Computation Of Taxable Income For Alabama Business - Privilege Tax (Bpt) Purposes - Alabama Department Of Revenue

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Computation of Taxable Income for Alabama BPT Purposes - June 17, 2009
Computation of Taxable Income for Alabama Business
Privilege Tax (BPT) Purposes
Prepared by:
Ed Cutter
Individual and Corporate Tax Division
Alabama Department of Revenue
(334) 242-4575
ed.cutter@revenue.alabama.gov
Date Prepared:
June 18, 2009
The Alabama Department of Revenue has identified a significant volume of errors
in Alabama business privilege tax returns filed by limited liability entities
concerning the amount of Taxable Income used in computing the business privilege
tax rate for a determination period and the 30% of Taxable Income Deduction
allowed to pass-through entities in computing Net Worth in Alabama (30% of
Taxable Income allowed by Sections 40-14A-24(b)(8) and(9), Code of Alabama
1975).
This document is intended to provide clarity in the preparation of the Alabama
business privilege tax return.
The document especially addresses the computation of the business privilege tax
rate for a determination period as well as the computation of the deduction allowed
to pass-through entities in computing Net Worth in Alabama (The 30% of Taxable
Income Deduction allowed by Sections 40-14A-24(b)(8) and(9), Code of Alabama
1975 – see item 6, below).
The document also addresses the question of whether the taxable income amount
should be adjusted in any way for certain guaranteed payments to partners.
Please note, the computation/process is complex for certain taxpayers with complex
multistate allocation and apportionment issues, but it is a much simpler process for
those taxpayers conducting 100% of their business in Alabama, and which do not
have nonbusiness income.
Page 1 of 5 Computation of Taxable Income for Alabama BPT Purposes
6/18/2009

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