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Business Privilege Tax Incentives

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Business Privilege Tax Incentives

The business privilege tax is an annual tax paid by corporations and limited liability entities (including disregarded entities) for the privilege of conducting business in Alabama.

The tax base is the taxpayer’s net worth apportioned to Alabama. For business entities new to Alabama, the tax accrues as of the date of organization, qualification, or beginning to do business, and is due two and one-half thereafter. The tax for existing entities accrues as of January 1 of every taxable year, and is due March 15.

Business Privilege Tax Rate

The tax rate for business privilege tax is graduated, based on the entity’s federal taxable income apportioned to Alabama. The rates range from $.25 to $1.75 for each $1,000 of net worth in Alabama. The minimum tax is $100.

Business Privilege Tax Cap

The maximum business privilege tax for most business entities is $15,000. The exceptions are for financial institutions, financial institution groups, and insurance companies that have a maximum business privilege tax of $3,000,000.

Business Privilege Tax Deductions

  • Pollution Control Equipment: An entity can deduct from their Alabama net worth the net amount invested in 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.
  • Air Carrier Hub Operation Equipment: An entity can deduct from their Alabama net worth the net amount invested by the taxpayer in all real and tangible personal property, equipment, facilities, structures, and components including, but not limited to, all aircraft replacement parts, components, systems, supplies, and sundries affixed or used on an aircraft, and ground support equipment and vehicles used by or for the aircraft, when used by certified or licensed air carrier with a hub operation within this state, for use in conducting intrastate, interstate, or foreign commerce for transporting people or property by air.

Business Privilege Tax Enterprise Zone Credit or Exemption

This credit or exemption is offered to help encourage economic growth in areas considered to have depressed economies (see Sections 41-23-24 and 41-23-30, Code of Alabama 1975 ). To qualify for this incentive, a business must meet detailed requirements concerning site location and employee qualifications.

For more information:

Stephanie Rankins, Enterprise Zone Coordinator
401 Adams Avenue
P.O. Box 5690
Montgomery, AL 36103-5690
P: (334) 242-5384
Alabama Department of Economic and Community Affairs
ADECA’s Enterprise Zone Program

 

Learn more about Business Privilege Tax