New regulations issued by the Alabama Department of Revenue (ADOR) set forth the Department's position regarding the application of the Alabama business privilege tax (BPT) to business entities, including certain owners of such entities. ADOR also clarified the BPT filing requirements for disregarded entities. If your business – or a business entity in which you have a ownership interest – currently has activities or owns property in Alabama, these new regulations may subject you to the BPT or alter the manner in which you file BPT returns. The regulations become effective on March 30, 2011.
Scope of BPT
The BPT is a tax imposed on the net worth of business entities
(corporations, limited liability companies, limited partnerships,
etc.) doing business in Alabama, or organized, incorporated,
qualified, or registered under the laws of Alabama. The new
regulations clarify the term "doing business" by
providing examples of what activities constitute doing business for
BPT purposes in ADOR's view.
With respect to property ownership, the regulations provide
specific examples of property ownership that constitute doing
business in Alabama; however, they also state that, in most
instances, a business entity that merely owns property located in
Alabama (whether personal property or real property) is "doing
business," and therefore subject to the BPT.
With respect to activities, the regulations provide that the facts
and circumstances of each case must be considered in order to
determine if a business entity is doing business in Alabama but
include examples of activities carried on within the borders of
Alabama that ADOR considers to constitute "doing
business." The regulations also offer insight into the filing
requirements of owners of business entities subject to the BPT that
are business entities themselves.
You can view the new regulations on the scope of the BPT by
clicking on the following link.
Filing Requirements of Disregarded Entities
Disregarded entities (e.g., certain single-member limited
liability companies and qualified subchapter S subsidiaries) are
subject to the BPT; however, the filing requirements for such
entities have not been clear in all situations, particularly when
such entities have owners who also are subject to the BPT. The new
regulations address this issue by providing that if a disregarded
entity has an owner subject to the BPT, both the disregarded entity
and the owner are required to file BPT returns. The regulations
detail what information should be included on each of these
returns. In addition, the regulations discuss what informationz
needs to be included on returns filed by disregarded entities that
do not have an owner subject to the BPT.
You can view the new regulation on the filing requirements of
disregarded entities by clicking on the following link.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
