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Important Notices!
 
Alabama Department of Revenue - Tax Incentives - Tax Abatements Act

Property Tax & Sales Tax Abatements are Authorized Under Several Statutory Provisions

  • Tax Incentive Reform Act of 1992 Abatements (Chapter 9B, Title 40, Code of Alabama 1975)
  • Alabama Reinvestment Act Abatements (Chapter 9G, Title 40, Code of Alabama 1975)
  • Brownfield Development Abatements (Chapter 9C, Title 40, Code of Alabama 1975)

TAX INCENTIVE REFORM ACT OF 1992 ABATEMENTS
(CHAPTER 9B, TITLE 40, CODE OF ALABAMA 1975)

SUMMARY

The Tax Incentive Reform Act of 1992 (Chapter 9B, Title 40, Code of Alabama 1975) gives cities, counties, and public industrial authorities the ability to abate the following new and expanding qualifying projects:

  • State sales and use taxes;
  • Non-educational county and city sales and use taxes;
  • Non-educational state, county, and city property taxes - up to 20 years (except data processing centers – see section below regarding data processing centers);
  • Mortgage and recording taxes to which property is conveyed into or out of a public authority, city or county government.

The appropriate city, county or public industrial authority has the ability to grant all the state sales tax and the city and county sales tax not earmarked for education, and the state, city and county noneducational property tax for up to 20 years. However, each taxing jurisdiction (city, county and state) shall abate their own non-educational property taxes for any period longer than 10 years (except data processing centers), not to exceed 20 years. For property tax abatements granted over 10 years:

  • Cities will abate city non-educational property taxes;
  • Counties will abated county non-educational property taxes; and
  • The Governor will abate state non-educational property taxes.
  • The governing body of a county and/or a city may separately authorize one or more public industrial authorities to provide by resolution for such consent on their behalf.

To receive an abatement for any or all of these taxes, a project must meet certain qualifications and follow certain procedures, as determined by law and regulation.

Data Processing Centers:

  • The maximum abatement period is 10 years from and after the date the private use property becomes owned for federal income tax purposes for projects that invest up to $200M within 10 years from the commencement of the project.
  • The maximum abatement period is 20 years from and after the date the private use property becomes owned for federal income tax purposes for projects that invest over $200M but less than $400M within 10 years from the commencement of the project.
  • The maximum abatement period is 30 years from and after the date the private use property becomes owned for federal income tax purposes for projects that invest over $200M within 10 years from the commencement of the project and exceed $400M within 20 years from the commencement of the project.

In addition, data processing centers are eligible for abatement of state and non-educational local sales and use taxes associated with constructing and equipping a project for an extended time period contingent upon the above.

STATUTORY REQUIREMENTS FOR ABATEMENTS
Business Activity Requirement:

  • Any trade or business in the 2012 North American Industrial Classification System (NAICS), promulgated by the Executive Office of the President of the United States, Office of Management and Budget as:
    • 1133 (logging),
    • 115111 (cotton ginning),
    • 2121 (coal mining),
    • 22111 (electric power generation),
    • 221330 (steam and air conditioning supply),
    • 31 (except National Industry 311811), 32, and 33 (manufacturing),
    • 423 and 424 (merchant wholesalers, goods),
    • 482 (rail transportation),
    • 4862 (pipeline transportation of natural gas),
    • 48691 (pipeline transportation of refined petroleum products),
    • 48699 (all other pipeline transportation),
    • 48819 (air transportation support activities),
    • 4882 (rail transport support activities),
    • 4883 (Port authority water transportation support activities (other than 48833)),
    • 493 (warehousing and storage),
    • 511 (publishing industries),
    • 5121 (motion picture and video industries (other than 51213)),
    • 51221 (record productions),
    • 517 (telecommunications),
    • 518 (data processing, hosting, and related services),
    • 51913 (internet publishing, broadcasting, web search portals),
    • 52232 (financial transactions processing, reserve and clearinghouse activities),
    • 54133 (engineering services),
    • 54134 (drafting services),
    • 54138 (testing laboratories),
    • 5415 (computer systems design and related services),
    • 541614 (process, physical distribution, logistics consulting services),
    • 5417 (scientific research and development services),
    • 55 (Management of companies (if not for the production of electricity)),
    • 561422 (in bound call centers only),
    • 562213 (solid waste combustors and incinerators),
    • 56291 (remediation services),
    • 56292 (materials recovery facilities),
    • 611512 (flight training facilities),
    • 927 (space research and technology) or
    • 92811 (national security)
  • Headquarters facilities as defined in NAICS 551114 (where at least 50 new jobs are created);
  • Data processing centers (where at least 20 new jobs are created);
  • Renewable energy facilities;
  • Research & development facilities;
  • Tourist destination attractions;
  • Projects owned by utilities that produce electricity from alternative energy resources;
  • Projects owned by utilities that produce electricity from hydropower production;
  • The 11 targeted business sectors under the accelerate Alabama Strategic Economic Development Plan adopted in January 2012 by the Alabama Economic Development Alliance, created by Executive Order Number 21 of the Governor on July 18, 2011:
    • Advanced Manufacturing in Aerospace/Defense, Automotive, Agricultural Products/Food Production, Steel/Metal or Forestry Products
    • Technology in Biosciences, Information Technology or Enabling Technologies
    • Distribution/Logistics Corporate Operations

CAPITAL INVESTMENT REQUIREMENT

New Project

There is no threshold or limiting investment amount for a new abatement project with the exception of projects owned by utilities producing electricity.

  • Projects owned by utilities which produce electricity from alternative energy resources must have capital costs of at least $100,000,000;
  • Projects which produce electricity from hydropower production must have capital costs of at least $5,000,000.

Major Addition

The additional capital investment by an industry that is expanding their current facilities in Alabama must be at least:

  • 30% of the original cost of the currently existing industrial property (sum total of the original facilities and equipment and any expansions and additions prior to the current addition), or
  • $2,000,000.

ALABAMA REINVESTMENT ACT ABATEMENTS
(CHAPTER 9G, TITLE 40, CODE OF ALABAMA 1975)

SUMMARY

Act 2015-24, known as the Alabama Reinvestment & Abatements Act (Chapter 9G, Title 40, Code of Alabama 1975) allows for certain reinvestment projects to qualify for sales, use and property tax abatements on capitalized replacement equipment and property purchased for capitalized repairs, rebuilds, renovations, and maintenance if the property is acquired as part of any addition, expansion, improvement, renovation, re-opening, or rehabilitation of a facility existing facility, or replacement of any existing equipment or tangible personal property that qualifies as a “qualifying project”.

CHAPTER 9G SALES TAX ABATEMENTS

Gives cities, counties, and public industrial authorities the ability to abate all the state and non-educational county and city sales and use taxes on capitalized purchases of the tangible personal property that is incorporated into a qualifying project. Chapter 9G sales and use tax abatements are subject to and shall follow the same procedures, provisions, limitations, and definitions under Chapter 9B except that the following can be abated:

  • Capitalized replacement equipment or tangible personal property
  • Capitalized repairs, rebuilds, renovations and maintenance.

CHAPTER 9G PROPERTY TAX ABATEMENTS

The Alabama Reinvestment & Abatements Act (Chapter 9G, Title 40, Code of Alabama 1975) gives cities, counties, and Governor the ability to abate all the non-educational state, county and city property taxes on real and personal property incorporated into a qualifying project for up to 20 years. Chapter 9G abatements are subject to and shall follow the same procedures, provisions, limitations, and definitions under Chapter 9B WITH THE EXCEPTIONS BELOW:

  • Capitalized replacement equipment and capitalized repairs, rebuilds, and maintenance on real and personal property can be abated
  • The amount of the property tax abatement shall be equal to the noneducational property taxes owed, minus the noneducational property taxes owed from the tax year immediately before the project was placed in service, specific to the property that is receiving an abatement, and
  • Regardless of the length of the abatement, the abatement may be granted as follows:
    • City non-educational property taxes may be abated only with the consent by resolution of the governing body of the city;
    • County non-educational property taxes may be abated only with the consent by resolution of the governing body of the county;
    • State non-educational property taxes may be abated only with the consent of the Governor.
    • The governing body of a county and a municipality may separately authorize one or more public industrial authorities to provide by resolution for such consent on their behalf.

STATUTORY REQUIREMENTS FOR CHAPTER 9G ABATEMENTS

Must be defined as a Qualifying Project

A Chapter 9G Qualifying Project is a project which:

  • No state project agreement has been or will be entered into with the Governor for the provision of other incentives.
  • Spends at least $2M in capital expenditures as part of any addition, expansion, improvement, renovation, re-opening, or rehabilitation of a facility, or replacement of any existing equipment or tangible personal property, and
  • Predominately involves an approved activity.

Business Activity Requirement

  • Any trade or business in the 2012 North American Industrial Classification System (NAICS), promulgated by the Executive Office of the President of the United States, Office of Management and Budget as:
    • 1133 (logging),
    • 115111 (cotton ginning),
    • 2121 (coal mining),
    • 22111 (electric power generation),
    • 221330 (steam and air conditioning supply),
    • 31 (except National Industry 311811), 32, and 33 (manufacturing),
    • 423 and 424 (merchant wholesalers, goods),
    • 482 (rail transportation),
    • 4862 (pipeline transportation of natural gas),
    • 48691 (pipeline transportation of refined petroleum products),
    • 48699 (all other pipeline transportation),
    • 48819 (air transportation support activities),
    • 4882 (rail transport support activities),
    • 4883 (Port authority water transportation support activities (other than 48833)),
    • 493 (warehousing and storage),
    • 511 (publishing industries),
    • 5121 (motion picture and video industries (other than 51213)),
    • 51221 (record productions),
    • 517 (telecommunications),
    • 518 (data processing, hosting, and related services),
    • 51913 (internet publishing, broadcasting, web search portals),
    • 52232 (financial transactions processing, reserve and clearinghouse activities),
    • 54133 (engineering services),
    • 54134 (drafting services),
    • 54138 (testing laboratories),
    • 5415 (computer systems design and related services),
    • 541614 (process, physical distribution, logistics consulting services),
    • 5417 (scientific research and development services),
    • 55 (Management of companies (if not for the production of electricity)),
    • 561422 (in bound call centers only),
    • 562213 (solid waste combustors and incinerators),
    • 56291 (remediation services),
    • 56292 (materials recovery facilities),
    • 611512 (flight training facilities),
    • 927 (space research and technology) or
    • 92811 (national security);
  • The production of biofuel as such term is defined in Section 2-2-90(c)(2);
  • Research & development facilities;
  • The national or regional headquarters for a company that conducts significant business operations outside the state and that will serve as the principal office of the company’s principal operating officer with chief responsibility for the daily business operations of the company; or
  • One of the 11 targeted business sectors under the accelerate Alabama Strategic Economic Development Plan adopted in January 2012 by the Alabama Economic Development Alliance, created by Executive Order Number 21 of the Governor on July 18, 2011:
    • Advanced Manufacturing in Aerospace/Defense, Automotive, Agricultural Products/Food Production, Steel/Metal or Forestry Products
    • Technology in Biosciences, Information Technology or Enabling Technologies
    • Distribution/Logistics Corporate Operations

BROWNFIELD DEVELOPMENT TAX ABATEMENTS

SUMMARY

The Brownfield Development Tax Abatement Act (Chapter 9C, Title 40, Code of Alabama 1975) gives cities and counties the ability to abate the following:

  • Non-educational city and county sales and use taxes;
  • Non-educational state, city and county property taxes – up to 20 years;
  • Mortgage and recording taxes.

To receive an abatement for any or all of these taxes, a business must meet certain qualifications and follow certain procedures, as determined by law and regulation.

STATUTORY REQUIREMENTS FOR BROWNFIELD ABATEMENTS

The property must be in the Alabama Department of Environmental Management's voluntary cleanup program to qualify for Brownfield abatements.

CAPITAL INVESTMENT REQUIREMENT

New Company

There is no threshold or limiting investment amount for new Brownfield abatement project. The total amount of the capital investment by a company that is locating in Alabama is eligible for the tax abatements.

Major Addition

The additional capital investment by a company that is expanding their current facilities on Brownfield development property must equal the lesser of: 30 percent of the original cost of the property as remediated or $2,000,000.

CONTACT US:

Questions regarding tax abatements should be directed to:

Ashley Moon
Revenue Examiner, CPM
Office of the Commissioner
Alabama Department of Revenue
P.O. Box 327001
Montgomery, AL 36132-7001
Telephone: 334-242-1184
email:  ashley.moon@revenue.alabama.gov

Kelly Graham
Director of Economic Development
Office of the Commissioner
Alabama Department of Revenue
P.O. Box 327001
Montgomery, AL 36132-7001
Telephone: 334-242-1188
email:  kelly.graham@revenue.alabama.gov