Taxes & Incentives

Qualifying projects that create new, direct jobs in Marion County can receive a cash refund of up to 3% of the previous year’s gross payroll (not including fringe benefits) for up to 10 years. 

Qualifying projects can receive up to an additional 1% cash refund for projects in Lamar and Fayette counties, which are classified as targeted counties. Two sites per year located outside of these counties can receive the additional 1% refund at the Governor’s discretion.

Up to an additional 0.5% cash refund is available on the wages of veterans for companies that employ a workforce composed of at least 12% of veterans.

Qualifying projects can receive a credit of up to 1.5% of the qualified capital investment costs each year for up to 10 years (up to 15 years for projects in targeted counties with populations less than 25,000 and sell their output nearby).

Credits can be used to reduce income tax (or taxes on banks or insurance companies), and taxes for utility services.

Credits can be carried forward for five years.

The first three years of the credits may be sold to create up-front cash to assist in funding qualified projects, with Department of Commerce approval.

The Alabama corporate income tax rate is one of the lowest in the nation at 6.5%. The following tax credits may be available for qualifying projects:

Deductions / Abatements

• 15-year net operating loss carryforward
• Basic skills educational tax credit covering up to 20% of employer sponsored educational program that enhances basic skills of employees
• Heroes for Hire income tax credit – $1,000 deduction for each job to a recently deployed, unemployed veteran

For more information, see Alabama Income Tax Incentives section on the ADOR website.

Rates are graduated based on the entity’s federal taxable income apportioned to Alabama. These range from $.25 to $1.75 for each $1,000 of net worth in Alabama.

Total Business privilege taxes range from a minimum of $100 to a maximum of $15,000 for most business entities.

For more information, see Business Privilege Tax Information section on the ADOR website.

All real and personal business property is assessed at 20% of its fair market value.

The Alabama state property tax rate is limited to 6.5 mills (.65% of each $1,000 of assessed value).

Both cities and counties may levy additional millage rates.

Current millage rates for counties and cities can be found in the Millage Rate Section of the ADOR website. 

Abatements of non-educational property taxes for qualifying new or expanding businesses may be offered from 10 to 20 years.

Pollution-control equipment is exempt from ad valorem taxes.

Property taxes are not levied on finished goods or inventory held for re-sale.

For more information, see Property Tax Incentives section on the ADOR website.

General sales tax: 4.0%.

Manufacturing and farm equipment: 1.5%

Automotive vehicles: 2%

In addition to state taxes, most cities and counties also levy their own sales and use taxes. Current rate information for Marion, Fayette, and Lamar County can be found in the City and County Tax Rates Section of the ADOR website.

Deductions/Abatements

Abatements of non-educational sales and use taxes on construction materials are available for projects totaling $2,000,000+ or 30% of the original investment.

Exemptions:

• Pollution control equipment (sales tax)
• Utility gross receipts 
• Raw materials (sales tax)
• Increased utility services for up to 10 years

Financial assistance may be available to companies who are locating or expanding in Alabama through grants, loans, and other programs available through federal, state, and local government sources. For information about assistance programs available in the C3 Region, please contact the C3 of Northwest Alabama Economic Development Alliance at 800-399-7205.

Regional Revolving Loan Funds for Economic Development

Fixed-rate financing, at below-market rates, for business startups or expansions and economic or community development projects is directly available through the Northwest Alabama Regional Council of Governments for Marion County and the West Alabama Regional Commission for Fayette and Lamar Counties.

This program is open to qualifying businesses that are headquartered in Alabama or are moving their headquarters to the state.

Administered by the Alabama Department of Commerce, the program provides alternative funding to conventional bank financing.

More information about this program can be found on the Alabama Department of Commerce website.

This program provides 10-year, 2% interest rate loans of $250,000 – $4,000,000, covering up to 90% of total project costs to help existing industries finance energy-savings improvements to their facilities.

These grants are awarded to counties, municipalities, development boards or authorities, port authorities, or public corporations for site preparation or reasonable rehabilitation of an existing building or structure necessary to attract a qualifying project. The size of each grant is dependent on the amount of capital investment. Click here for more information about applying for an industrial development grant.

This program covers the costs of construction, construction engineering, and inspection for providing public access to new or expanding distribution, manufacturing, or industrial firms.

May be used as long term financing of up to 100% of a project including:

• 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.)

Fayette, Lamar, and Marion Counties have established an improvement district with the authority to issue bonds backed by assessments on property within the district, confer exemption from certain state and local taxes, and issue tax-exempt bonds for infrastructure construction projects.

This program provides state income tax, financial institution excise, or premium tax credits for investments and businesses in impoverished and low-income communities. Call the C3 Office at 205-468-3213 for more information.

This state level fund provides grant funding to public universities within Alabama to leverage research and development expenditures that support economic development initiatives within the state.

The USDA provides a variety of loan, grant, and loan guarantee programs, plus technical assistance for companies looking to develop in rural areas. More information about these programs, including grant and loan information, can be found on the USDA Rural Development – Alabama website.

The Alabama Department of Environmental Management is the state’s one-stop-shop for environmental permitting with the authority to issue the permits required by all the major federal environmental laws.

Alabama Power has a history of developing customized service offerings. The incentives offered to customers are customized based on a number of factors. For further information on how these incentives may assist locating your project in Alabama Power’s service territory, please contact a representative at Alabama Power’s Economic Development Department.