Many types of incentives are offered to new and expanding industry at both the state and local level.

 

Tax Incentives

Sales, Use, and Property Tax Abatements

• A new or expanding industry may apply to the city, county, or industrial development authority ("granting body") for an abatement of all state sales and use taxes and all non- educational construction-related local sales and use taxes and an abatement of all non- educational ad valorem taxes related to the project.
• Ad valorem tax abatements are available for up to the weighted average economic life of the abated property, up to 10 years.
• Tax abatements are also available on expansions costing at least 30% of the original cost of the facility or over $2,000,000, whichever is less.
• A qualifying project includes any trade or business described in 1987 Standard Industrial Classification Major Groups 20 to 39, inclusive (generally, manufacturing), 50 and 51 (wholesale distribution), Industrial Group Numbers 0737 (various computer-related services) 0724 (barber colleges and shops), 4613 (refined petroleum pipelines), 8731 (research, development, and testing services), 8733 (noncommercial research organizations) and 8734 (testing laboratories).

Capital credits

• A new or expanding industry may qualify for credits against its Alabama income taxes for 20 years.
• Industries must invest $2,000,000 in the facility and create at least 20 new jobs. Small business additions (having less than 100 jobs in the state) need only invest $1,000,000 and create 15 new jobs.
• Employees must receive an average hourly wage of $8.00 (new hourly/salaried employees only and all employees thereafter hired) OR average total compensation of $10.00/hour (new hourly/salaried employees only and all employees thereafter hired).
• A qualifying project includes any trade or business described in 1987 Standard Industrial Classification Groups 20-39; 50; 51; 737; 8731; 8733; and 8734; agricultural and food products processors; process or treatment facilities which recycle, reclaim, or convert materials to a reusable product; and corporate headquarter facilities.

Federally tax-exempt bond financing

• Federally tax-exempt bond financing may be available for certain small manufacturing issues. Bonds may only be tax-exempt if the total land and depreciable capital costs of the project are $10,000,000 or less.
• Tax exempt financing can provide extremely low interest rates that may be either fixed or floating.

Solid waste and sewage disposable bonds

• Although federally tax-exempt industrial development bonds are generally limited to projects with $10,000,000 in capital or less, an exception applies for the portion of plants allocable to solid waste and sewage disposal.
• Very large bond issues are permitted to the extent an engineering study justifies treating a portion of plant costs as attributable to solid waste or sewage disposal.

Franchise tax incentives

• Alabama levies a foreign franchise tax on non-Alabama corporations of $3 per $1,000 of capital employed in Alabama.
• Certain industries may be exempted from this tax, based on capital investment and jobs created, as follows:
  

  Amount Invested	New Employees
  Not less than $1,000,000,000	Not less than 500
  Not less than $900,000,000	Not less than 600
  Not less than $800,000,000	Not less than 700
  Not less than $700,000,000	Not less than 800
  Not less than $600,000,000	Not less than 900
  Not less than $500,000,000	Not less than 1,000
  Not less than $400,000,000	Not less than 1,100
  Not less than $300,000,000	Not less than 1,200

• The investment must be made within 6 years after December 1, 1997.
• A declaration of intent to claim the deduction must be filed with the Department of Revenue within 30 months from September 22, 1999.
• The deduction expires 20 years after December 1, 1997.
• There are other planning techniques that may reduce or even eliminate this tax.
• The United States Supreme Court has declared Alabama's foreign franchise tax unconstitutional, but it is expected that any replacement tax will have similar exemptions.

Pollution control facilities

• Air and water pollution control facilities are automatically exempt from sales, use, and property taxes, if the taxpayer claims the exemption.

Non-Tax Incentives

Alabama Industrial Development Training

• Perhaps the most popular incentive in the State is the Alabama Industrial Development Training ("AIDT") program. This program provides recruitment, assessment, and training of potential employees, development and production of training materials, and training facilities.
• AIDT will allow the company to supply training instructors, but will also make instructors available from the State's university and junior college system, as well as other industries.
• Often, an on-site training facility will be established.
• This program is extremely flexible and is custom-designed for each industry.

Site Preparation Grants

• The State Industrial Development Authority (the "SIDA") administers a pool of funds available for the development of sites. These funds are made as a grant to an industrial development authority or similar governmental entity. Funds are limited with a maximum of $375,000 per project, and no more than the actual cost of site preparation.
• A qualifying project includes any trade or business described in 1987 Standard Industrial Classification Major Groups 20 to 39, inclusive, 50 and 51, Industrial Group Number 737, and Industry Numbers 0724, 8731, 8733 and 8734.

  Grant Scale:

  Capital Costs	% of Project Cost or Limit
  Less than $100,000	6%
  $100,000 - $199,999	5% (minimum $6,000)
  $200,000 - $399,999	4% (minimum $10,000)
  $400,000 - $799,999	3% (minimum $16,000)
  $800,000 - $1,599,999	2% (minimum $24,000)
  $1,600,000 - $9,999,999	1% (minimum $32,000)
  $10,000,000 - $20,000,000	.75% (minimum $100,000)
  $20,000,000 or greater	maximum $150,000
  Effective: June 1999

Various other grant programs

• There are other state and federal grants and subsidized loan programs available.
• Most of these grants and programs have deadlines that require application before commencement of construction and/or before taking title to the project.

Alabama State Employment Service ("ASES")

• ASES Works with AIDT to provide job screening and testing, at no charge.

Wallace Plan for Linked Deposits

• The financial institution making the loan will receive state deposits sufficient to allow the institution to make a loan at up to 3% below the interest rate that the borrower would otherwise pay.
• These loans are in the amount of $15,000 per job to be created or sustained. For loans of over $250,000, one job must be created for each $10,000 of the loan.
• The biggest limitation is that the reduced rate will only apply for the first two years of the loan.

Miscellaneous Grant Programs

• ADECA Infrastructure Grants
• EDA Infrastructure Grants
• ARC Grants
• Community Development Block Grants
• Rural Economic and Community Development Loan and Grants