Taxes & Incentives

Taxes & Incentives

Alabama offers a competitive tax environment for new and established companies.  Combined with property and sales tax incentives, qualifying businesses experience tax relief during the start-up of a new or expanding project.  In addition, Tuscaloosa County is a business-friendly community imposing minimum local taxes on its corporate citizens.

Tax

Rate

Notes

Ad Valorem Tax (Real and Personal Property)-State and Local
Property assessed at 20.0%

City of Tuscaloosa:  51.5 mills

 

 

Tuscaloosa County:  27.0 mills

 

Brookwood/Moundville:  32.0 mills
Tax abatement available to qualifying companies for up to 10 years
City of Tuscaloosa:

  • 27.5 mills eligible for abatement
  • 24.0 mills non-abatable education tax
Tuscaloosa County:

  • 14.0 mills eligible for abatement
  • 13.0 mills non-abatable education tax

Brookwood/Moundville:

  • 19.0 mills eligible for abatement
  • 13.0 mills non-abatable education tax

Business Privilege Tax-State

Minimum Tax:  $100.00

Maximum Tax:  $15,000.00

Sliding scale per $1,000.00 net worth (taxable income)

Corporate Income Tax-State

6.5% (Deduction allowed for federal income tax paid or accrued making Alabama’s effective rate approximately 4.8%)

Corporate Income Tax-Local

None

Personal Income Tax-State

Married filing jointly:

2% – First $1,000 taxable income

4% – Next $5,000 taxable income

5% – all taxable income over $6,000

Other individuals assessed at the same percentages but at one-half of the taxable income amount for each item.

Personal Income Tax-Local

None

Inventory Tax

None

Inventory and goods-in-process are not taxed.

Motor Vehicle Sales Tax-State and Local

3.5%

Abatement effective during construction phase only

3.16% eligible for abatement to qualifying companies

0.34% non-abatable education tax

Occupation Tax

None

Sales Tax-State and Local

9.0%

Abatement effective during construction phase only

7.65% eligible for abatement to qualifying companies

1.35% non-abatable education tax

School District Income Tax-Local

None

Unemployment Compensation Tax

New Employers:  2.7%

Established Employers:  0.20% to 5.40% of first $8,000.00 of wage paid to each employee in calendar year.

Use Tax (Manufacturing)-State and Local

3.375%

Abatement effective during construction phase only

2.865% eligible for abatement to qualifying companies

0.51% non-abatable education tax

All taxes assessed on an annual basis unless otherwise noted.

Incentives

New and expanding industries have access to a variety of incentives to support business growth and profitability in Tuscaloosa County, Alabama. Both tax and non-tax incentives are available and include tax abatements and credits, financing resources, and workforce training services. The Tuscaloosa County Industrial Development Authority (TCIDA) works with companies to maximize project savings through local, state and federal incentives.

Tax Incentives

Sales, Use, and Property Tax Abatements

  • A new or expanding industry may apply to TCIDA for an abatement of the following:
    – noneducational state, county and city property taxes;
    – state sales and use taxes;
    – noneducational county and city sales and use taxes;
    – mortgage and recording taxes.
  • Property tax abatement available for up to 10 years.
  • Sales and use tax abatements available during construction phase of project.
  • Qualifying projects include any trade or business designated within the 2007 North American Industry Classification System (NAICS) as:
    – Sectors 31-33 (except National Industry 311811);
    – Subsector 423, 424, 511 (except internet), 927;
    – Industry Group 5417, 5415, 5182;
    – Industry 11331, 48691;
    – National Industry 115111, 517110, 541380, 561422 (in bound call centers only);
    – Any process or treatment facility which recycles, reclaims, or converts materials to a reusable product;
    – Headquarters facilities as defined in NAICS 551114;
    – Data processing centers (where at least 50 new jobs are created).

Tax Exempt Industrial Revenue Bonds

  • Tax-exempt industrial revenue bonds (IRBs) are debt securities that may be issued by the TCIDA for new and expanding manufacturing projects.
  • IRBs provide financing for expanding facilities and purchasing new machinery and equipment. Tax-exempt IRB funds may not be used to refinance existing debt or for venture and working capital.
  • Tax-exempt IRBs are sold in the open market or purchased by investors or financial institutions. Interest income earned by the bond purchaser is exempt from state and local taxes. The lender passes those savings on to the borrower in the form of lower interest rates.
  • Tax-exempt bonds of up to $10 million can be issued to finance up to 100% of an eligible project.
  • Bonds are intended to fund projects over a million dollars, but smaller, mini-bonds may be issued.

Taxable Industrial Revenue Bonds

  • Taxable industrial revenue bond issues may be issued by the TCIDA for transactions that do not qualify for tax-exempt bond financing.
  • Taxable IRBs continue as one of the mainstays of industrial finance because they may be issued with fewer restrictions and in unlimited amounts while the user maintains tax savings.

Air and Water Pollution Control Exemption

  • Property acquired for the primary purpose of controlling, reducing, or eliminating air or water pollution, qualifies for the exemption even though a secondary or incidental purpose may be its use in the production of goods or services.
  • Sales and Use taxes are exempt on eligible property, if taxpayer claims the exemption.

Solid Waste and Sewage Disposal Bonds

  • Bond can be issued by the TCIDA for qualifying projects.
  • Issues can be structured to the extent an engineering study justifies treating a portion of plant costs as attributable to solid waste or sewage disposal.

Non-Tax Incentives

Alabama Industrial Development Training (AIDT)

  • Services provided at no cost to employers or trainees.
  • Workforce delivery system includes:
    – recruitment, assessment and training of potential employees;
    – leadership development;
    – development and production of job-related training materials;
    – provision of training facilities;
    – delivery of job-specific services;
    – safety assistance;
    – maintenance assessments;
    – continuous improvement/process improvement assessments;
    – on-the job training.
  • Also provides certified manager training and supervisory and team leadership training.
  • Program enhances career technical program offerings at the state’s community and technical colleges, and guides employers to existing resources.
  • Training delivered through classrooms or 38 Mobile Training Units (MTUs) customized to meet specific company needs.

Site Preparation Grants/Industrial Development Grants

  • State Industrial Development Authority (SIDA) issues grants for the preparation of project sites.
  • Qualifying projects include any trade or business designated in SIC Code classifications Major Groups 20-39, Major Groups 50 and 51, Industrial group 737, and Industry Numbers 0724, 8731, 8733 and 8734.
  • Grants of up to $150,000 available based on project capital costs.

Alabama State Employment Service (ASES)

  • Alabama JobLink program available at no cost to employers.
  • Services include access to database of thousands of resumes, online posting of job openings, and email updates of new, matching job seeker resumes.
  • ASES works with AIDT to enhance Alabama’s workforce development support system.

Alabama Plan for Linked Deposits

  • State Treasurer makes deposits in state banks on which banks pay 2% below the normal interest rate paid to the state for its funds. The reduction in the interest rate paid by the bank must be passed on to the borrowers on loans qualifying for this program.
  • Eligibility for corporations and partnerships includes headquartered in Alabama; no more than 150 employees; and creating/sustaining job opportunities.

Small Buisiness Administration (SBA)/Small Business
Development Center (SBDC)

  • SBA guarantees loans to small businesses which are unable to obtain financing in the private credit marketplace, but can demonstrate an ability to repay loans granted.
  • SBA assists small business concerns by providing long- term, fixed-rate financing for fixed assets through the sale of debentures to private investors.
  • A Small Business Development Center (SBDC) is located on the University of Alabama campus in Tuscaloosa.
  • SBDC provides a complete range of services including market research, assessment of business operations, identify government procurement opportunities, outline lending options, and business plan development to an eight-county area of West Alabama.
  • The Center assists clients interested in starting a business or already in business.

Alabama Industrial Access Road and Bridge Program

  • The Alabama Industrial Access Road & Bridge Corporation provides funding for industrial access road and bridge construction in Alabama. TCIDA can sponsor an entity for an Industrial Access Project.
  • Eligible industrial access projects may be new road construction or road improvement to assist new or expanding industry (example: turn-lane, deceleration lane, pave unimproved road, widening, resurfacing, bridge replacement, etc.).
  • Proposed road projects must be a public right-of-way and, if funded, shall constitute part of the public highway and street system of the state.

Alabama Infrastructure Grants

  • Grants facilitate the expansion or development of new industry by funding public infrastructure projects, including water and sewer lines, and access roads.
  • Qualifying projects include any trade or business designated in SIC Code Major Groups 20-39, or consisting of major warehouse or distribution centers.
  • At least 15 jobs must be created.
  • $35,000-$200,000 grant available per project.
  • Source of funds includes Alabama Department of Economic and Community Affairs (ADECA), Community Development Block Grants (CDBG), and State and Federal Governments.
  • Administered through the State Economic Development Grant program.

Rural Economic Development Loan and Grants (REDLG)

  • Provides funding to rural projects through local utility organizations that are current Rural Development Electric or Telecommunication Programs Borrowers.
  • USDA provides zero interest loans and grant funds to local utilities to fund qualifying projects that will create or retain rural jobs.
  • Qualifying projects include business incubators and facilities and equipment for education and training for rural residents to facilitate economic development.

Other criteria/requirements may apply to each of the incentives listed. The information presented is general in nature and may not apply to your specific situation. Legal advice should be sought before taking action based on the information provided.