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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 Alabama Business Tax law is found in Chapter 14A, Title 40, Code of Alabama 1975 . 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). The Business Privilege Tax is levied on a taxpayer’s net-worth apportioned to Alabama. With the exception of the Business Privilege return for Financial Institutions Groups, the Business Privilege tax return due date conforms to the due date of the corresponding federal return.

 

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 $0.25 to $1.75 for each $1,000 of net worth in Alabama. The minimum business privilege 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 may 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 may 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. Please click here for further information.

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