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Line 10. Enter the net amount invested in, or book value from the taxpay-

by LLEs to determine the tax rate for the Alabama business privilege tax shall

er’s balance sheet, for all devices, facilities, or structures, and all identifiable

be the federal ordinary income or (loss) from trade or business activities adjust-

components or materials for use therein, that are located in Alabama and are

ed by any items of income or expenses passed through to the members or part-

ners that were determined pursuant to Internal Revenue Code Section 702. The

acquired or constructed primarily for the control, reduction, or elimination of air,

ground, or water pollution or radiological hazards where such pollution or radi-

income shall be apportioned in accordance with Chapter 27, Title 40, Code of

ological hazards result from or would be caused by the taxpayer’s activities in

Alabama 1975, and the accompanying rules.

Alabama.

Federal Taxable Income for Disregarded Entities. The federal taxable

Line 11. Enter the amount reported on the taxpayer’s balance sheet for the

income to be used by Disregarded Entities to determine the tax rate for the

balance of any reserve, account, or trust reasonably determined to satisfy any

Alabama business privilege tax shall be the federal ordinary income or (loss)

liability that is imposed by federal, state, or local government laws or regulations

from trade or business activities adjusted by any items of income or expenses,

for reclamation, storage, disposal, decontamination, retirement, or other related

determined pursuant to internal Revenue Code Section 1361 or Internal

costs associated with a plant, facility, mine, or site in Alabama. Attach documen-

Revenue Code Section 61. This income shall be apportioned in accordance

tation identifying the applicable law or regulation that establishes taxpayer’s lia-

with Chapter 27, Title 40, Code of Alabama 1975, and the accompanying rules.

bility, as well as a computation of the liability. The documentation must also

Line 16b – Tax Rate. Enter on line 16b the taxpayer’s business privilege tax

identify the location of the plant, facility, mine or site in Alabama.

rate. The tax rate is specified in Section 40-14A-22, Code of Alabama 1975,

Line 12. Enter the total amount reported on the taxpayer’s balance sheet as

and is determined using the following table:

the book value of the taxpayer’s investment in low-income, residential real

Federal Taxable Income Apportioned and Allocated to Alabama

estate projects that qualify for federal or state income tax credits, loans or

Amount of tax per

grants. See Section 40-14A-24(b)(7) Code of Alabama 1975. The taxpayer

More Than or

$1,000 of Taxable

must attach a listing showing the details of the deduction. For each separate

Equal to

But Less Than

Tax Rate

Alabama Net Worth

low-income housing project, the attached documentation must identify the

name of the project, the FEIN of the project, the site of the project, and the net

—

.00025

$ .25 per $1,000

amount invested in the project. The documentation must also identify how the

200,000

.00100

$ 1.00 per $1,000

investments are reported on the taxpayer’s balance sheet. If this deduction is

200,000

500,000

.00125

$ 1.25 per $1,000

taken, the return will not be considered complete without the listing.

500,000

$ 2,500,000

.00150

$ 1.50 per $1,000

Line 13. S-corporations, LLEs and disregarded entities enter 30% of the

$ 2,500,000

—

.00175

$ 1.75 per $1,000

federal taxable income apportioned and allocated to Alabama for the determi-

nation period, but not less than zero. This deduction is allowed by Section 40-

Line 17 – Gross Privilege Tax Calculated.

14A-24(b)(8) and (9), Code of Alabama 1975.

Multiply the amount on line 15 (Taxable Alabama Net Worth) by the rate on

Taxable income is to include income passed through to the shareholders

line 16b (Tax Rate).

and members. Taxable income for an S-corporation, other than a qualified sub-

Example:

chapter S subsidiary, is the amount taken into account by its owners pursuant

Line 15 – Taxable Alabama Net Worth. . . . . . . . . . . . . . . . . . . . . . .

$1,000,000

to Internal Revenue Code Section 1366. Taxable income for an LLE is the

Line 16a – Federal Taxable Income Apportioned and

amount taken into account by its owners pursuant to Internal Revenue Code

Allocated to Alabama . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 250,000

Section 702. Taxable income for a disregarded entity is the amount taken into

Line 16b – Tax Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

.00125

account by the owner pursuant to Internal Revenue Code Section 61 or 1361.

Taxable income shall be apportioned and allocated to Alabama in accordance

Line 17 – Gross Privilege Tax Calculated . . . . . . . . . . . . . . . . . . . .

1,250

with Alabama income tax law (Title 40, Chapter 18, Code of Alabama 1975) or

Special Calculation for Short Taxable Years: If the taxable year is a short

Alabama financial institutions excise tax law (Title 40, Chapter 16, Code of

taxable year, the gross privilege tax calculated will be prorated using a fraction,

Alabama 1975).

the numerator of which is the number of calendar days in the short taxable year,

Line 14 – Total Deductions. Enter the total of lines 9 through 13.

the denominator of which will be 365. The computation of prorated business

privilege tax must be attached to the return. Please note the taxpayer should file

Line 15 – Taxable Alabama Net Worth. Enter the difference between line

a short year return only if there is a change in the tax year end (For example,

8 (Total Alabama Net Worth) and Line 14 (Total Deductions).

the taxpayer converts from a calendar year end to a fiscal year end).

Computation of Privilege Tax Due

Example Assuming Facts from Above Example and a Short Year of 180 days:

Line 16a – Federal Taxable Income Apportioned to Alabama. Enter the

Taxable Alabama Net Worth

federal taxable income used to determine the Tax Rate (see the instructions for

line 16b) which is applied to the Taxable Alabama Net Worth (see line 15) to

Multiplied by Tax Rate Equals

$1,250

arrive at the Gross Privilege Tax Calculated (see line 17). The tax rate used to

Multiplied by

180/365 Short year factor

compute the business privilege tax is based upon the taxpayer’s federal taxable

Line 17 – Gross Privilege Tax Calculated

$616

income during the determination period, as required by Section 40-14A-22,

Line 18 – Alabama Enterprise Zone Credit. Enter the amount of Alabama

Code of Alabama 1975.

Enterprise Zone Credit to which the taxpayer is entitled. Attach supporting doc-

Federal Taxable Income for S-Corporations. The federal taxable income

umentation from the Alabama Department of Economic and Community Affairs

to be used by S-corporations to determine the tax rate for the Alabama business

(ADECA) showing the amount of the Alabama Enterprise Zone Credit the tax-

privilege tax shall be the federal ordinary income or (loss) from trade or busi-

payer is entitled to claim. Contact ADECA for additional information concerning

ness activities plus any items of income or applicable deductions passed

the Alabama Enterprise Zone Credit.

through to the shareholders that were determined pursuant to Internal Revenue

Line 19 – Privilege Tax Due. Enter the difference between line 17 and line

Code Section 1366. The income shall be apportioned in accordance with

18, but not less than $100, the minimum amount of the tax. This amount is also

Chapter 27, Title 40 Code of Alabama 1975, and the accompanying rules.

entered on page 1 of Form PPT on line 9 (Privilege Tax Due) in the Computation

Deductions shall not be allowed for the federal income tax or any federal or

of Amount Due or Refund Due area of page 1.

Alabama net operating loss in computing the federal taxable income for purpos-

es of determining the business privilege tax rate.

See the following concerning the minimum and maximum amounts for the

Federal Taxable Income for LLEs. The federal taxable income to be used

tax.

Alabama Business Privilege Tax Ty2011 Forms And Schedules Preparation Instructions - Alabama Department Of Revenue Page 11

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