Alabama House Bill 391 reduced the minimum state business privilege tax in 2023 from $100 to $50.  

Beginning in 2024, businesses that are subject to the minimum tax ($100 or less) are completely exempt from paying the tax and filing a Business Privilege Tax Return (BPTIN/CPT/PPT).

This means many single-member entities will no longer be required to file. One caution – just because you paid the minimum in 2023 does not mean 2024 will be the same. Changes in the income and net worth of the entity may result in an assessment in excess of the minimum tax. The rates range from $.25 to $1.75 for each $1,000 of net worth in Alabama. 

For example, assume a dormant entity with $1,000 in a checking account. The calculation would be $1,000 X .00025 = .25 tax. So, no return is required. 

Next, assume an entity had $100,000 in taxable income and a net worth of $99,000 on December 31. The calculation becomes $99,000 X .001 = $99. Again, no return is required, and no tax is due.

As with all things involving taxes, there are multiple exceptions to the general rule.

The change is expected to save Alabama businesses $23 million.