Alabama Form PTE-C: Filing, Deadlines, and Penalties

Alabama Form PTE-C, the Nonresident Composite Payment Return, is filed by S corporations, partnerships, and LLCs taxed as partnerships to report and pay Alabama income tax on behalf of their nonresident owners. If your pass-through entity had even one nonresident owner at any point during the tax year, you must file Form PTE-C and remit tax at 5% of each nonresident owner’s share of Alabama-source income.¹ The rate matches the highest marginal individual income tax rate under Alabama Code Section 40-18-5.²

Who Has to File

The obligation is triggered by a single nonresident owner. It applies to S corporations defined in Alabama Code Section 40-18-160 and to Subchapter K entities, which covers partnerships and LLCs taxed as partnerships.³ The nonresident member only needs to have held an interest at some point during the year for the entity to owe a composite return on that member’s share.

The return covers each nonresident member’s share of Alabama-source income and reports the 5% tax paid on their behalf. The entity, not the individual owner, is responsible for filing and paying.

Filing Deadline, Address, and Payment Voucher

Form PTE-C is due on the 15th day of the third month after the close of the tax year. For calendar-year filers, that is March 15.

File Form PTE-C separately from the entity’s regular income tax return. Partnerships file Form 65 and S corporations file Form 20S on their own tracks; the composite return does not ride along with either. Mail Form PTE-C and payment to the Alabama Department of Revenue at P.O. Box 327444, Montgomery, AL 36132-7444, and include Form PTE-V as the payment voucher.²

An extension of time to file does not extend the time to pay. If you extend the return but owe tax, you still need to remit the payment by the original deadline. The extension protects you from a late-filing problem, not a late-payment one.

Nonresident Owners You Can Exclude

Certain nonresident members do not have to be included in the composite payment, but each exemption is narrow and each requires paperwork. The exempt member must complete and sign Schedule NRC-EXEMPT before the original due date of the return, and the entity must attach a copy to both the composite return and its income tax return every year the exemption applies.²

The exempt categories are:

Real estate investment trusts that are not captive REITs and that have no Alabama-source income after the dividends-paid deduction.
Tax-exempt organizations whose share of Alabama-source income does not create unrelated business taxable income.
Insurance companies already paying Alabama’s premiums tax and exempt from income tax under Alabama Code Section 40-18-32(5).
Pre-approved tiers within a multi-entity structure where the indirect owner agrees to Alabama’s personal jurisdiction for income tax purposes. Written approval from the Department of Revenue must be obtained at least 30 days before the return’s original due date.
Nonresidents whose only Alabama income comes from a capital credit project and whose credit fully offsets any potential liability.
C corporations that have reported losses for the three most recent tax years and expect another loss in the current year.

A nonresident owner who does not fit one of these categories cannot be excluded. Filing NRC-EXEMPT for someone who does not qualify does not make them exempt; it just delays the eventual assessment.

Penalties for Filing or Paying Late

Alabama charges a penalty of 1% of the unpaid tax for each month or partial month a payment is late on annual returns, up to a maximum of 25%.⁴ If the balance is still unpaid 30 days after the Department of Revenue issues its first notice and demand, a second 1% monthly penalty starts accruing, also capped at 25%. The two penalties stack, so a long-overdue balance can reach 50% of the tax owed before interest is added.

Interest runs on top of the penalties. Because the payment is due by the original deadline whether or not an extension has been granted, an entity that extends its return but sends no money is exposed to the late-payment penalty from day one.

When Form PTE-C Does Not Apply

One situation removes the PTE-C obligation entirely. If your entity has made the separate Electing Pass-Through Entity election under Alabama Act 2021-1, you do not file Form PTE-C. The electing entity pays Alabama income tax at the entity level on all of its Alabama taxable income (not just the nonresident share), and the Department of Revenue has confirmed the composite return is not required in that case.⁵

If your entity has not made that election, or has revoked it, Form PTE-C remains the required vehicle for handling nonresident owners’ Alabama tax. One narrow crossover: an entity that made estimated payments anticipating a PTE election but then decides not to elect, or revokes, can request a refund of those payments by submitting Form PTE-C.⁶

Tiered Structures and Credits Passing Up

If your entity is an upper-tier partnership or S corporation that owns an interest in a lower-tier entity that made the PTE election, the tax the lower entity paid produces a credit that passes up. Report that credit on your Form PTE-C if your entity did not make its own election.⁷ This is the mechanism that keeps the same dollar of Alabama income from being taxed twice through a stacked ownership chain.

1
Alabama Legislature. Alabama Code 40-18-24.2 – Taxation of Pass-Through Entities
2
Alabama Department of Revenue. Form PTE-C 2024 – Nonresident Composite Payment Return
3
Alabama Administrative Code. Alabama Administrative Code 810-3-24.2 – Pass Through Entity Composite Returns and Qualified Investment Partnership Requirements
4
Legal Information Institute. Alabama Administrative Code r. 810-14-1-.30 – Penalty for Failure To Timely Pay
5
Alabama Department of Revenue. Electing Pass Through Entities
6
Alabama Administrative Code. Alabama Administrative Code Rule 810-3-36-.01 – Electing Pass-Through Entity Returns
7
Alabama Department of Revenue. Instructions for the Preparation of Alabama Department of Revenue Electing Pass-Through Entity Return