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    Taxes & Incentives

    Alabama offers corporations some of the lowest tax rates in the country. Alabama’s property tax is the lowest in the nation and the Alabama Capital Investment Tax Credit usually eliminates a company’s state income tax for 20 years.

    The state’s greatest incentive is the services of Alabama Industrial Development Training (AIDT.) It is consistently ranked the top worker training program in the country. AIDT will recruit, screen and train your potential employees before your company has to make the decision whether to hire them.

    Alabama also offers competitive utility prices along with credits and incentives that can further reduce your bills. Below is a complete listing of all incentive programs. For more information on how these incentives could help your company please contact our office at 1-800-669-9450 or email to naida@naida.com.

    Tax Incentives and Advantages in North Alabama

    Income Tax Credits and Deductions
    Capital Investment Tax Credit
    Sales & Use Tax Abatements
    Property Tax Abatements
    Enterprise Zones
    Employer Education Credit
    Site Preparation Grants
    Industrial Access Road and Bridge Program
    HUBZones
    USDA Rural Development
    Alabama Industrial Development Training (AIDT)
    TVA Incentives for Industry
    Environmental Permitting
    Other Tax Advantages

    www.revenue.alabama.gov/Taxincentives/index.html

    Income Tax Credits and Deductions

    Alabama is one of the few states that will allow a taxpayer to deduct from total income the apportioned amount of federal income tax paid or accrued. There are also several credits that are statutorily available to be applied against the Alabama income tax liability. The available credits are the capital credit, Alabama enterprise zone credit, and employer education credit.

    Please see the following descriptions of each credit:

    Capital Investment Tax Credit

    http://www.ador.state.al.us/Taxincentives/capcrsummary.htm

    This program allows eligible companies (both new and expanding) an annual income tax credit of up to 5% of their initial capital costs. This tax credit to be applied to the income tax liability generated by income from a project approved by the Alabama Department of Revenue is available each year, for 20 years. The credit begins in the year the qualifying project is ‘placed in service’. This credit can effectively eliminate the Alabama income tax liability.

    Thresholds:

    • 20 new jobs
    • $2 million in capital investment

    There is no carry-forward, carry-back or retroactivity of tax credits. Eligible businesses include SIC Groups 20-39; 50; 51; 737; 8731; 8733; and 8734; agricultural and food product processors; process or treatment facilities which recycle, reclaim, or convert materials to a reusable product; and corporate headquarters facilities.

    Capital Investment Tax Credit – Favored Geographic Areas

    The thresholds are lower if located in a favored Geographic Area as follows:

    State Enterprise Zones

    Less Developed Counties are determined annually by the Department of Industrial Relations. These determinations are made based upon 3 criteria: percent change in population, personal per capita income, and average percent employed.

    The lower thresholds are 5 new jobs and $500k in capital investment.

    Locations within North Alabama that qualify as favored Geographic Areas from January 1, 2006 – December 31, 2006 are as follows:

    • Jackson County – Enterprise Zones only
    • Lawrence County – Enterprise Zones only
    • Winston County – Entire County

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    Sales & Use Tax Abatements

    http://www.ador.state.al.us/Taxincentives/abatecover.htm

    This is a one-time abatement of taxes associated with constructing and equipping a project. For example, sales taxes on the materials portion of the building cost and sales taxes on manufacturing machinery to go into the new plant.

    The total non-education levy can be abated. Back to top.

    Property Tax Abatements

    http://www.ador.state.al.us/Taxincentives/abatecover.htm

    Alabama’s property tax rates are the lowest in the USA. Additional abatements of the total non-education levy of property tax are available for up to 10 years. Back to top.

    Enterprise Zones

    Portions of two Counties in North Alabama ( Lawrence County & Jackson County) have been designated as Enterprise Zones to encourage economic growth. Qualified businesses may apply their credit against the income or business privilege tax. Back to top.

    Employer Education Credit

    Employers who provide basic skills education programs to Alabama resident employees receive a credit for 20% of the actual program costs for an employer, which provides or sponsors an education program that embraces basic skills of employees up to and including 12th grade. This credit is limited to the employer’s income tax liability and predicated upon the company receiving written approval from the State Department of Education. Back to top.

    Site Preparation Grants

    Grant funds provided for use in the preparation of a Project site may be utilized for (1) preparation of a means of access to the site; (2) provision for adequate drainage of the site; (3) boundary and topographical surveying, clearing and grubbing, and excavating; (4) the reasonable rehabilitation of buildings and other structures; and, (5) other work relative to site preparation deemed necessary or appropriate. The amount of funds provided through the grant will be a percentage of the capital costs involved in the qualifying project. These funds may be applied to projects investing less than $25 million. Back to top.

    Industrial Access Road and Bridge Program

    This program administered by the Department of Transportation (DOT) provides financial assistance to assist in transportation access to a new and/or expanding industry. Eligible industrial access projects may be new road construction or a road improvement such as a turn lane, deceleration lane, paving of an unimproved road, widening, resurfacing bridge replacement etc.

    A local sponsor is required for an Industrial Access Project (typically this will be the local city/county government or industrial development board). This local sponsor is responsible for any project costs above approved Industrial Access Road funding, securing all right-of-way, all future maintenance, plan preparation, and all preliminary engineering.

    The proposed road project must be a public right-of-way and, if funded, shall constitute part of the public highway and street system of the state. Back to top.

    HUBZones

    The SBA Historically Underutilized Business Zone is an Empowerment Contracting Program to stimulate economic development in urban and rural communities by providing Federal contracting preferences to small businesses. Under the program, small businesses can qualify for special set-aside Government contracts and get up to a 10 percent edge in competitive contract bidding or even be the sole bidder in some cases.

    These businesses must obtain HUBZone certification in part by employing staff who live in a HUBZone and also maintain a principal office in one of these specially designated areas.

    • Qualified “non-metropolitan county” by income and unemployment rates
    • Qualified Census Tract
    • Indian reservation

    Qualified “non-metropolitan counties” within North Alabama that qualify for HUBZone status include:

    • Franklin County
    • Jackson County
    • Marshall County.

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    Qualified Census Tracts within North Alabama that qualify for HUBZone status include the following:

     

    • Colbert County 0203.00
    • Lauderdale County 0103.00, 0102.00, 0101.00, 0106.00, 0107.00
    • Lawrence County 9792.00
    • Limestone County 0210.00, 0205.00, 0206.00, 0207.00
    • Madison County 0024.00, 0022.00, 0021.00, 0025.02, 0025.01, 0012.00, 0016.00, 0011.00, 0007.02, 0008.00, 0002.01, 0001.00
    • Marshall County 0311.00
    • Morgan County 0007.00, 0001.00, 0006.00, 0004.00

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    Additional information can be found at www.sba.gov or by calling:

    Donna H. Glenn

    Small Business Administration Alabama Division Office

    (205) 290-7101 Extension 228

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    USDA Rural Development

    USDA Rural Development Services consist of loan, grant and loan guarantee programs plus technical assistance for industry, cooperative development, housing community facilities development and telecommunications.

    Programs for business development include small business grants, business opportunity grants, direct loans, loan guarantees, and an intermediary re-lending program. Back to top.

    Alabama Industrial Development Training (AIDT)

    Alabama’s Industrial Development Training program recently repeated its #1 ranking as the nation’s best state workforce training program according to a poll of site selection consultants conducted by Expansion Management magazine.

    AIDT has also achieved the world’s first ISO 9001:2000 certification for a state-funded workforce training program. AIDT can develop a full range of technical pre-employment selection programs uniquely customized to your company. They can conduct Certified Manager Training, Supervisory Skills Training, On the Job Training, ISO 9000 Training and OSHA compliant Safety Training/Assessments. AIDT’s Maintenance Assessment program can also benefit you by assessing the core skills of potential maintenance personnel before you hire or promote them.

    AIDT’s pre-employment services allow an evaluation and enhancement of skills for your potential employees, through job-specific training. You have the opportunity to observe candidates in a simulated work environment where attitudes and interpersonal skills are tested. Candidates attend training at their own expense and on their own time, making a personal investment that ensures those completing training are highly motivated and performance focused. Even so, all final hiring decisions remain in your hands at training completion.

    AIDT works with you to define curricula, required skills and abilities for each job. They plan the training schedule, evaluation process and determine the staff and equipment needs for training. AIDT provides comprehensive design and development of training manuals, corporate and process training videos, multimedia presentations as well as printing and distribution services.

    AIDT assists in recruiting candidates who meet your unique requirements for employment. Their detailed screening process is designed to seek the most highly qualified candidates available. Several options for training delivery can be provided, including the nation’s premier fleet of mobile training units. These units can be delivered directly on-site for your training, even during the early stages of construction. Classrooms and labs can also be provided at their North Alabama training center.

    Ultimately, AIDT’s financial infrastructure allows them the flexibility to make things happen – fast and efficiently. AIDT’s unique selection and training system helps ensure a skilled workforce that produces results - all at no cost to you. Back to top.

    TVA Incentives for Industry

    North Alabama is blessed to be served by affordable, abundant and reliable TVA electric power. TVA’s generation and transmission of power has provided electricity at 99.999% reliability for the past several years. TVA’s network of power distributors throughout North Alabama, provide some of the lowest electricity rates in the nation, complimented by attractive pricing programs and rate credits. Sample power bills are available for particular sites at your request. Several programs that aid in the location of new industry and the growth of existing industry are available in North Alabama courtesy of TVA and the distributors of TVA electricity in North Alabama. Brief descriptions of these programs are as follows:

    Economic Development Loan Fund (EDLF) –Through leveraging other public and private financial sources, TVA loan funds are used to promote economic expansion and job creation.  The loan funds are primarily available to manufacturing firms and local nonprofit economic development entities.  Loans can be used to fund the construction of new manufacturing facilities, expansion of existing facilities, and development of publicly owned industrial sites or buildings.

    Enhanced Growth Credit (EGC)– The Enhanced Growth Credit Program provides credits on electric power bills to new or expanding industrial companies that create new, firm electrical demand of 100 kW or more.

    Distributors may choose to offer only one or both of the following credit options. These credits are applied in any month the company’s power usage reaches the minimum added kW requirements:

    • Eight-Year Declining Option – The monthly credit for the first 12-consecutive month period will be $6 per kW. The credit is reduced by $0.75 per 12-month period for seven additional years and then ends. The eight-year period begins with the first month in which the customer meets the minimum added load requirements. Thereafter, credit is applied any month in which power usage reaches the minimum added kW requirements.
    • Four-Year Flat Option – the monthly credit for a four year period, beginning with the date the first credit is received, is equal to $6 per kW. The credit is applied in any month in which power usage reaches the minimum added kW requirements.

    Firm Power– All customers are eligible for this option which means you have electricity available 24 hours a day. There are three basic charges for firm power: the customer charge, the energy charge and the demand charge. The customer charge is a fixed charge to cover minimum service. This charge covers such things as the costs for billing, meter reading, and customer accounting. The energy charge is applied to the actual amount of electricity used during the billing period. Usage is measured in kilowatt-hours. The energy charge covers fuel costs and other expenses related to operating the power system. The demand charge is applied to the highest power demand recorded at your facility during any 30-minute period in your monthly billing cycle. This charge reflects the cost of providing adequate generating plant capacity to meet your maximum power load.

    If your load is over 50 kilowatts, you will be provided with a demand meter. You will also be asked to enter into a power contract based on the maximum kilowatt demand expected during the contract period. Contract periods usually range from one to 10 years and are related to complexity of the service facilities required to meet your needs.

    Small Manufacturing Credit– This credit offers significant power cost savings to qualifying manufacturers that have a contract demand greater than 1,000 kW but not more than 5,000 kW. The Small Manufacturing Credit does not expire as long as the contract demand stays between 1,000 kW but not more than 5,000 kW. For the GSA3 rate structure, the credits range from $1.38 per kW for the first 1,000 kW of metered demand, $1.63 per kW of any metered demand in excess of 1,000 kW, and $0.54 per kWh of firm energy. This credit will be applied prior to the application of any applicable credits under the Enhanced Growth Credit Program, or any comparable program.

    Comprehensive Service Program – Through a partnership between our North Alabama Power Distributors and TVA a variety of services can be provided to industrial consumers to help them solve their energy problems and control their energy costs. Such services include identifying energy efficiency improvements for buildings and equipment, recommending energy-efficient construction guidelines, power quality monitoring and recommending solutions, lighting analyses and recommendations, analysis of energy management systems, consulting on HVAC systems and technologies, infrared and ultrasonic testing services, and many others. These services are generally free of charge and can reduce a company’s expense when attempting to find solutions to electrical issues. Back to top.

    Alabama Department of Environmental Management

    Environmental Permitting

    The Alabama Department of Environmental Management (ADEM) serves as a one-stop shop for environmental permitting in the State. ADEM administers all major federal environmental laws. They help to streamline the regulatory environmental permitting procedures and serve as a single point of contact or “umbrella” agency for all state environmental regulations. Back to top.

    Other Tax Advantages

    • Alabama exempts property tax on inventory of goods, wares and merchandise that are offered for sale.
    • Federal income taxes are deductible from state income tax liability.
    • Pollution control equipment is exempt from property taxation.
    • The Department of Revenue has a specially-dedicated Office of Economic Development to coordinate the incentives process.

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