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Business Privilege Tax FAQ

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 organized, incorporated, qualified, or registered under the laws of Alabama is required to file an Alabama Business Privilege Tax Return and Annual Report. The Business Privilege Tax remains due every registered year until the entity is legally dissolved/withdrawn through Probate, regardless of whether or not such entity is actively doing business in Alabama.

  • 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?

With the exception of the Business Privilege return for Financial Institutions Groups, the Business Privilege tax return due date corresponds to the due date of the corresponding federal return.

For C-corporations with a calendar year or a fiscal year other than June 30, the Alabama business privilege tax return is due no later than three and a half months after the beginning of a taxpayer’s taxable year. The 2020 Form CPT for a calendar year C-corporation would be due on April 15, 2020.

For C-corporations with a fiscal year of June 30, 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 2020 Form CPT would be due on September 15, 2020.

For Limited Liability Entities, the Alabama business privilege tax return is due no later than two and a half months after the beginning of the taxpayer’s taxable year. The 2020 Form PPT for a calendar year limited liability entity would be due on March 15, 2020.

The due date for the Business Privilege Tax return for Financial Institution Groups corresponds to the due date for the Alabama Financial Institution Excise tax return. The return is due three and a half months after the beginning of the taxpayer’s taxable year or April 15, 2020.

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

If you have questions, or need to provide information to the Business Privilege Tax Section regarding a delinquent return, electronic responses, with explanations and attachments, may be sent to: businessprivilegetax.delinquents@revenue.alabama.gov

 

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?
With the exception of the financial institutions, the Department of Revenue is now following IRS filing and extension dates for taxpayers filing form / taxable year 2019 return CPT or PPT. The six-month extension for filing the Business Privilege Tax return will be granted automatically. For financial institutions, the Department will follow the filing and extension dates of the Alabama Financial Institution Excise Tax return. An automatic extension to file will be granted for the corresponding period and time requested, if granted, for the Financial Institution Excise Tax return. For all taxpayers, the amount of tax due must be paid on or before the due date, without extension. There is no extension of time to file the form BPT-IN. The form BPT-IN must be filed within two- and one-half months after the entity incorporates, organizes, qualifies or starts doing business in the State. Form BPT-V must accompany all business privilege tax payments, unless payments are made electronically.

What is an initial return? When is it due?
An initial business privilege tax return is the first return due after the taxpayer comes into 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.
  • If no federal return is included, a balance sheet and income statement are required.

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 ADOR’s Make a Payment page.

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 in determining ownership).

The LLE must have more than 90% of its gross receipts from interest, dividends, rents, and certain other passive 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 17 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. The taxpayer’s taxable year next preceding or, if different, the fiscal year next preceding the taxpayer’s current taxable year. If the constitutional amendment proposed by Act 99-600 is ratified by the qualified electors of the state and proclaimed by the Governor as provided in Sections 284 and 285 of the Constitution of Alabama 1901, then for all tax years beginning after December 31, 2000, the term “determination period” means the taxpayer’s taxable year next preceding the taxpayer’s current taxable year.

TAXABLE YEAR. The calendar year for which a tax levied by this chapter is being determined. For all tax years beginning after December 31, 2000, the term “taxable year” means the fiscal year used by the taxpayer to file returns required under the income tax levied by Chapter 18 or the financial institution excise tax levied by Chapter 16, or, in the case of an insurance company subject to the premium tax levied by Chapter 4A of Title 27, the calendar year.

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.

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 to determine the appropriate rate from the rate schedule.

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 provided for under the privilege tax statute?
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.  The filing deadline for Family LLE election is September 15 of the calendar year.

Delinquency Notices

Why did I receive a Business Privilege Tax Delinquent Notice?
The Alabama Department of Revenue’s records indicate the required return and payment for the tax due have not been received. Business entities are liable for the Alabama business privilege tax for each taxable year during which the entity is in legal existence – regardless of the level of business activity.  With certain exceptions, the minimum business privilege tax is $100, and the maximum business privilege tax is $15,000.  A business entity that legally exists, but is dormant in its business operations, is subject to the Alabama business privilege tax filing and payment requirements until the entity is legally dissolved or withdrawn.

What do I need to do in response to the Business Privilege Tax Delinquent Notice?
If you have received a business privilege tax delinquency notice from the Alabama Department of Revenue, and you have not filed the required return or made the required payment please do so at this time in order to avoid any further interest and penalties.  Forms can be obtained by clicking on the ADOR Form page.  If you are uncertain if a return was required or filed, please forward a copy of the delinquency notice to your tax professional.

What do I need to do if I received this notice in error?
If you believe you received the delinquency notice in error and have filed the required return, please provide a copy of the return and proof of payment after consulting your tax professional.  Attach copies of the return and proof of payment to a copy of the business privilege tax delinquency notice and mail the response to:

Alabama Department of Revenue
Individual and Corporate Tax Division
Business Privilege Tax Section – Delinquency Notice Response
PO Box 327900
Montgomery, AL  36132-7900

How do I register for MAT?

Taxpayers must receive an (Online Filing Info) letter to sign up for MAT. Normally after they have registered their business with the Secretary of State, taxpayers will receive their letter within 4-6 weeks from the Alabama Department of Revenue. Once this letter is received, taxpayers need to visit our website https://myalabamataxes.alabama.gov/_/#1. In the left side of the screen you will see username, password, and logon. Beneath that you will see forgot password, forgot username, DON’T HAVE A LOG ON? REGISTER HERE. Taxpayers should click register here. Select: Business Privilege Tax. Then the taxpayer will need to provide the Account number, Sign On ID, and Access Code. This information is located on the (Online Filing Info) letter.

How do I change my address on MAT?

Where do I start?

  • Click the Home link to go to the summary page you see when you first sign in.
  • To edit a customer level address:
    • Click the Names and Addresses tab from the customer springboard.
    • Find the Customer Names & Addresses section.
  • To edit an account level address:
    • Go to the Accounts tab and click the applicable account (i.e. Business Privilege Tax).
    • Click the Names and Addresses tab from the account springboard.
    • Find the Account Names & Addresses section.

What do I do?

View an address

  • Click an address to view it.
  • Edit an address
  • Click the Edit button.
  • Update the address fields.
  • Click the Verify Address link to check that it is a valid address. This step is mandatory
  • Click the Select link next to the verified address (if applicable).
  • When finished, click the Submit button to submit the request.
  • A confirmation message appears. Click the Print Confirmation button to print the page, or click OK to continue.

 

How do I make a Payment for Business Privilege Tax?

My Alabama Taxes (MAT): Taxpayers can make an ACH Debit payment through their MAT account.

MAT Billing payment: Make an ACH Debit payment by clicking Pay A Bill I’ve received under Quick payments from the www.myalabamataxes.alabama.gov home screen. No MAT account is needed just the billing letter received.

Official Payments Corporation: If taxpayer does not have a MAT account and wish to pay by credit card, they can make payments by credit card on www.officialpayments.com or by phone at 1-800-272-9829. Official payments do charge a convenience fee of 2.5%. (Discover/Novus, MasterCard, Visa or American Express)

Value System Payments: If taxpayer does not have a MAT account and wish to pay by credit card, they can make payments by credit card on www.valuepaymentsystems.com. (Bill Me Later, Discover/Novus, MasterCard or, Visa)

Mail: Check or Money orders may be mailed if the amount owed is less than $750.00. Attach voucher Form BPT-V and payment. Mail to address below:

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

All other MAT questions click on the following link, https://myalabamataxes.alabama.gov/webfiles/help/index.html#faq.

How do I find Business Privilege Tax Forms on the ADOR website?

Go to our website, www.revenue.alabama.gov. Click on Forms. Enter Business Privilege into the Search box. Sort the forms by Year by clicking on the box “Year” to find the needed Form. Click on the needed Form. Instructions, Forms with calculations, Printable Forms, and our Voucher (BPT-V) are located here.

How do I obtain a Certificate of Compliance from Alabama Department of Revenue?

Where to apply

  • www.revenue.alabama.gov
  • Click Businesses (along top left in dark blue)
  • Certificate of Compliance (last option in first column, bottom left)
  • Request a Certificate of Compliance (link within paragraph)
  • Please Read: Important Information Regarding Certificate of Compliance and Special Notes (in red)
  • Request a Single Certificate of Compliance
  • Fee is $10(with an additional $4 service charge)
  • Payment Options: American Express, Discover, Master Card or Visa

 

*Sometimes the taxpayer may not know the 6-digit Secretary of State ID. They can enter all nines in that field, but it must be in the correct format, 999-999. Also, if they do not have a FEIN number, they can do the same, but must be in correct format, 99-9999999. In order to ensure accuracy in verifying the entity for compliance, it is not recommended that a request be made without the proper identifying numbers for the entity. Either the correct FEIN or SOS ID must be on the application*

Certificates of Compliance are issued if the Department verifies that an entity has filed all returns required to be submitted and paid the taxes as shown due as payable on those returns.

If an entity has not filed all returns required to be submitted and not paid the taxes as shown due as payable on those returns, the certificate will be denied.

Disregarded entities requesting a Certificate of Compliance must provide their owner’s information (name, FEIN) in order for the Department to be able to verify the income tax filing requirements for the disregarded entity have been met, since the disregarded entity’s income is reported on its owner’s return for income tax purposes. Failure to provide the owner’s information for a Certificate of Compliance request made for a disregarded entity is the number one reason a request for a Certificate of Compliance is erroneously denied.

How do I obtain the forms needed to register, withdraw, or dissolve my business through the Office of the Secretary of State?

Forms and information needed can be accessed through one of the following websites provided by the Office of the Secretary of State or Atlas Alabama.

https://www.sos.alabama.gov/ Main page for Office of the Secretary of State

https://www.sos.alabama.gov/business-entities Business Entities main page

https://www.sos.alabama.gov/business-entities/business-downloads Business downloads/ forms

https://atlasalabama.gov/ – Atlas Alabama

What fees are associated with Office of the Secretary of State?

All fees associated with the Office of Secretary of State business entities can be found at the following website:

https://www.sos.alabama.gov/sites/default/files/2019-01/be-FeeSchedule.pdf Business Entity Fees

How do I Withdraw or Dissolve my business?

The steps for withdrawals and dissolutions are outline below.

Dissolutions- Domestic entity

  1. Complete Articles of Dissolutions Form

https://www.alabamainteractive.org/sos/welcome.action

Form link to dissolve an LLC: link https://www.sos.alabama.gov/sites/default/files/2019-07/sosdf-9.pdf

Form link to dissolve a corporation: link https://www.sos.alabama.gov/sites/default/files/2019-07/sosdf-4.pdf

  1. Mail or take the following to the Office of the Judge of Probate in the county where the corporation’s Certificate of Formation/Organization was recorded:
    1. One signed original and two (2) copies of the completed form.
    2. The appropriate county filing fees.
    3. The State’s filing fee of $100.00 (check or money order) order payable to Office of the Secretary of State. Fee can also be paid by credit card in some counties.
    4. County certifies a copy and transmits to SOS with check within 10 days after filing is recorded.

 

Withdrawals- Foreign entity

  1. Complete a Request for Certificate of Compliance from ADOR. https://www.alabamainteractive.org/ador_tax_compliance/welcome.action
  2. Provide any missing returns and payments as determined by ADOR staff, if found not to be in compliance to ADOR.
  3. Receive Certificate of Compliance from ADOR.
  4. Complete Certificate of Withdrawal Form https://www.alabamainteractive.org/sos/welcome.action
  5. Submit two (2) signed completed Certificate of Withdrawals with Certificate of Compliance (from ADOR) and filing fee to Secretary of State’s address on the form.
    1. Certificate of Compliance cannot be more than 6 months old to be accepted by SOS.

 

 

Office of the Judge of Probate- County Offices contact link page- https://www.sos.alabama.gov/city-county-lookup/probate-judges