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Attach your check payable to the Alabama Department of Revenue to

• Exempt payables are defined as stated in Section 40-14A-23(e)(2) b.

the front of the return.

They include trade debt, accounts payable, or deposit liabilities to related

parties that are doing business in Alabama.

Definitions:

• Non-Exempt Payables are all other related party debts.

Corporation – An entity, including a limited liability company electing to

II. Filing Rules

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

Effective January 1, 2001, the balance sheet year for the Business

entity…. The term “corporation” shall include but not be limited to the

Privilege Tax will be the same year used by the taxpayer to file income tax,

following: corporations, professional corporations, joint stock companies,

financial institution excise tax or insurance premium tax returns. The due date

unincorporated professional associations, real estate investment trusts,

for corporations will be two and one half months after the first day of their

limited liability companies electing to be taxed as corporations for federal

fiscal year. The due date for LLE’s will be three and one half months after the

income tax purposes, and all associations classified as corporations for

first day of their fiscal year. Short year returns will be due for privilege tax.

federal income tax purposes. The term “corporation” shall not include any

III. Required Attachments – Generally

county, municipal corporation, political subdivision of the state, governmental

• Pages 1 through 4 of the unconsolidated federal tax return

corporation, instrumentality or agency thereof. (Section 40-14A-1(d))

• For insurance companies, Pages 1 through 8 of the federal return and

Limited Liability Entity – Any entity, other than a corporation, organized

the balance sheet

under the laws of this or any other jurisdiction through which business may

• Copy of Alabama income tax apportionment schedule (for multi-state

be conducted while offering limited liability to the owners of the entity with

taxpayers)

respect to some or all of the obligations of the entity and which is taxable

• Documentation to validate all exclusions and deductions

under subchapter K of the Federal Code, including, without limitation, limited

liability companies, registered limited liability partnerships, and limited

IV. Instructions for Schedule E – Initial Returns

partnerships. (Section 40-14A-1(k))

-An initial return is the first return due after the taxpayer incorporates,

Electing Family Limited Liability Entity – An electing family limited

registers, organizes, qualifies, or begins doing business in Alabama,

liability is a limited liability entity that meets the following requirements:

whichever comes first. Enter that date here: _____/_____/_____.

(Section 40-14A-1(h))

-The initial PSA is due 30 days after the above date, and may not be

(1) An individual and the members of the individual’s family as defined in

extended.

Section 40-14A-1(h)(4) directly or constructively own 80 percent or more of

Schedule E, Line 1

the profits and capital interests.

Complete Lines 1 through 6 of Forms PSA, Schedule A as of the date

(2) Must meet the requirements of either the gross receipts test as defined

above. Skip any lines that do not apply. Enter the total from Schedule A, Line

in Section 40-14A-1(h)(3)(a) or the assets test as defined in Section 40-14A-

6 to Schedule E, Line 1.

1(h)(3)(b).

Schedule E, Line 2

(3) Must attach a statement to the return making the annual election and

Complete Lines 1 through 7 of Form PSA, Schedule B as of the date

declaring all of the requirements have been met.

above. Skip any lines that do not apply. Enter the total from Schedule B, Line

Disregarded Entity – A limited liability company that is disregarded for

7 to Schedule E, Line 2.

purposes of federal income tax, or a qualified subchapter S subsidiary as

Schedule E, Line 4

defined in 26 U.S.C. Section 1361. (Section 40-14A-1(g))

The apportionment factor for the initial return is calculated by dividing the

Insurance Company – An insurance company that is subject to the

amount of tangible property in Alabama by the total tangible property on the

premium taxes levied by Chapter 4A of Title 27, Code of Alabama 1975.

above date. For entities that conduct all of their business in Alabama, enter

Financial Institution Group – All taxpayers in an affiliated group where

at least one member of the group is a financial institution that is subject to the

100%.

provisions of Title 40, Chapter 16 (relating to financial institution excise tax).

Schedule E, Line 6

In the event a financial institution taxpayer is not a member of an affiliated

Complete Lines 11 through 19 of Form PSA, Schedule B as of the date

group, that financial institution shall be treated as a financial institution group.

above. Skip any lines that do not apply. Enter the total from Schedule B, Line

(Section 40-14A-22(f)(1)(c))

19 to Schedule E, Line 6.

Note: Financial institution group members are required to complete

Schedule E, Line 10

Schedule G of Form PSA, which can be obtained through the Department’s

For initial returns, the proration percentage will be apportioned from the

Web site at

above date until the last day of the taxpayer’s tax year.

Related Party – A related party is any member of a controlled group of

V. Penalties and Interest

corporations as defined in 26 U.S.C. Section 1563, or a limited liability entity

Failure to timely file return – If a return is filed after the due date, enter

that would be a member of a controlled group if rules similar to those of 26

a late filing penalty of 10% of the tax due or $50, whichever is greater.

U.S.C. Section 1563 were applied to limited liability entities. (Section 40-14A-

Failure to timely pay tax – If payment is not received by the due date,

(1)(L))

enter a late payment penalty of 1% per month, of the amount of the tax due,

Additional information concerning the related party debt add-back:

not to exceed 25% of the tax. Taxpayers paying 90% of the actual tax liability

• Individual shareholders are NOT considered related parties.

with a valid extension request will not be subject to this penalty.

• All related party debt should be itemized, including the related parties’

Interest – Interest is due on all payments made after the original due date.

FEIN, complete name, and whether the related party debt is Exempt or Non

The interest rate is the same as provided in Section 40-1-44(a).

Exempt.

If assistance is needed in computing the penalty and/or interest amounts

• Related party debt cannot be negative.

• Related party debt and related party receivables are not netted under

call (334) 353-7923. The examiner that will assist you will need to know the

any circumstances.

tax liability and the date the return will be mailed.

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Form Psa Instructions - Business Privilege Tax Return And Annual Report - Instructions For The Preparation Of The Alabama - 2003 Page 2

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