Forgetting the 5% nonresident composite obligation. If any shareholder is a nonresident of Alabama, the S corp must either (a) file Form PTE-C and remit 5% of that shareholder's Alabama-source share by March 15, (b) obtain a signed Schedule NRA opting the shareholder out, or (c) make the Electing PTE election. Owners who move out of state mid-year, or who add an out-of-state co-owner, routinely miss this and get assessed the tax plus interest at the entity level. A close second: assuming the old $100 minimum Business Privilege Tax is still due and paying/filing an unnecessary Form PPT — the minimum was fully eliminated for tax years beginning after December 31, 2023.
Recognized automaticallyPTET available
S-corp election in Alabama
In short
No entity-level income tax on pass-through income; the Alabama Business Privilege Tax (BPT) technically still applies but is fully exempt (and no return is required) when the computed tax is $100 or less — which covers most small S corps.
Does Alabama recognize the federal S election?
Alabama automatically recognizes the federal S election — there is no separate Alabama S-corp election form. The ADOR S-Corporation page states plainly: "Alabama recognizes the federal election to be treated as an S-Corporation through Form 20S." Once the IRS accepts Form 2553, the entity simply begins filing Alabama Form 20S (S Corporation Information/Tax Return) instead of the C-corp Form 20C. Income flows through to shareholders on an Alabama Schedule K-1, which must be completed for anyone who was a shareholder at any time during the year.
Tax the entity still owes
Business Privilege Tax: ADOR Notice dated January 4, 2024 states "For the taxable years beginning after December 31, 2023, there is a full exemption from the business privilege tax on tax due of $100 or less" and "Taxpayers whose business privilege tax is calculated to be $100 or less are not required to file a Business Privilege Tax Return (BPTIN/CPT/PPT)." This is the successor to the old $100 minimum (halved to $50 for 2023, then eliminated). A typical small single-shareholder S corp therefore owes $0 BPT and files no BPT return. Larger entities still compute BPT on a graduated rate applied to Alabama net worth. Composite tax: if the S corp has nonresident shareholders and does not make the Electing PTE election, it must file Form PTE-C and "pays a tax at the rate of 5 percent on behalf of its nonresidents," due the 15th day of the third month after year end. Alabama's top individual rate (and the PTET rate) is 5%.
Registering for payroll
Two registrations. (1) Alabama Department of Revenue withholding tax account — register through the Combined Registration/Application on My Alabama Taxes (MAT). Employees complete Form A-4 (Employee's Withholding Exemption Certificate). The employer files Form A-6 (Employer's Monthly Return of Income Tax Withheld) or Form A-1 (Employer's Quarterly Return of Income Tax Withheld) depending on assigned frequency, plus Form A-3 (Annual Reconciliation of Alabama Income Tax Withheld) with W-2s. All can be filed and paid online through MAT. (2) Alabama Department of Labor — state unemployment insurance (SUTA) account, registered separately from ADOR.
Annual filings
Form 20S (S Corporation Information/Tax Return) — due the 15th day of the third month following the end of the S corporation tax period (March 15 for calendar-year filers); an automatic six-month extension applies and a federal Form 7004 extension is honored, but ALL TAX PAYMENTS ARE DUE BY THE ORIGINAL DUE DATE. Alabama Schedule K-1 for every shareholder. Form PTE-C (Nonresident Composite Payment Return) at 5%, same due date, unless the shareholder signs Schedule NRA (Alabama Pass-Thru Entity Non-Resident Agreement) or the entity makes the PTE election. Form EPT if the Electing PTE box is checked, due March 15 for calendar-year filers. Business Privilege Tax return (Form PPT) only if computed tax exceeds $100. Secretary of State Annual Report — beginning January 1, 2024 this is filed directly with the Alabama Secretary of State (no longer attached to the BPT return) and applies to domestic and foreign for-profit corporations and professional corporations, $10 fee. Withholding: A-6 monthly or A-1 quarterly plus A-3 annual reconciliation. Quarterly SUTA reports to the Alabama Department of Labor.
Pass-through entity tax
Alabama Electing Pass-Through Entity Tax (Act 2021-1), entity-level rate 5%. Mechanics changed for 2025: ADOR states "For tax periods beginning on or after January 1, 2025, the Electing Pass-Through Entity must check the Electing PTE box on the timely filed Form 65 or Form 20S, including any extensions," and "The Electing PTE box must be checked each year the election is in effect." Electing entities "are required to file Form EPT, in addition to Form 65 or Form 20S," with Form EPT "due on the 15th day of the third month after the close of the tax year (i.e., March 15 for calendar year filers)." The election requires a vote or written consent of the governing body plus owners holding greater than 50% of voting control. The older mechanism (submitting Form PTE-E through My Alabama Taxes prior to the 15th day of the 3rd month after year end, per ADOR Notice of October 20, 2021) applied to pre-2025 periods. Making the election removes the Form PTE-C composite requirement. Note: Alabama's PTET is a permanent state-law provision and is not written to sunset with the federal SALT cap.
The mistake owners make most often in Alabama
Filing your federal Form 2553
Businesses operating in Alabama send Form 2553 to the IRS Ogden service center — fax 855-214-7520. Full address and filing checklist for Alabama.
Frequently asked questions
Does Alabama require a separate S-corporation election?
No. Alabama does not require a separate state election. Alabama automatically recognizes the federal S election — there is no separate Alabama S-corp election form. The ADOR S-Corporation page states plainly: "Alabama recognizes the federal election to be treated as an S-Corporation through Form 20S." Once the IRS accepts Form 2553…
What tax does an S corporation pay in Alabama?
No entity-level income tax on pass-through income; the Alabama Business Privilege Tax (BPT) technically still applies but is fully exempt (and no return is required) when the computed tax is $100 or less — which covers most small S corps.
Where do I file Form 2553 from Alabama?
With the IRS Ogden service center. Fax 855-214-7520, or mail to Department of the Treasury, Internal Revenue Service, Ogden, UT 84201.
What is the most common S-corp mistake in Alabama?
Forgetting the 5% nonresident composite obligation. If any shareholder is a nonresident of Alabama, the S corp must either (a) file Form PTE-C and remit 5% of that shareholder's Alabama-source share by March 15, (b) obtain a signed Schedule NRA opting the shareholder out, or (c) make the Electing PTE election. Owners who move out of state mid-year, or who add an out-of-state co-owner, routinely miss this and get assessed the tax plus interest at the entity level. A close second: assuming the old $100 minimum Business Privilege Tax is still due and paying/filing an unnecessary Form PPT — the minimum was fully eliminated for tax years beginning after December 31, 2023.
Compare with other states: Alaska, Arizona, Arkansas, California, Colorado, Connecticut.
Sources
- https://www.revenue.alabama.gov/individual-corporate/s-corporation/
- https://www.revenue.alabama.gov/faq-categories/s-corporations-partnerships/
- https://www.revenue.alabama.gov/notice-important-changes-to-the-2024-business-privilege-tax-filing-requirements/
- https://www.revenue.alabama.gov/individual-corporate/electing-pass-through-entities/
- https://www.revenue.alabama.gov/notice-alabama-electing-pass-through-entity-tax-act-guidance/
- https://www.revenue.alabama.gov/individual-corporate/pass-thru-entities-subchapter-k-entities-partnerships-and-s-corporations/
File your Form 2553 correctly
Scorply completes your federal election and includes a Alabama guide in your packet, so you know exactly what else you owe here.
Start my Form 2553Researched from official Alabama sources and verified July 30, 2026. State tax rules change. This is general information, not tax advice — confirm with the state or a CPA before you rely on it.