Alabama Economic Development Directory

Alabama State Incentives

INCOME TAX CAPITAL CREDIT: Currently codified as Article 7, Chapter 18, Title 40, Code of Alabama 1975. It is a credit of five percent of the capital costs of a qualifying project, to be applied to the Alabama income tax liability or financial institution excise tax generated by the project income, each year for 20 years. This credit cannot be carried forward or back, and cannot be used to generate a refund to the taxpayer. The capital credit is used only after all other deductions, losses or credits permitted under Titles 40 and 41 of the Code of Alabama 1975. The credit will follow the income generated by the project and, therefore, will be allowed to “pass-through” entities such as: corporations, partnerships, limited liability companies, etc. Types of Capital Credit projects include:

• New Project or Expansion Project: Consists of new investment at a new site in Alabama, or new investment that will expand the capacity and the number of employees at an existing facility. The law allows more than one project on the same site. A company may have any number of projects in Alabama, as long as each project meets the statutory requirements for a qualifying project.

• Small Business Addition: A small business addition is an addition to an existing facility of a small business. A small business is a business located in Alabama that has 100 or fewer full-time employees, prior to the date on which the addition is placed in service.

CERTIFIED CAPITAL COMPANY PROGRAM (CAPCO): Promotes investment in Alabama-based businesses by creating several venture capital funds required to invest in Alabama companies. Businesses that request CAPCO investment funding must meet certain criteria and requirements set by the Alabama Development Office. CAPCO financing, an alternative to conventional bank financing, can accommodate a slightly higher risk profile and provide a more flexible structure for growing businesses. Eligibility requirements include:

• Headquartered in Alabama or will be relocated to Alabama
• Principal business operations in Alabama or will be relocated to Alabama
• Have no more than 100 full-time employees, and 80 percent of employees are in Alabama or 80 percent of payroll is paid to employees in Alabama
• Industries that qualify for the CAPCO program may include manufacturing, processing, or assembling products; conducting research and development; or providing services.

SALES & USE TAX ABATEMENTS: Taxes on construction-related transactions, pollution control devices are exempt from sales and use taxes.

ENTERPRISE ZONE CREDIT: To stimulate growth in depressed areas of the state, Alabama offers certain tax credit incentives to business that locate or expand within a designated enterprise zone.

“MADE IN ALABAMA” JOB INCENTIVES ACT: Qualifying companies may receive a transferable income tax credit to offset import tariff costs during local construction process.

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.

BROWNFIELD DEVELOPMENT TAX ABATEMENTS: Gives cities and counties the ability to abate the following:

• Non-educational city and county sales & use taxes;
• Non-educational state, city and county property taxes—up to 20 years;
• Mortgage and recording taxes.

ALABAMA INFRASTRUCTURE GRANT PROGRAM: Funds are available for extension of water, sewer and road facilities.

ALABAMA INDUSTRIAL ACCESS ROAD & BRIDGE PROGRAM: Provides financial assistance to communities for industrial access to new and expanding industries. It allows for the construction of roads, bridges, etc. on public right-of-ways in conjunction with industrial projects.

INDUSTRIAL REVENUE BONDS: May be used as long-term financing of up to 100 percent 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, etc.)

Typically, tax-exempt IRBs have interest rates ranging from 70-85 percent 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 percent of the project costs. The principal and interest on the bonds are paid solely from the funds derived from leasing or 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 ECONOMIC DEVELOPMENT LOAN PROGRAM: The state has more than 2,300 commercial lending sources with assets of over $61.3 billion. The Alabama Economic Development Loan Program is used to work with commercial lenders for projects in non-entitlement communities.

EMPLOYER EDUCATION CREDIT: A tax credit is statutorily available to employers who provide approved basic skills education programs to Alabama resident employees. The credit is 20 percent of the actual costs limited to the employer’s income tax liability. The requirements are:

• Program must have written approval from the Alabama Department of Education.
• Employees shall have been continuously employed for at least 16 weeks for at least 24 hours per week.
• Employer cannot receive or require reimbursement or any form of remuneration for any cost of  education.

RENEWAL COMMUNITY PROGRAM: Created by Congress in 2000, provides federal income tax incentives to businesses that are located or will locate in designated areas. Three of the nation’s 40 Renewal Community areas are in Alabama.  The sites include the Greene and Sumter Renewal Community, made up of both counties, the Mobile Renewal Community, which includes Prichard and a section of east Mobile, and the Southern Alabama Renewal Community, which includes Wilcox County and parts of Butler, Conecuh, Dallas, Hale, Lowndes, Marengo, Monroe and Perry Counties.

ALABAMA INDUSTRIAL DEVELOPMENT TRAINING (AIDT): State training program certified in compliance with ISO 9001:2000, the International Organization for Standardization Principle for Quality Management. Services are provided at no cost to employers or trainees. The workforce management system includes recruitment, assessment and training of potential employees, development and production of job-related training materials, provision of training facilities and delivery of job-specific services. It also provides certified manager training and supervisory and team leadership training.