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Individual & Corporate Income Tax

Frequently Asked Questions

 

Frequently Asked Questions Business Privilege Tax

 

 

    Amended Returns

  • is an amended Alabama Business Privilege Tax return filed?

 

 

 

 

 

 

 

 


 

  • What taxpayers must file an Alabama Business Privilege Tax return?

    According to the Alabama business privilege tax law, every corporation, limited liability entity, and disregarded entity doing business in Alabama or is organized, incorporated, qualified, or registered under the laws of Alabama is required to file an Alabama Business Privilege Tax Return and Annual Report.

    C-corporations, Financial Institution Groups, insurance companies, REITs, and business trusts must file Alabama Form CPT. Limited liability entities taxed as corporations for federal income tax purposes must also file Alabama Form CPT.

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

    Limited liability entity is defined in Section 40-14A-1, Code of Alabama 1975, as:

    “…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…”

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

    “…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…”

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

    “… An S corporation defined under Section 40-18-160…”

     

  • What entities are not required to file an Alabama Business Privilege Tax return?

    Political subdivisions of the state
    Governmental corporations
    Governmental agencies
    Organizations described in Internal Revenue Code Section 501(a)
    Community chest
    Any entity organized and operated exclusively for religious purposes
    Homeowners association
    Political parties
    Political action committees
    Political campaign committees
    Agricultural cooperative
    See Section 40-14A-43, Code of Alabama 1975.

     

  • When is the Alabama Business Privilege Tax return due?

    For corporations, the Alabama business privilege tax return is due no later than two and a half months after the beginning of a taxpayer’s taxable year. The 2014 Form CPT for a calendar year C-corporation would be due on March 17, 2014.

  • For Limited Liability Entities, the Alabama business privilege tax return is due no later than three and a half months after the beginning of the taxpayer’s taxable year. The 2014 Form PPT for a calendar year limited liability entity would be due on April 15, 2014.

    For Disregarded Entities, the Alabama business privilege tax return is due no later than the time its owner is required to file.

    See Section 40-14A-25, Code of Alabama 1975.

 

  • What address do I use to mail the Alabama Business Privilege Tax return?

    If you are not making a payment, mail your return to:

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

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

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

  • Why is the Alabama Business Privilege Tax levied?

    The Alabama Business Privilege Tax is levied for the privilege of being organized under the laws of Alabama or doing business in Alabama (if organized under the laws of another state or country). See Section 40-14A-22, Code of Alabama 1975.  

  • Can I file an extension to obtain more time to file an Alabama Business Privilege Tax return?

    Effective with taxable years beginning on or after January 1, 2009, the filing of a Form PSE will no longer be required in order to obtain an extension to file the business privilege tax return. According to Rule 810-2-8-.06 any taxpayer required to file a business privilege tax return will be granted an automatic six month extension of time for filing the return. While an automatic extension is in place for the filing of the annual business privilege tax return, payment of the total tax due (including any corporate annual report fees) must be received on or before the original due date of the return. Payments made for a taxable year in which the automatic extension provision is utilized are referred to as automatic extension payments. Form BPT-V must accompany all business privilege tax payments, unless payments are made electronically. For taxable years beginning before January 1, 2009, an Alabama Form PSE, Extension Request for the Alabama Business Privilege Tax Return and Annual Report, must be filed.

 

  • What is an initial return? When is it due?

    An initial business privilege tax return is the first return due after the taxpayer becomes in existence or begins doing business in Alabama. The initial business privilege tax return is due two and one half months after the taxpayer is incorporated or organized (if an Alabama taxpayer), or two and one half months after the taxpayer qualifies with the Alabama Secretary of State to do business in Alabama (if incorporated or organized in another state or country). Section 40-14A-29, Code of Alabama 1975. For taxable years beginning on or after January 1, 2008, the Form BPT-IN is used to file an initial business privilege tax return. For years prior to January 1, 2008, the Alabama Schedule BPT-IN, Alabama Business Privilege Tax Initial Privilege Tax Computation Schedule is used to file an initial business privilege tax. See the instructions for more information.  

  • Does the Alabama Business Privilege Tax return require any attachments?

    Yes, as follows:

    • A copy of page 1 through 5 of the federal tax return.
    • Insurance companies must attach pages 1 through 8 of the federal return in addition to a copy of the balance sheet.
    • For taxpayers doing business in Alabama and outside the State of Alabama, a copy of the Alabama apportionment schedule (For Form 20C, Form 20S, Form 65, and Form ET-1).
    • Documentation to thoroughly support any exclusion or deduction claimed in the computation of the taxpayer's net worth.
    • 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.

  • How is an amended Alabama Business Privilege Tax return filed?

    Prepare and submit the applicable Form CPT or Form PPT. Check the appropriate checkbox on the front page of the form to indicate an amended return. Attach a thorough explanation for filing the amended return, and attach the computation of the additional tax due or of the refund due to the taxpayer.  

  • How can I pay what I owe using EFT?

    In order to pay the Alabama business privilege tax using EFT, the taxpayer must first be a registered EFT taxpayer. Registration information is available on the Revenue Department's Web site at http://revenue.alabama.gov/eft/eftindex.html.  

  • What is an Electing Family Limited Liability Entity?

    An Electing Family Limited Liability Entity is defined in Section 40-14A-1, Code of Alabama 1975. Upon meeting certain requirements, an Electing Family Limited Liability Entity would qualify for a maximum Alabama Business Privilege Tax of $500.

    To qualify the LLE must be more than 80 percent owned, directly or indirectly, by an individual and the members of the individual’s family (See 40-14A-1(h)(4), Code of Alabama 1975, for attribution rules to follow to identify an individual family members for indirect ownership).

    The LLE must have more than 90% of its gross receipts from interest, dividends, rents, and certain other passive-time income. At least 90% of the adjusted basis of the assets owned by the LLE must consist of cash, stock, securities, timber, annuities, and certain other “non-business” type assets. Again, see Section 40-14A-1, Code of Alabama 1975, for a more thorough explanation of the Electing Family Limited Liability Entity ownership, income, and asset requirements.

    A qualifying LLE would make the election to be treated as an Electing Family Limited Liability Entity by completing Schedule BPT-E, Family Limited Liability Entity Election Form, and attaching the completed Schedule to the Alabama Form PPT being filed for the LLE. Page 1, line 20 must be checked to indicate that the election form is attached to the Form PPT. 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 40-14A-1(h), Code of Alabama, 1975.

  • What is a Determination Period?

    The relationship between a taxpayer's Determination Period and the taxpayer's taxable year is, at first, confusing. But, to understand how to properly compute the Alabama Business Privilege Tax, one must first understand the terms Determination Period and Taxable Year, as they are used in the Alabama business privilege tax law (Section 40-14A-1, Definitions).

  • Are credit unions subject to the Business Privilege Tax and or the Corporate Shares Tax levied in Chapter 14A, Code of Alabama 1975?

    No.  Section 40-14A-43, Code of Alabama 1975, states "The taxes levied by this chapter shall not apply to any organization described in 26 U.S.C. §501(a)..."

    Section 501(a) of the Internal Revenue Code further refers to 26 U.S.C. §501(c), which identifies exempt organizations.  Section 501(c)(14) (A) addresses credit unions without capital stock organized and operated for mutual purposes and without profit.  

  • How do I file the domestic or foreign Franchise Tax return?

    The Franchise Tax return should not be filed, the Alabama Business Privilege Tax replaces the domestic and foreign Franchise Tax.  

  • Are overpayments of the old Franchise Tax allowed as credits against the Business Privilege Tax?

    No, Franchise Tax overpayments cannot be used as credits against the Business Privilege Tax.

  • How is the rate for the Business Privilege Tax determined?

    To determine the tax rate for the Business Privilege Tax, begin with the federal taxable income.  Then multiply that amount by the taxpayer's apportionment factor.  The resultant amount is used in the rate schedule to determine the appropriate rate. 

  • How is the federal taxable income for S corporations and limited liability entities determined?

    The federal taxable income to be used for S corporations and limited liability entities is the total amount of income passed through to the shareholders, members, or partners. 810-2-8-.01(1)(b) and 810-2-8-.01(1)(c)  

  • What is a limited liability entity?

    A limited liability entity is any entity, other than a corporation, 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 Internal Revenue Code of 1986.  Limited liability entities include, but are not limited to, limited liability companies, limited liability partnerships, registered limited liability partnerships, and limited partnerships.  

  • How does an entity elect to be treated as a "family limited liability entity" and therefore subject to the $500 cap under the privilege tax?

    A qualifying LLE would make the election to be treated as an Electing Family Limited Liability Entity by completing Alabama Schedule BPT-E, Family Limited Liability Entity Election Form, and attaching the completed form to the Alabama Form PPT being filed for the LLE. Page 1, line 20 must be checked to indicate that the election form is attached to the Form PPT.