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Procedures for Chapter 9G Abatements

Procedures for Alabama Reinvestment and Abatement Act Chapter 9G Abatements

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

See Abatement Forms and Templates

Private User

The Private user is any individual, pass-through entity, or corporation organized for profit that is or will be treated as the owner of private use property for federal income tax purposes.

  • The private user must apply for the appropriate sales, use and property tax abatements by submitting a completed “Application to Granting Authority for Abatement of Taxes for Reinvestment Project” (Form CO:CAAG) to the appropriate governing body.
  • After the abatement is granted, the private user is responsible for submitting a completed abatement package to the Alabama Department of Revenue within 90 days after the abatement is granted.  The package must include the following:
    • a copy of  the executed abatement agreement(s),
    • a copy of the certified resolution(s) by each appropriate public body,
    • a copy of the application to local granting authority (Form CO:CAAG) and the list of property to be acquired under the abatement,
    • the certificate of exemption application (Form ST:EX-A2), and
    • documentation private user is enrolled in the E-Verify program.
  • Once the completed abatement package is received by the Department of Revenue, the Department will issue a certificate of exemption for making necessary purchases to be incorporated into the project.
  • Contractor(s) or subcontractor(s) who will be purchasing property to be incorporated into the project must file an application for a certificate of exemption (Form ST:EX-A2) with the Department of Revenue, 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. Once the application and letter are received, the Department of Revenue will issue a certificate of exemption to the qualified contractor or subcontractor.
  • About the Certificate of Exemption: Once the Certificate of Exemption is issued, the certificate of exemption will be used to make all purchases of tangible personal property to be incorporated into the project without payment of sales and use taxes to the vendor.  The certificate holder will not have to file and remit any state sales and use tax returns with respect to the project unless the certificate is used to make a tax-exempt purchase of property which does not qualify for the abatement.  For local taxes, the certificate holder is required to remit separately that portion of local sales and use taxes which have been earmarked for educational purposes and any local taxes due on purchases which do not qualify for the abatement but were purchased tax-exempt using the exemption certificate. The certificate of exemption is effective the date the abatement is granted and will expire on the date of the completion of the project.
  • For property tax purposes, the private user should contact the local county assessing official in the county where the property is located to claim the abatement for non-educational property taxes. Any real and/or personal property that has been granted an abatement should be claimed between October 1 and December 31 of the year the project is placed in service, with the local county assessing official.  Therefore, to ensure that a qualifying project receives the proper credit due, a copy of any and all executed abatement agreements in addition to the listing of all abated property (real and/or personal) should be provided to the local county assessing official.  Not providing this information to the local assessing official may delay the credit for the abated taxes.

 

Governing Body for Abatement of Taxes

The Governing Body is the statutory authority allowed to grant tax abatements with respect to private use industrial property to qualifying projects and is subject to geographical or jurisdictional limitations

Governing Body for Chapter 9G Sales Tax Abatements

  • A county may grant sales and use tax 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 sales and use tax 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.
    • If a city is the jurisdictional authority but does not abate the city’s corresponding sales and use taxes, the city must have consent from the governing body of the county by resolution to abate the county’s sales and use taxes.
  • A public industrial authority may grant sales and use tax 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.
    • If a municipal public authority is the jurisdictional authority but does not abate the city’s corresponding sales and use taxes, the municipal public authority must have consent from the governing body of the county by resolution to abate the county’s sales and use taxes.

Governing Body for Chapter 9G Property Tax Abatements

  • The county may grant property tax abatements for any and all tax years 1-20 with respect to property located in the county but only as to the county non-educational property taxes
  • A city may grant property tax abatements for any and all tax years 1-20 with respect to property located within the limits of the city but only as to the city non-educational property taxes
  • The Governor may grant property tax abatements for any and all tax years 1-20 with respect to property located in the state but only as to the state non-educational property taxes
  • The city and a county and a municipality may separately authorize one or more public industrial authorities to provide by resolution for such consent on their behalf

Governing Body’s Responsibilities

  • The governing body (county government, city government, and/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 (county government, city government, public industrial authority, and/or Governor) 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)
    • 2012 North American Industrial Classification System (NAICS) code as provided to the private user by the Department of Labor or specific qualifying business activity allowed by statute
    • If the project is for a reinvestment project (Chapter 9G) to an existing industrial development property, the agreement should contain information to document that the addition is at least $2,000,000.

Limitations of the Tax Abatements

An abatement applies to all real and personal property incorporated into the project. However, certain restrictions apply:

  • 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 20 years from the date the abatement period begins (with the exception of data processing centers.)
    • No additional property (real or personal) may be eligible for abatement once the project is placed in service unless an additional project is made
  • For sales and use tax, the abatement becomes effective on the date on which the abatement is granted by resolution and continues in effect until the entire project is placed in service (with the exception of data processing centers.)  Only those purchases made after the abatement is granted will qualify for the tax abatement.
  • 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. If any purchases made with the exemption certificate do not qualify, the state sales tax will be required to be remitted.
  • 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.
  • The Department will review, audit, and conduct inspections and investigations of property for which abatements are granted.

 

Contact Us:

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

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