JOBS AND INVESTMENT CREDITS FOR QUALIFYING NEW OR EXPANDING
INDUSTRIAL PROJECTS WITH AT LEAST 50 ALABAMA JOBS
- Annual cash payments of up to 3% of last year’s payroll for new employees
- Available for up to 10 years
- Amounts are paid as refunds of taxes for utility services; Not dependent on utility taxes actually owed or paid
- Annual credits for up to 1.5% of capital invested
- Available for up to 10 years, with up to 5 years of carry forward
- The first 3 years may be transferred
- Credits may offset income, utility gross receipts, insurance and bank taxes, including taxes owed by existing operations
These credits can apply to projects involving the following sectors regardless the number of jobs.
Engineering & Design
Metal and Machining Technology or Toolmaking
ABATEMENTS – Available to qualifying new and expanding industrial projects
(Sales and property tax abatements are generally available to any new project even without creating 50 jobs. A new project may qualify for tax abatements, but not the jobs or investment credits. Expansion projects for existing companies may be eligible for abatements without creating any new jobs assuming their capital costs meet the lesser of either 30% of the original cost of the existing industrial property, or $2 million.)
City, County and State non-educational sales tax abatements are available on construction materials and manufacturing machinery related to a qualifying project.
City, County and State non-educational real and personal property tax abatements are available for up to 20 years.
IMPORTANT THINGS TO KNOW
- The Jobs and Investment Credits are granted upon the execution of a project agreement with the State, following the Department of Commerce’s analysis of the project’s financial payback to the State. By law, credits can only be granted to a project where the State’s net return is positive.
- Jobs and Investment Credits may be granted for less than the percentages shown, and for shorter time periods.
If no new jobs are created, the project’s financial payback likely will not justify granting incentives at the full levels.
- Investments can be made over a number of years.
- A local granting authority (i.e. IDB, City Council, etc.) has the ability to abate non-educational property taxes at the City, County and State level for years one through 10.
- Non-educational property tax abatements for years 11 through 20 require each entity (i.e. City, County, State) to abate its respective portion.
- Enhanced incentives with lower qualifying thresholds are available in counties with populations less than 25,000 (targeted counties), or for the employment of a workforce at least 12% of which is veterans.
ALABAMA REINVESTMENT INCENTIVES FOR EXISTING COMPANIES
Available to qualifying industrial expansions investing at least $2 million
For the first time, Alabama’s incentives cover capitalized replacement and maintenance property, as follows:
- City, County and State non-educational sales and use tax abatements are available on construction materials and manufacturing machinery.
- Non-educational property taxes may be abated for up to 20 years (limited to the incremental increase in such taxes if the property does not perform a new function).
UTILITY TAX CREDITS
- Cash refunds for incremental increase in utility gross receipts tax due to increased energy use.
- Available for up to 10 years.
IMPORTANT THINGS TO KNOW
- Regardless of the length of the abatement, City, County and State non-educational property tax abatements may only be granted by the consent of each governing authority.
INCENTIVES FOR ALL INDUSTRIAL PROJECTS
The State of Alabama, cities and counties have various programs to provide infrastructure improvement and other discretionary incentives, as warranted.
The State may also provide comprehensive workforce recruitment and training through AIDT. Services include Post-Employment/On-the-Job Training; Maintenance Assessments; Safety Assistance and Training; Leadership Development; Process Improvement; and Robotics Technology Park.
Summary of Other Alabama Taxes and Tax Incentives
- Corporations’ income tax is based on net taxable income derived only from business conducted within the state and determined by applying a four-factor formula of property, payroll, and double-weighted sales to total net income
- The corporate income tax rate is capped at 6.5 percent (individuals are taxed at a rate of 5 percent)
- Alabama allows a full deduction for all federal income taxes apportioned to Alabama, creating a significantly reduced net effective rate of 4.5 percent
- The constitutional limit for state millage rate on both real and personal property is capped at 6.5 mills, of which 3 mills are dedicated solely to education
- Business property, both real and personal, is taxed at 20 percent of the assessed fair market value
- Inventories and goods-in-process are not taxed
- Pollution control equipment is statutorily exempt from property taxation
- Any tangible personal property being warehouse in Alabama for shipment to a location outside the state is exempt
Sales and Use Taxes
- Four state rate differentials, which include:
- A 1.5 percent rate for manufacturing and farm machinery
- A 2 percent rate for automotive vehicles
- A 3 percent rate for food sold through vending machines
- A 4 percent general rate for all other items
- Raw materials used by manufacturers or compounders are exempt from sales and use taxation
- Pollution control equipment is statutorily exempt from taxation
- A credit is available for sales and use tax paid to another state and its subdivisions
- Exemption for quality control testing
- Utility gross receipts tax exemptions for:
- Sewer costs
- Water used in industrial manufacturing in which 50 percent or more is used in industrial processing
- Exclusions for utility services used in certain types of manufacturing and compounding processes
- Natural gas that becomes a component of tangible personal property manufactured or compounded, but is not used as fuel or energy
- Natural gas used to chemically convert raw materials prior to its use in an electrolytic or electro-thermal manufacturing or compounding process
Business Privilege Tax
- The state Business Privilege Tax is capped at $15,000 annually, except for financial institutions and insurance companies, and applies to all corporations and limited liability entities that do business in Alabama or are organized under the laws of Alabama
- The tax base is the net worth of the taxpayer apportioned to Alabama, with the rate ranging from $0.25 to $1.75 for each $1,000 of net worth in Alabama- the rate varies depending on business activity
Brownfield Development Tax Abatements
- Cities and counties have the ability to abate non-educational city and county sales and use taxes, and non-educational city, county, and state real and personal property taxes (up to 20 years) for any new business activity located on a Brownfield property in the Alabama Department of Management’s Voluntary Cleanup program
- An existing company expanding their facilities on Brownfield redevelopment property may qualify for the abatements assuming the new capital investment meets the lesser of 30% of the original cost of the property as remediated, or $2,000,000
Enterprise Zone Credit/Exemption
- Under certain conditions, an enterprise zone credit or exemption for income tax, sales and use tax, and/or business privilege tax is available for qualified participants
Full Employment Act of 2011
- Businesses with 50 or fewer employees may receive a one-time income tax credit equal to $1,000 per new job paying over $10 per hour
Heroes for Hire Credit
- A one-time $1,000 income tax credit for each recently deployed, and now discharged, unemployed veteran hired and a $2,000 income tax credit to recently deployed, and now discharged, unemployed veterans who start their own businesses (employers must also meet the requirement of the Full Employment Act of 2011)
Grants and Other Non-Tax Incentives
Industrial Development Grant Program (Site Preparation)
- The Industrial Development Grant Program provides grants to counties, municipalities, local industrial development boards or authorities organized as a public corporation in the state for site preparation for land owned or possessed by the entities
- A grant applied toward the reasonable rehabilitation of an existing building or structure may be allowed, but is determined by the Grantee as being necessary to solicit or attract a qualifying project
- The size of the grant depends on the amount of capital investment:
|Capital Cost||Percentage of Capital Cost|
|Less than $200,000||5.0%|
|$200,000 to $499,999||3.5% (minimum $10,000)|
|$500,000 to $999,999||2.5% (minimum $20,000)|
|$1,000,000 to $1,999,999||1.5% (minimum $28,000)|
|$2,000,000 to $9,999,999||1.0% (minimum $32,000)|
|$10,000,000 and greater||0.75% (minimum $100,000; maximum $150,000)|
Industrial Access Road and Bridge
- Industrial access funds are intended to provide adequate public access to new or expanding distribution, manufacturing, and industrial firms. The industry must be committed to new investment and the creation of new jobs. The new access must be on public right of way for public use (city, county, or state) and maintained by the project sponsor (city or county) unless located on state highways. Industrial access funds are limited to construction, construction engineering, and inspection costs.
One-Stop Environmental Permitting
- The Alabama Department of Environmental Management (ADEM) has the authority to issue permits required by all major federal laws
Senior Vice President
of Economic Development
205-241-8136 | email
205-241-8133 | email
205-241-8130 | email