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advalorem

Property Tax Incentives

All real and personal property in Alabama is subject to property tax unless specifically exempted by law. The Alabama Constitution of 1901 and Alabama law contain various property tax provisions that may be considered as industrial incentives.

Alabama Property Tax Home Page

Assessed Value fixed by Alabama Constitution

Amendment 373 of the Constitution provides that all real and personal business property will be assessed at 20% of its fair market value. That is, for property with a fair market value of $1,000,000, the assessed value would be $200,000 ($1,000,000 * 20%).  The combined state and local millage rate would then be applied to the assessed value.

Low Millage Rates

Section 214 of the Constitution limits the state millage rate on both real and personal property to 6.5 mills (3 mills for education, 1 mill for relief, and 2.5 mills for general uses). This rate is equivalent to a tax of $6.50 for every $1000 of assessed value.

However, both cities and counties may levy millage rates in addition to the state's 6.5 mills. These local rates vary, but the average rate statewide is 42 mills, including the state's 6.5 mills. For real and personal business property with a fair market value of $1,000,000 the average property tax would be only $8,400 ($1,000,000 * 20% * .042). Click here for “Year 2002 Millage Rates” for all Alabama counties (.pdf format) or (Excel spreadsheet format).

Tax Abatements

The Tax Incentive Reform Act of 1992 (TIRA) allows qualified industries to receive abatements of non-educational property taxes for new businesses locating to Alabama, and for expansions of existing facilities in Alabama.  TIRA is in law at Chapter 9B, Title 40, Code of Alabama 1975.  Click here for more information on tax abatements.

Pollution Control Equipment Exemption

All equipment, facilities, or materials constructed or acquired primarily for the control, reduction, or elimination of air or water pollution are statutorily exempt from property taxation. The pollution control exemption is provided in Section 40-9-1(20), Code of Alabama 1975. Click here for more information on property tax exemptions.

Raw Materials, Finished Goods, and Inventory Exemptions

All raw materials, finished goods, and stocks of goods, wares, and merchandise held for resale are statutorily exempt from property taxes.  The raw materials exemption is provided in Section 40-9-1(13), Code of Alabama 1975. The finished goods exemption is provided in Section 40-1(14), Code of Alabama 1975. The inventory exemption is provided in Section 40-9-1(23), Code of Alabama 1975, and in Amendment 373 to the Alabama Constitution of 1901.   Click here for more information on property tax exemptions.

Class 6 Cities - Exemptions from City Property Taxes

Alabama cities are classified by population, according to the 1970 Census (see Section 11-40-12, Code of Alabama 1975).  Class 6 Cities (according to their population in 1970) currently are:

Alexander City Mountain Brook
Athens Opelika
Auburn Ozark
Cullman Prattville
Enterprise Sheffield
Fairfield Sylacauga
Homewood Talladega

Alabama law (Sections 11-51-220 through 11-51-241, Code of Alabama 1975) allows the governing body  of a Class 6 City to grant two kinds of exemptions from city property taxes, separately from, and in addition to, the "tax abatements" mentioned above.

First, the governing body of a Class 6 City may grant a partial or complete exemption from "city property taxes" (which does not include city educational property taxes) for "any parcel of land or personal property located within the city for a period of not more than 15 years" (see Section 11-51-221, Code of Alabama 1975).

Second, the governing body of a Class 6 City and the board of education of the municipality, "may grant, with respect to any parcel of commercial  property located within the municipality, for a period of not more than 15 years, a partial or complete exemption from the portion of the municipal and county ad valorem taxes allocated for municipal educational purposes which exceeds 20 mills" subject to the provision that the property taxes from the parcel of property, for municipal educational purposes, for the year preceding the first year of exemption, do not decrease under the exemption (see Section 11-51-241, Code of Alabama 1975).