added to the amount on line 12 in arriving at the taxpayer’s
net worth. Related parties are defined in Section 40-14A-1, Code of Alabama
1975, as any member of a controlled group of corporations as defined by
Internal Revenue Code Section 1563. The definition of related parties also
includes any limited liability entity that would be a member of a controlled group
if rules similar to Section 1563 were applied to limited liability entities. Note: The
amount entered on line 13 must not be less than zero. Individual shareholders
are not considered related parties. Related party debt and related party receivables are not netted in any circumstances. Exempt payables are defined as
stated in Section 40-14A-23(e)(2)(b), Code of Alabama 1975. They include
trade debt, accounts payable, or deposit liabilities to related parties that are
doing business in Alabama. Non-Exempt payables are all other related party
debts.

Line 4. Enter the excess amount (the amount in excess of $500,000 for
each shareholder) of compensation or similar amounts paid to (or accrued as a
liability to) certain direct or indirect shareholders during the determination period, as defined in Section 40-14A-23, Code of Alabama 1975. This amount will
be added to lines 1, 2, and 3 in arriving at the taxpayer’s net worth. Section 4014A-23(f), Code of Alabama 1975, should be referred to for a more thorough
explanation of this adjustment.
Line 5. Total S-Corporation Net Worth – Enter the sum of lines 1 through 4.
II. Limited Liability Entities (LLEs)

Line 14. Enter the excess amount (the amount in excess of $500,000 for the
owner) of compensation, distributions or similar amounts paid to (or accrued as

Line 6. Enter the total amount of the partner/member capital accounts, but
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a liability to) certain direct or indirect owners during the determination period, as
defined in Section 40-14A-23, Code of Alabama 1975. This amount will be
added to the amounts entered on lines 12 and 13 in arriving at the taxpayer’s
net worth. Section 40-14A-23(f), Code of Alabama 1975, should be referred to
for a more thorough explanation of this adjustment.

amount invested” means the cash, including any premium and net of any discount, paid as the purchase price for the bond or other security, less the amount
of any premium amortized and plus the amount of any discount accreted,
reduced by the proportionate amount of principal on the bond or other security
that is amortized or otherwise paid or retired. The taxpayer must attach a listing
showing the details of the deduction. For each bond or security, the listing
should provide the net amount invested, the issuing agency, issuance date, and
how the investment is reported on the taxpayer’s balance sheet. If this deduction is taken, the return will not be considered complete without the listing. This
deduction is not available to dealers in securities (those subject to the requirements of Internal Revenue Code Section 1236) for the book value of bonds and
securities held by the dealer primarily for sale to customers in the ordinary
course of its trade or business.

Line 15. Total Disregarded Entity Net Worth – Enter the sum of lines 12
through 14.

Part B – Privilege Tax Exclusions and Deductions:
Exclusions – Exclusions are allowed by Section 40-14A-23 (g), Code of
Alabama 1975. Attach documentation supporting any exclusion claimed on the
return.
Line 1. Enter the amount of net worth from Part A line 5, line 9 or line 15.

Line 10. Enter the net amount invested in, or book value from the taxpayer’s
balance sheet, for all devices, facilities, or structures, and all identifiable components or materials for use therein, that are located in Alabama and are
acquired or constructed primarily for the control, reduction, or elimination of air,
ground, or water pollution or radiological hazards where such pollution or radiological hazards result from or would be caused by the taxpayer’s activities in
Alabama.

Line 2. Enter the total book value amount for the investment the taxpayer
has in the equity of other taxpayers. Attach a listing providing for each separate
investment, the name of the taxpayer, the taxpayer’s FEIN, the taxpayer’s
address and the book value of the investment. This exclusion is not available
for the book value of security (as defined in Internal Revenue Code Section
1236) held by a dealer in securities (as referred to in Internal Revenue Code
Section 1236) primarily for sale to customers in the ordinary course of its trade
or business.

Line 11. Enter the amount reported on the taxpayer’s balance sheet for the
balance of any reserve, account, or trust reasonably determined to satisfy any
liability that is imposed by federal, state, or local government laws or regulations
for reclamation, storage, disposal, decontamination, retirement, or other related
costs associated with a plant, facility, mine, or site in Alabama. Attach documentation identifying the applicable law or regulation that establishes taxpayer’s
liability, as well as a computation of the liability. The documentation must also
identify the location of the plant, facility, mine or site in Alabama.

Line 3. Enter the amount reported on the taxpayer’s balance sheet for the
unamortized portion of goodwill that resulted from a direct purchase of another
corporation or limited liability entity. Attach a listing showing for each direct purchase the goodwill originally acquired, the date the direct purchase occurred,
accumulated amortization, the name and location of the business acquired, and
the name and FEIN of the entity that acquired the business and goodwill. If this
exclusion is taken, the return will not be considered complete without the listing.

Line 12. Enter the total amount reported on the taxpayer’s balance sheet as
the book value of the taxpayer’s investment in low-income, residential real
estate projects that qualify for federal or state income tax credits, loans or
grants. See Section 40-14A-24(b)(7), Code of Alabama 1975. The taxpayer
must attach a listing showing the details of the deduction. For each separate
low-income housing project, the attached documentation must identify the
name of the project, the FEIN of the project, the site of the project, and the net
amount invested in the project. The documentation must also identify how the
investments are reported on the taxpayer’s balance sheet. If this deduction is
taken, the return will not be considered complete without the listing.

Line 4. Enter the amount reported on the taxpayer’s balance sheet for the
unamortized portion of post-retirement benefits, for which the taxpayer elected
to amortize under Financial Accounting Standards Board (FASB) Statement
Number 106. FASB Statement Number 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions, was issued in December 1990, and
focuses principally on post-retirement health care benefits. The supporting documentation should include a description of benefits, amortization schedule, and
the line detail of the post-retirement benefits on the balance sheet.
Line 5. Total Exclusions – Enter the total of lines 2, 3, and 4.
Net Worth Apportionment

Line 13. S-corporations, LLEs and disregarded entities enter 30% of the
federal taxable income apportioned to Alabama for the determination period,
but not less than zero. This deduction is allowed by Section 40-14A-24(b)(8)
and (9), Code of Alabama 1975.

Line 6. Net Worth Subject to Apportionment – Enter the difference
between line 1(Total Net Worth) and line 5 (Total Exclusions).
Line 7. Apportionment Factor – Section 40-14A-24(a), Code of Alabama
1975, establishes the net worth apportionment requirements for the Alabama
business privilege tax. Taxpayers that conducted all of their business in Alabama
during the determination period should enter 100%. No supporting documentation is required of taxpayers reporting an apportionment factor of 100%.

Taxable income is to include income passed through to the shareholders
and members. Taxable income for an S-corporation, other than a qualified subchapter S subsidiary, is the amount taken into account by its owners pursuant
to Internal Revenue Code Section 1366. Taxable income for an LLE is the
amount taken into account by its owners pursuant to Internal Revenue Code
Section 702. Taxable income for a disregarded entity is the amount taken into
account by the owner pursuant to Internal Revenue Code Section 61 or 1361.
Taxable income shall be apportioned to Alabama in accordance with Alabama
income tax law (Title 40, Chapter 18, Code of Alabama 1975) or Alabama
financial institutions excise tax law (Title 40, Chapter 16, Code of Alabama
1975).

Taxpayers that conducted business both within and without Alabama (multistate taxpayers) during the determination period should generally not enter
100%. Multistate taxpayers must enter the same factor as was used by the taxpayer during the determination period for purposes of apportioning the taxpayer’s income in accordance with Alabama’s income tax law (Chapter 18, Title 40,
Code of Alabama 1975), or Alabama’s financial institutions excise tax law
(Chapter 16, Title 40, Code of Alabama 1975). Attach a copy of the computation of the apportionment factor from the applicable Alabama tax return for the
determination period.

Line 14. Total Deductions – Enter the total of lines 9 through 13.
Line 15. Taxable Alabama Net Worth – Enter the difference between line
8 (Total Alabama Net Worth) and Line 14 (Total Deductions).

Line 8. Total Alabama Net Worth – Multiply line 6 (Net Worth Subject to
Apportionment) by line 7 (Apportionment Factor).

Computation of Privilege Tax Due

Deductions – Deductions are allowed by Section 40-14A-24(b), Code of
Alabama 1975. Attach documentation supporting any deduction claimed on the
return.

Line 16a. Federal Taxable Income Apportioned to Alabama – Enter the
federal taxable income used to determine the Tax Rate (see the instructions for
line 16b) which is applied to the Taxable Alabama Net Worth (see line 15) to
arrive at the Gross Privilege Tax Calculated (see line 17). The tax rate used to
compute the business privilege tax is based upon the taxpayer’s federal taxable

Line 9. Enter the net amount invested in bonds and securities issued by the
State of Alabama, or its political subdivisions, prior to January 1, 2000. “Net
4

income during the determination period, as required by Section 40-14A-22,
Code of Alabama 1975.

Special Calculation for Short Taxable Years: If the taxable year is a short
taxable year, the gross privilege tax calculated will be prorated using a fraction,
the numerator of which is the number of calendar days in the short taxable year,
the denominator of which will be 365. The computation of prorated business
privilege tax must be attached to the return. Please note the taxpayer should file
a short year return only if there is a change in the tax year end (For example,
the taxpayer converts from a calendar year end to a fiscal year end).

Federal Taxable Income for S-Corporations. The federal taxable income
to be used by S-corporations to determine the tax rate for the Alabama business
privilege tax shall be the federal ordinary income or (loss) from trade or business activities plus any items of income or applicable deductions passed
through to the shareholders that were determined pursuant to Internal Revenue
Code Section 1366. The income shall be apportioned in accordance with
Chapter 27, Title 40 Code of Alabama 1975, and the accompanying rules.
Deductions shall not be allowed for the federal income tax or any federal or
Alabama net operating loss in computing the federal taxable income for purposes of determining the business privilege tax rate.

Example Assuming Facts from Above Example and a Short Year of 180 days:
Taxable Alabama Net Worth Multiplied by Tax Rate Equals . . . . . . . . . $1,250
Multiplied by . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180/365 Short year factor
Less Alabama Enterprise Zone Credit if entitled to a claim . . . . . . . . . . . . . . $0
Line 20 Privilege Tax Due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $616
Please note: A determination period that is less than a full year does not
constitute a short year return. If a taxpayer has a change in tax year to a calendar tax year or vice versa, the return for the new tax year is not the short year
return.

Federal Taxable Income for LLEs. The federal taxable income to be used
by LLEs to determine the tax rate for the Alabama business privilege tax shall
be the federal ordinary income or (loss) from trade or business activities adjusted by any items of income or expenses passed through to the members or partners that were determined pursuant to Internal Revenue Code Section 702. The
income shall be apportioned in accordance with Chapter 27, Title 40, Code of
Alabama 1975, and the accompanying rules.

Example: Corporation A previously had a tax year ending June 30 but has
changed to a calendar tax year effective January 1, 2024. The corporation previously filed the 2023 Business Privilege Tax return based on the determination
period ending June 30, 2023. The 2024 return would have as its determination
period July 1, 2023-December 31, 2023. The 2024 return pays the tax for the
full 2024 tax year; therefore it would not be a short year return. The 2023 tax
year was a short tax year. The 2023 return would need to be amended, with the
tax due prorated.

Federal Taxable Income for Disregarded Entities. The federal taxable
income to be used by Disregarded Entities to determine the tax rate for the
Alabama business privilege tax shall be the federal ordinary income or (loss)
from trade or business activities adjusted by any items of income or expenses,
determined pursuant to internal Revenue Code Section 1361 or Internal
Revenue Code Section 61. This income shall be apportioned in accordance
with Chapter 27, Title 40, Code of Alabama 1975, and the accompanying rules.

Line 18. Alabama Enterprise Zone Credit – Enter the amount of Alabama
Enterprise Zone Credit to which the taxpayer is entitled. Attach supporting documentation from the Alabama Department of Economic and Community Affairs
(ADECA) showing the amount of the Alabama Enterprise Zone Credit the taxpayer is entitled to claim. Contact ADECA for additional information concerning
the Alabama Enterprise Zone Credit.

Line 16b. Tax Rate – Enter on line 16b the taxpayer’s business privilege tax
rate. The tax rate is specified in Section 40-14A-22, Code of Alabama 1975,
and is determined using the following table:
Federal Taxable Income Apportioned to Alabama
More Than or
Equal to

But Less Than

Tax Rate

—
1
200,000
500,000
2,500,000

$
1
$ 200,000
$ 500,000
$ 2,500,000
—

.00025
.00100
.00125
.00150
.00175

$
$
$
$

Line 19. Privilege Tax Due – Enter the difference between line 17 and line
18. If $100 or less, STOP. You do not have a filing requirement. Do not submit
return. This amount is also entered on page 1 of Form PPT on line 5 (Privilege
Tax Due) in the Computation of Amount Due or Refund Due area of page 1.

Amount of tax per
$1,000 of Taxable
Alabama Net Worth

$
$
$
$
$

.25 per $1,000
1.00 per $1,000
1.25 per $1,000
1.50 per $1,000
1.75 per $1,000

See the following concerning the minimum and maximum amounts for the tax.

Maximum Privilege Tax:
S-corporations, LLEs, and disregarded entities have a $15,000 maximum
levy for the Alabama Business Privilege Tax. See Section 40-14A-22(d), Code
of Alabama 1975.

Line 17. Gross Privilege Tax Calculated –
Multiply the amount on line 15 (Taxable Alabama Net Worth) by the rate on
line 16b (Tax Rate).

LLEs meeting the definition of “electing family limited liability entity” as stated in Section 40-14A-1, Code of Alabama 1975, have a maximum levy for the
Alabama Business Privilege Tax of $500.

Example:
Line 15 – Taxable Alabama Net Worth . . . . . . . . . . . . . . . . . . . . . . . . $1,000,000
Line 16a – Federal Taxable Income Apportioned to Alabama . . . . $ 250,000
Line 16b – Tax Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.00125
Line 17 – Gross Privilege Tax Calculated . . . . . . . . . . . . . . . . . . . . . . $

Minimum Privilege Tax:
Alabama ACT 2022-252 amends Section 40-14(A)-22. For taxable year
2024, taxpayers who would be subject to the minimum tax of one hundred dollars ($100), do not have a filing requirement.

1,250

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