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  • Taxes & Incentives

  • Alabama Jobs Credit Alabama Jobs Credit

  • Qualifying projects may be eligible for an annual cash rebate of up to 3% of the previous year’s gross payroll (not including fringe benefits) for new, direct jobs. The incentive period is 10 years.

    • For companies employing at least 12% veterans in their eligible workforce, up to an additional 0.5% job credit is available for the wages of veterans.
    • Amounts are paid as refunds of taxes for utility services.
    • There is no job minimum for chemical manufacturing, data centers, metal/machining, engineering, design, and research projects. All other projects must create 50 jobs.
    • This is a discretionary incentive. The availability of this incentive is based on the results of an economic impact analysis performed for each project.
  • Alabama Investment Credit Alabama Investment Credit

  • Qualifying projects may be eligible for a credit up to 1.5% of the qualified capital investment expenses each year for up to 10 years.

    • This credit can be taken against the Alabama income tax liability and/or utility tax liability.
    • This credit can be carried forward for 5 years.
    • This credit may be transferable for the first 3 years to generate cash for the project. Investment credit transfers must be at least 85% of face value and be approved by the Alabama Department of Commerce.
    • There is no job minimum for chemical manufacturing, data centers, metal/machining, engineering, design, and research projects. All other projects must create 50 jobs.
    • This is a discretionary incentive. The availability of this incentive is based on the results of an economic impact analysis performed for each project.
  • Full Employment Act of 2011 Full Employment Act of 2011

  • Tax years beginning January 1, 2012, employers who had no more than 50 employees as of January 1, 2011, are eligible for a $1,000 nonrefundable income tax or financial institution excise tax credit for each qualifying job created. The job created must be a net increase in employment and the employee hired must be paid more than $10 per hour and the credit is available in the tax year during which the employee has completed 12 months of consecutive employment. 

  • Heroes For Hire Income Tax Credit Heroes For Hire Income Tax Credit

  • Employers are eligible for a $1,000 nonrefundable income tax or financial institution excise (state-portion) tax credit for each job created if the employee is a recently deployed unemployed veteran. The act also allows a one-time nonrefundable credit up to $2,000 for expenses associated with the start-up business for a recently deployed unemployed veteran who holds at least 50% ownership interest in a start-up.

  • Alabama New Market Tax Credit Alabama New Market Tax Credit

  • A tax credit against state income, financial institution excise, and insurance premium tax is available to investors in community development entities which provide funding to businesses that located in qualified low-income or impoverished communities, especially central business districts, in Alabama. This credit parallels the provisions of the federal New Markets Tax Credit (I.R.C. § 45D) in many ways. The total amount of tax credits the Department of Commerce can grant to all applicants for any given tax year is capped at $20 million and the maximum qualifying credit for a particular project is $10 million.

  • Foreign Trade Zone Foreign Trade Zone

  • Foreign Trade Zones (FTZ) are specially designated areas, in or adjacent to a U.S. Port of Entry, which are considered to be outside the Customs Territory of the United States. The Montgomery Area Chamber of Commerce operates general purpose zone #222 in the City of Montgomery. The zone covers a total of 5525 acres across four locations within the city.

    Any number of firms may operate within the zone.  Foreign and domestic goods may be admitted to a zone for the operations not otherwise prohibited by law. Merchandise may be stored, exhibited, assembled, processed, destroyed within the zone, or sent into U.S. Customs Territory subject to the customs duties and excise taxes only at the time they leave the zone.

    Benefits of the FTZ:

    • Duty exemption on re-exports
    • Relief from inverted tariffs
    • Duty elimination on waste and scrap
    • No duty on rejected or defective parts
    • Duty deferral
    • No duty on domestic content or value added
    • Relief from local ad valorem taxes
    • No duty on sales to the U.S. military or NASA
  • Industrial Revenue Bonds Industrial Revenue Bonds

  • Industrial Revenue Bonds may be used as long-term financing of up to 100% of a project for:

    • Acquisition of land, buildings, site preparation and improvements
    • Construction of buildings
    • Acquisition and installation of furnishings, fixtures and equipment
    • Capitalizable soft costs (e.g., architectural and engineering, interest incurred during construction, costs associated with bond issuance, etc.)


    Typically, tax-exempt IRBs have interest rates ranging from 70-85% of prime and are limited to $10 million per single issuance and $40 million total maximum per company. Taxable IRBs have an interest rate equal to conventional loans and have no limit. Terms for both are normally 10-20 years and can finance up to 100% of the project costs.  The principal and interest on the bonds are paid solely from the funds derived from leasing and selling the facilities to the user company. Under most circumstances, upon complete payment of the bond issue, the lessee or user company acquires ownership of the industrial facility for a nominal sum.

  • Alabama Industrial Access Road and Bridge Program Alabama Industrial Access Road and Bridge Program

  • The Industrial Access Road and Bridge Program provides financial assistance for the construction of access roads and bridges to benefit new and/or expanding industries. The program allows for the construction of roads, bridges, etc. on public right-of-ways in conjunction with industrial projects. Any work to be funded with Industrial Access funds must be approved by the Alabama Department of Transportation prior to work being performed.

  • Industrial Development Grant Program (Site Prep) Industrial Development Grant Program (Site Prep)

  • The State Industrial Development Authority (SIDA) sells bonds to make grants to counties, municipalities, local industrial development boards or authorities, economic development councils or authorities, airport authorities, port authorities, or public corporations or certain state entities to pay for preparation of project sites owned or leased by these entities. Grant funds may be utilized for:

    • Preparation of a means to access the site
    • Provide adequate drainage of the site
    • Surveying, clearing and excavating
    • Reasonable rehabilitation of buildings and other structures
    • Other site preparation deemed necessary and appropriate

     

    The size of the grant is dependent upon the amount of capital investment:

    Capital Costs Grant Amount
    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
    Requirements for the Industrial Development Grant
  • Workforce Investment Act Workforce Investment Act

  • When private business needs more good workers, area Workforce Investment Act programs can assist.

    WIA, a federal program, provides the framework for a unique workforce preparation and employment system designed to meet the needs of businesses and job seekers, and those wanting to further their careers. WIA training programs in the Montgomery area are available through the Montgomery Area CareerLink office – a division of the Alabama Department of Economic and Community affairs. The Montgomery CareerLink office provides employers with a number of resources including an On-the-Job training and Incumbent Worker training programs, soft skills training, private interview space and more.  Services provided by the Montgomery CareerLink office are free for both job seekers and employers.

     

  • Sales and Use Tax Sales and Use Tax

    Area General Rate Manufacturing Machinery Rate
    City of Montgomery 3.5% 1.750%
    Montgomery County 2.5%* 0.333%**
    State of Alabama 4.0% 1.500%
    Total 10.0% 3.583%

    *1.0% designated for education     **0.133% designated for education 

    Note: 1/2 of City rate is levied for purchases made outside city limits/inside police jurisdiction.

    Qualifying projects are eligible for an abatement of non-educational construction-related sales and use taxes associated with constructing and equipping a project. The abatement must be granted prior to placing project in service.

    Statutory, Job Creation and Capital Investment Requirements

    Property Tax Property Tax

    Rate per $100 of assessed value
    City of Montgomery $1.25
    Montgomery County $1.75*
    State of Alabama $0.65**
    Total $3.65

    *$1.00 designated for education     **$0.30 designated for education 

    Qualifying projects are eligible for an abatement of up to 10 years from property taxes levied for non-educational purposes. A project can request an abatement extension for years 11 – 20. The availability of all abatements is determined by the results of an economic impact analysis.

    Alabama does not levy a property tax on inventory of goods, wares, and merchandise that is offered for sale. Inventory that is used for lease or rental purposes is subject to property tax.

    All equipment, facilities or materials constructed or acquired primarily for the control, reduction or elimination of air or water pollution are exempt from property tax.

    Business Privilege Tax Business Privilege Tax

    The business privilege tax is an annual tax paid by corporations and limited liability entities (including disregarded entities) for the privilege of conducting business in Alabama. The tax base is the taxpayer’s net worth apportioned to Alabama. For business entities new to Alabama, the tax accrues as of the date of organization, qualification, or beginning to do business, and is due 30 days thereafter. The tax for existing entities accrues as of January 1 of every taxable year, and is due March 15.

    Business Privilege Tax Rate

    The tax rate for business privilege tax is graduated, based on the entity’s federal taxable income apportioned to Alabama. The rates range from $.25 to $1.75 for each $1,000 of net worth in Alabama. The minimum tax is $100.

    Business Privilege Tax Cap

    The maximum business privilege tax for most business entities is $15,000. The exceptions are for financial institutions, financial institution groups, and insurance companies that have a maximum business privilege tax of $3,000,000.

    Corporate Income Tax Corporate Income Tax

    Corporations pay Alabama income tax based on their net taxable income derived from business conducted within the state. The amount of net income apportioned to Alabama is determined by applying a four factor formula of property, payroll, and double weighted sales to total net income. The rate of corporate income taxation is 6.5% (Individuals are taxed at a rate of 5%). Corporations that anticipate having a tax liability of $500 or more must file and pay estimated tax on a quarterly basis.