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FAQ Categories / Tax: Partnerships & LLEs - Limited Liability Entities

Alabama Department of Revenue
Income Tax Administration Division
P.O. Box 327444
Montgomery, AL 36132-7444

Alabama Department of Revenue
Income Tax Administration Division
P.O. Box 327441
Montgomery, AL 36132-7441

No, a partnership, or other entity classified as a Subchapter K entity, is required to file a composite return and make composite payments on behalf of its nonresident owners or members if there are one or more nonresident owners or members at any time during the taxable year.

Section 40-18-31.2, Code of Ala. 1975, creates the factor presence standard for business activity in the state to determine nexus for business income tax, business privilege tax and financial institution excise tax. The section stipulates that the threshold amounts may be adjusted periodically consistent with the Consumer Price Index.

A partnership is deemed to have “substantial nexus” for the tax period in which they exceed the following thresholds for Alabama:

  • For tax years January 1, 2015 – December 31, 2018:
    • $50,000 of property;
    • $50,000 of payroll;
    • $500,000 of sales; or
    • 25 percent of the total property, total payroll, or total sales.
  • For tax years beginning on or after January 1, 2019:
    • $54,000 of property;
    • $54,000 of payroll;
    • $538,000 of sales; or
    • 25 percent of the total property, total payroll, or total sales.

Partnerships organized in Alabama or commercially domiciled in this state have substantial nexus in Alabama.

If a partnership’s (not organized or commercially domiciled in Alabama) activities do not exceed the standard of “mere solicitation of sales” that fall under the protection of PL 86-272, the factor presence nexus standards established for tax years beginning January 1, 2015, and after will not apply.

For assistance in determining nexus and filing responsibilities of a partnership in Alabama, complete the Nexus Questionnaire online at My Alabama Taxes in the Businesses panel.

If an income tax return preparer prepares 25 or more acceptable, original corporate/partnership income tax returns using tax preparation software in calendar year 2011, then for that calendar year and for each subsequent calendar year thereafter, all acceptable corporate/partnership income tax returns prepared by that income tax preparer must be filed using electronic technology, as defined in the “Electronic Tax Return Filing Act”, as codified in Chapter 30 of Title 40, Code of Alabama 1975.

If an income tax return preparer prepares 25 or more acceptable, original corporate/partnership income tax returns using tax preparation software in calendar year 2011, then for that calendar year and for each subsequent calendar year thereafter, all acceptable corporate/partnership income tax returns prepared by that income tax preparer must be filed using electronic technology, as defined in the “Electronic Tax Return Filing Act”, as codified in Chapter 30 of Title 40, Code of Alabama 1975.

No, there is no opt-out provision for corporate/partnership mandate.

Beginning with Tax Year 2009 Corporation with assets of $5 million or more, or partnerships with 50 or more partners are mandated to e-file Tax Year 2010 Alabama corporate/partnership income tax returns, and all subsequent tax years.

March 4, 2010 and applies to acceptable corporate/partnership income tax returns required to be filed for taxable years beginning on and after January 1, 2009.

If an extension has been granted for federal purposes, the extension is also granted for Alabama purposes; the Federal Form 7004 must be submitted with the Form 65. The extension only applies to filing a return; no extensions are granted for payment of taxes due.

ALL COMPOSITE RETURN TAX PAYMENTS ARE DUE BY THE ORIGINAL DUE DATE OF THE RETURN. Taxes not paid on or before the original due date will be subject to interest at the rate provided in §40-1-44, Code of Alabama 1975, and all applicable penalties until paid. Payments should be submitted with Form PTE-V Pass Through Income Tax Voucher.

No, a single member LLC is a disregarded entity and should not file a separate Form 65.

Yes, a partnership, or other entity classified as a Subchapter K entity, is required to file a composite return and make composite payments on behalf of its nonresident owners or members if there are one or more nonresident owners or members at any time during the taxable year. The law generally exempts Alabama QIPs from the composite payment and return requirement.

A QIP is a partnership or other entity classified as a subchapter K entity, or a business trust as defined in §40-18-1, Code of Alabama 1975, that for a tax period meets the gross income and asset requirements for a Qualified Investment Partnership as required by §40-18-24.2; and, for which an authorized officer, partner, member or manager of the entity has certified for the tax period that the entity meets the gross income and asset requirements. Proper certification of a QIP requires the completion of Alabama Schedule QIP-C, Qualified Investment Partnership Certification, which must be filed by the due date of the Alabama partnership income tax return for the entity.