Alabama doesn’t have a Franchise Tax, but it does have a Business Privilege Tax that closely resembles a Franchise Tax in other states. It is typically filed by an accountant, given the detailed financial information required.
Alabama Act No. 2024-213, effective October 1, 2024, eliminated the annual report filing requirement for all corporations and LLCs. No annual reports are required in 2025 and beyond.
The Business Privilege Tax applies to Foreign Corporations, limited liability entities, and disregarded entities that have qualified to do business in Alabama with the Secretary of State. It is separate from Alabama Corporate Income Taxes.
There are two main filings:
The annual Business Privilege Tax Return is due the same day as the company’s Federal Tax Returns—typically April 15 for calendar-year C-corporations or March 15 for pass-through entities.
The tax is calculated based on net worth with adjustments, multiplied by the apportionment factor, less deductions, to arrive at taxable Alabama net worth.
The graduated tax rates range from $0.25 to $1.75 for each $1,000 of net worth, determined by the entity's federal taxable income apportioned to Alabama.
Both the Initial Business Privilege Tax Return and the Business Privilege Tax Return have detailed forms and instructions to help your accountant calculate tax due.
For the taxable year 2024, taxpayers whose calculated business privilege tax is $100 or less are exempt from filing and paying the Business Privilege Tax.
While accountants typically file Alabama Business Privilege Taxes, Discern notifies you when filings are due, provides guidance and links to required forms, and offers centralized tracking across all jurisdictions where you operate.
Book a demo today to streamline your ongoing compliance management.
.png){kind=small}