Key Takeaways

  • The Alabama Business Privilege Tax (ABPT) applies to most business entities registered or doing business in Alabama.
  • As of 2024, entities owing $100 or less are exempt from paying and no longer required to file a return.
  • Corporations no longer have to file annual reports with the Alabama Secretary of State.
  • New entities must still file an initial business privilege tax return within 2½ months of formation.
  • The tax amount is based on the business’s net worth in Alabama, with rates ranging from 0.00025% to 0.00175%.
  • Failure to file or pay on time may result in penalties and loss of good standing with the state.

What Is the Alabama Business Privilege Tax?

The Alabama Business Privilege Tax (ABPT) is a requirement for all businesses in the state of Alabama. While LLCs, LLPs, corporations, limited liability companies, and limited liability partnerships must file an annual report, the business privilege tax must be paid by all entities.

Pros

For filing convenience, any designated person who has authority within the company and is responsible for preparing the corporation's tax return and paying taxes is also eligible to file the annual report.

When filing the Alabama annual report, original signatures are not required.

The Business Privilege Tax ensures that a business is operating legally in Alabama.

Cons

Failure to file the Alabama Business Privilege Tax by its due date results in a minimum late fee of $50. The amount may be more based on the amount of tax owed.

Should an entity fail to file an annual report and pay any privilege tax due, the company could receive a poor rating. This means any lenders or customers needing the validation of your company's standing will find it is not in good standing with the state. This can have financial repercussions for your business.

While filing an annual CPT form online, which combines the tax return with the annual report and calculates any tax owed, the process is complicated.

Steps/Forms for Entities Filing a Business Privilege Tax Return

Each type of business entity in the state of Alabama has a specific tax form to fill out each year. The forms are as follows:

  • CPT – This form combines the Annual Report and the Alabama Business Privilege Tax Return into one convenient form. C Corps and professional corporations use this dual form when filing. The CPT form is filed with the Alabama Department of Revenue.
  • PPT – S Corps, Limited Liability Companies, and PLLCs file a PPT form for their business privilege tax. The PPT form also includes the AL-CAR form, which is used for the annual report. Both are filed with Alabama's Department of Revenue.
  • Form 65 – This form is filed with the Department of Revenue by Limited Partnerships (LPs).
  • Annual Notice – The notice is filed with the Secretary of State for Alabama. It is used by Limited Liability Partnerships (LLPs).
  • Charitable Organization Renewal – The annual renewal statement is filed by an entity operating as a charity. A notarized Charitable Organization Renewal form is filed with the Attorney General's Consumer Protection Division.

The amount of tax owed is based on the form used plus other factors. These include the net worth for corporations in Alabama. A $10 fee is for the annual report, and $100 is the minimum tax. For LLCs and PLLCs, the tax is also based on net worth. The PPT form used automatically does the calculations. Limited partnerships are not required to file a privilege tax or annual report form. LLPs, however, must pay $100 to file an Annual Notice. Alabama non-profit charities pay a $25 annual renewal fee to the Attorney General.

How the Alabama Business Privilege Tax Is Calculated

The Alabama Business Privilege Tax is based on a business’s net worth within the state. The calculation considers both total assets and liabilities apportioned to Alabama.

Key calculation points:

  • Rate range: 0.00025% to 0.00175%, depending on the entity type and net worth.
  • Minimum tax: Previously $100 (now waived for entities owing $100 or less).
  • Maximum tax: $15,000 for most entities, except financial institutions and insurance companies, which may have different caps.

Businesses may use the Department of Revenue’s online tax calculator or consult a CPA to determine their specific rate. Tax credits may also apply for certain business structures or economic development incentives.

Annual Report Requirement Repealed

As of January 1, 2025, corporations are no longer required to file annual reports with the Alabama Secretary of State. This change streamlines administrative responsibilities for corporations, aligning their obligations more closely with those of LLCs and LLPs.

Previously, the annual report accompanied the Business Privilege Tax return (via the CPT form). Now, corporations only need to ensure their Business Privilege Tax filings and payments are current with the Alabama Department of Revenue.

Although the report requirement is repealed, maintaining accurate and up-to-date information with the Secretary of State—such as principal address and registered agent details—remains critical for compliance.

Initial Business Privilege Tax Return Requirements

Newly formed or qualified entities must file an initial Alabama Business Privilege Tax Return within 2½ months of incorporation or qualification in the state. This initial return—commonly filed using Form BPT-IN—is separate from annual filings and establishes the entity’s compliance from the date of formation.

Key requirements include:

  • Who must file: Corporations, LLCs, limited partnerships (LPs), and limited liability partnerships (LLPs).
  • When to file: Within 2½ months of incorporation, formation, or registration with the state.
  • Where to file: Alabama Department of Revenue.
  • Extensions: Extensions may be granted upon request, but penalties may apply for late filing.

Businesses that qualify for the 2024 exemption do not need to submit the initial return if they meet the $100-or-less threshold. However, filing is still recommended for proper recordkeeping and proof of compliance.

2024 Changes to the Alabama Business Privilege Tax

Beginning January 1, 2024, major legislative updates simplified compliance with the Alabama Business Privilege Tax. Under House Bill 391, businesses that would have owed $100 or less in privilege tax are now fully exempt from both filing a Business Privilege Tax Return and paying the minimum tax. This change primarily benefits small entities and single-member LLCs that previously paid the minimum $100.

Before this amendment, all entities were required to pay at least $100 annually. In 2023, the minimum tax was reduced to $50, and in 2024, that amount was eliminated entirely for qualifying businesses.However, larger businesses with higher Alabama net worths still need to calculate and remit taxes based on their net worth apportionment. The Department of Revenue continues to use a graduated rate system based on the taxpayer’s net worth and legal entity type.

Penalties and Consequences for Noncompliance

Failure to file or pay the Alabama Business Privilege Tax on time can lead to:

  • A minimum late filing penalty of $50, plus interest on unpaid tax amounts.
  • Loss of good standing with the Secretary of State.
  • Possible administrative dissolution for domestic entities or revocation of registration for foreign entities.

Maintaining compliance ensures your business can obtain certificates of good standing, secure financing, and maintain contracts with clients or government agencies.

How to File and Pay Online

Businesses can conveniently file and pay their Alabama Business Privilege Tax through the My Alabama Taxes (MAT) portal.Steps include:

  1. Create or log into your MAT account.
  2. Select “Business Privilege Tax” under your entity profile.
  3. Complete the CPT, PPT, or initial return form as applicable.
  4. Submit payment electronically or schedule it via ACH.

Electronic filing is highly encouraged to ensure timely submission and immediate confirmation of compliance.

Frequently Asked Questions

  1. Who is exempt from the Alabama Business Privilege Tax in 2024?
    Entities that would owe $100 or less—typically small LLCs and single-member entities—are fully exempt from both filing and paying the tax starting January 1, 2024.
  2. Are corporations still required to file annual reports?
    No. As of 2025, corporations are no longer required to file annual reports with the Secretary of State, though they must still keep information current with the state.
  3. When is the initial business privilege tax return due?
    It must be filed within 2½ months of the entity’s formation, registration, or qualification date in Alabama.
  4. How is the Alabama Business Privilege Tax calculated?
    It’s based on an entity’s Alabama net worth, with rates between 0.00025% and 0.00175% and a maximum tax of $15,000.
  5. What happens if I don’t file or pay on time?
    Penalties start at $50, with additional interest on unpaid taxes. Noncompliance can result in loss of good standing or administrative dissolution.

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