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abate procedures

Abatement Procedures

To receive an abatement of sales and use taxes, property taxes, and/or mortgage and recording taxes, the law (Chapter 9B, Title 40, Code of Alabama 1975) requires that certain actions must be taken by the private user, the granting authority, the Department of Revenue and local taxing authorities.  See below.

Printable Abatement Forms in .pdf Format

Private User

  • The private user must determine the site for development. The site must be chosen before an abatement can be granted, because the source of abatement will depend on the location of the site. (i.e., within the jurisdiction of a certain county, city, or public industrial authority).
  • The private user must apply for an abatement of state and non-educational county and city sales and use taxes and non-educational property taxes on industrial development property to the appropriate governing body (i.e., county government, city government, or public industrial authority).
  • The private user should submit a completed "Application to Local Granting Authority for Abatement of Taxes " (Form CO:CAA) to the appropriate governing body. The application should include a complete and detailed listing of real and personal property for which an abatement is requested. Effective January 1, 2012, the private user must also submit documentation verifying that they are enrolled in the E-Verify program.
  • After the abatement is granted, the private user is required to send a copy of the executed abatement agreement, certified resolution by the public body, application to local granting authority (Form CO:CAA), the certificate of exemption application (Form ST:EX-A2), and the E-Verify documentation to the Department of Revenue within 90 days after the abatement is granted. If the abatement is granted by a municipality or a municipal industrial development board, a copy of the resolution must be either mailed by certified mail or by physical delivery to the county commission. Proof of delivery of affidavit or service, in the case of physical delivery, or by copy of certified mail receipt, in the case of mailing by certified mail is also required to be sent to the Department of Revenue. In addition, any contractor or subcontractor who will be purchasing property to be incorporated into the project should also file an application for a certificate of exemption, along with a letter from the private user verifying that they will be making purchases for the project. If the application is for a subcontractor, the letter verifying that they will be making purchases for the project can be from the private user or the prime contractor.
  • For property tax purposes, the private user must send a copy of the abatement agreement to the county assessing official in the county where the property is located. Any abatement that has been granted must be claimed by the private user with the county assessing official.

Governing Body

Subject to geographical or jurisdictional limitations, a local governing body may grant abatements of all non-educational property taxes, state and non-educational county and city sales and use taxes, and/or mortgage and recording taxes allowed to be abated with respect to the private use industrial property.

  • A county may grant abatements (for certain state, county, and city taxes) on property located within the county, but not within the city limits or police jurisdiction unless the county is given authority by the governing body of the municipality.
  • A city may grant abatements (for certain state, county, and city taxes) on property located within the city limits and police jurisdiction. If a city government abates county taxes, the city must notify the county by sending a copy of the abatement resolution to the county commission, by certified mail.
  • A public industrial authority may grant abatements (for certain state, county, and city taxes) on property located within the authority's jurisdiction. If a municipal public authority abates county taxes, the municipal public authority must notify the county by sending a copy of the abatement resolution to the county commission, by certified mail.

The governing body (county government, city government, or public industrial authority) must adopt a resolution granting the abatements for the applicable taxes. The abatements must be embodied in a written abatement agreement between the governing body and the private user. The abatement agreement should specify the following:

  • An estimated amount of tax abated for each type of tax;
  • The maximum exemption period for each abatement;
  • Good faith projections, by the private user, of the amount to be invested, the number of individuals to be employed, and the payroll (initially and in the succeeding three years); and
  • North American Industrial Classification System (NAICS) Code as provided to the private user by the Department of Labor.
  • If the project is for an addition to an existing industrial development property, the agreement should contain information to document that the addition is at least the lessor of 30% of the original cost of the industrial development property or $2,000,000.

An abatement applies to all real and personal property incorporated into the project. However, for sales and use tax purposes, only those purchases made after the abatement is granted will qualify for the tax abatement.

  • For sales and use tax, the abatement becomes effective on the date on which the abatement is granted and continues in effect until the entire project is placed in service (with the exception of data processing centers.)
  • For property tax, if bonds are issued the abatement shall start on the date the bonds are issued to finance the cost of the private use property; else, the abatement shall start on the date the project is placed in service or such date as specified in the abatement agreement.  An abatement for non-educational property taxes shall not exceed ten years from the date the abatement period begins (with the exception of data processing centers.)

Department of Revenue & Local Taxing Authorities

Once the executed abatement agreement, certified resolution, application to local granting authority for abatement of taxes, application for Sales & Use Tax Certificate of Exemption, documentation verifying that the private user is enrolled in E-Verify, and the proof of delivery to the county commission, if required, are received by the Department, the Department will issue a Certificate of Exemption to the private user and to any qualified contractor or subcontractor.

Once the Certificate of Exemption is issued, it will be used to make all purchases of tangible personal property to be incorporated into the project, without incurring sales and use tax. When local sales and use taxes are administered by the Department of Revenue, the certificate holder is required to remit separately the portion of local sales and use taxes which have been earmarked for educational purposes,  plus any local taxes due on purchases which do not qualify for the abatement, but were purchased tax-exempt using the exemption certificate. If the site is located in a locality which administers its own local sales and use taxes, then the certificate holder is responsible for coordinating the amount of local abatements and taxes due with the local taxing authority.     Once an abatement is granted, the Department of Revenue will supervise the valuation, equalization, and assessment of the abated property. Also, the Department will review, audit, and conduct inspections and investigations of property for which abatements are granted.