Does Alabama recognize the federal S-corporation election?

Yes. Alabama follows the federal S election, and no separate state election form is required — filing federal Form 2553 with the IRS is enough. The corporation does still file Form 20S (Alabama S Corporation return).

Which Alabama return does an S corporation file?

Form 20S (Alabama S Corporation return).

S-corp election · AL

Alabama S-Corporation Election

By Edmond Hui · Facts verified July 29, 2026 against primary state sources

Edmond Hui · Founder, MyStateLLC

Edmond Hui is a software engineer and serial entrepreneur based in New York who has founded multiple online businesses across e-commerce, media, and information publishing. Before transitioning into tech, he spent years as a commercial real estate professional closing deals totaling over 100,000 square feet, giving him firsthand experience with business formation and entity structuring. He built MyStateLLC to provide the free, state-specific LLC guidance he wished existed when forming his own companies.

Alabama follows the federal S election. Filing IRS Form 2553 is enough — there is no separate Alabama election form. Alabama is one of 43 states that follow the federal election with no state form of their own.

State treatmentFollows the federal election

Separate state formNot required

State corporate income taxYes

Does Alabama recognize the federal S election?

State treatment of the S election

Follows the federal election	Yes
Separate state election form	None required
State return	Form 20S (Alabama S Corporation return)

No separate state election to file: the federal election on IRS Form 2553 carries over. That is the election only — the corporation still files Form 20S. Of the 50 states, 43 follow the federal election with no state form of their own, and 1 more — New York — recognizes S status but requires an election of its own as well.

What an S corporation still owes Alabama

Alabama imposes no mandatory entity-level income tax on an S corporation's ordinary pass-through income (income flows to shareholders and is taxed on their Alabama individual returns). However, an S corporation still owes the net-worth Business Privilege Tax (filed on Form PPT). Alabama also offers an OPTIONAL Electing Pass-Through Entity Tax at 5% of Alabama taxable income if the entity elects it (filed on Form EPT, due the 15th day of the 3rd month / March 15 for calendar-year filers).

Franchise or gross-receipts tax

Alabama levies a separate Business Privilege Tax (a net-worth privilege tax, Ala. Code § 40-14A) on corporations and LLEs. Rate is graduated from $0.25 to $1.75 per $1,000 of net worth apportioned to Alabama (rate tier set by federal taxable income). Historic minimum was $100; reduced to $50 for taxable years beginning after 12/31/2022 — the ADOR Business Privilege Tax page still states this $50 minimum and makes no mention of any elimination to $0. Maximum is $15,000 (higher caps apply to financial institutions/insurance companies — $3,000,000; electing Family Limited Liability Entities capped at $500). Corporations also pay the $10 Secretary of State annual report fee with the return (Form CPT for C corps, Form PPT for S corps/pass-through entities).

Alabama corporation vs Alabama LLC

State filing charges only. Corporate income tax and franchise tax are excluded because both depend on income or net worth, so no flat figure exists for either entity.

	Corporation	LLC
Formation filing fee	$200	$200
Report cadence	Every year	Not required
Report fee	$10	No report required
Entity-level tax on the LLC side	—	Alabama Business Privilege Tax

Both entities cost $200 to file in Alabama, so the filing fee is not a reason to pick one over the other.

Full Alabama LLC cost breakdown · LLC vs C-corp explained · LLC vs S-corp explained

How Alabama compares

State treatment of the federal S election	States
Follows the federal election, no state form needed	43
No corporate income tax, so no state election exists	4
Has a corporate income tax and does not follow the election — the corporation is taxed like a C corporation	2
Follow the election but still impose some entity-level tax on the S corporation — California, Illinois, New York, Massachusetts and Delaware among them	—
Require a separate state election form as well	1

Compare all 50 states · LLC vs S-corp · S-corp salary and savings calculator

Frequently Asked Questions

: Yes. Alabama follows the federal S election, and no separate state election form is required — filing federal Form 2553 with the IRS is enough. The corporation does still file Form 20S (Alabama S Corporation return).
: Alabama imposes no mandatory entity-level income tax on an S corporation's ordinary pass-through income (income flows to shareholders and is taxed on their Alabama individual returns). However, an S corporation still owes the net-worth Business Privilege Tax (filed on Form PPT). Alabama also offers an OPTIONAL Electing Pass-Through Entity Tax at 5% of Alabama taxable income if the entity elects it (filed on Form EPT, due the 15th day of the 3rd month / March 15 for calendar-year filers).
: Form 20S (Alabama S Corporation return).

Where these numbers come from

This page covers how Alabama treats the federal S-corporation election and what an S corporation still owes the state. Every figure was checked against Alabama's own published sources on July 29, 2026— the state business filing agency's fee schedule, the governing statute, and where a state tax applies, the state Department of Revenue. Commercial formation-service pages were used as leads only and are never cited. Anything the review could not confirm from an official source is left blank on this page rather than filled with an estimate.

Corporate income tax and franchise tax are quoted as the state publishes them, as rate schedules and thresholds, and are excluded from every dollar total here. They depend on income or net worth, so there is no flat figure that would be true for every corporation.

Primary sources: