Alabama has a thriving business climate and the lowest property taxes in the United States.
Our low-tax, business-friendly environment is complimented by a number of programs and services that help industry succeed. Our experts can help your company navigate how best to take advantage of the incentives and development credits in place to foster economic growth.
- All real and personal business property will be assessed at 20 percent of its fair market value.
- State millage rate on both real and personal property is 6.5 mills (3 mills for education, 1 mill for relief and 2.5 mills for general uses). This rate is equivalent to a tax of $6.50 for every $1,000 of assessed value.
- Cities and counties may levy millage rates in addition to the state’s 6.5 mills. These local rates vary, but the average rate statewide is 42 mills, including the state’s 6.5 mills.
Sales and Use Tax
- State sales and use tax general rate: 4%.
- State sales and use tax rate for manufacturing and farm machinery: 1.5 %.
- Corporate rate is limited to no more than 6.5 %.
- Corporate taxpayers can deduct from its gross apportioned and allocated Alabama income, the full apportioned Alabama amount of federal income taxes paid.
Business Privilege Tax
- Based on the entity’s federal taxable income apportioned to Alabama. The rates range from 25 cents to $1.75 for each $1,000 of net worth in Alabama. The minimum tax is $100.
- The maximum for most business entities is $15,000. The exceptions to this rule are financial sector institutions that have a maximum business privilege tax of $3 million.
Read more about Alabama’s tax environment at Amazing Alabama.
Business Investment Solutions
Here are some of the business solutions that can help you save money and grow your company:
Made in Alabama Jobs Credit
- Annual cash rebate of up to 3% of the previous year’s gross payroll (not including fringe benefits) for new, direct jobs, for up to 10 years.
- Made in Alabama Jobs Credit – Tax Credit of up to 1.5% of the qualified capital investment expenses for a project for up to 10 years. Credits can be used to reduce income tax, utility tax services, or taxes on banks or insurance companies.
Alabama Reinvestment Act
- For companies investing at least $2 million on refurbishment, upgrades, or placing equipment back in service, but not creating any jobs.
- Property Tax and/or Sales and Use Tax abatement.
- Alabama Industrial Development Training (“AIDT”) – Employee-screening, hiring, and training programs to new and expanding industries located in Alabama.
Alabama Data Process Center Economic Incentive Act of 2012
- Abatement of the non-educational portion of state, county, and municipal sales and use taxes and property taxes on real and personal property.
Additional Tax Abatements & Credits
- Land, equipment, and construction materials.
- Sales and Use Tax Abatements.
- Federal Income Tax Deduction.
- No Sales and Use Tax on Raw Materials.
- Vendor Discounts on Sales Taxes.
- No Property Tax on Inventory.
- State Enterprise Zones.
- Utility gross receipts tax.
- Foreign Trade Zones.
- Airplane Maintenance Parts Exemption.
Rate Rider EDI
Load addition incentives are intended to give new customers a reduction in base rate charges for the first 5 years of a 10 year contract when they provide new load of at least 1,000 kW and commencing before January 1, 2021.
- Incentive – yearly discounts for the first five years based on the marginal cost to serve and capped based on a percentage of the base rate.
- Extension for Rate Rider EDI went into effect for November 2017 billings
Rate Rider CRI (Community Redevelopment Incentive)
CRIs are intended to give customers a reduction in base rate charges for 12 months when they establish a new account in an existing building that has been unoccupied for at least 6 months.
- Incentive – 15% discount on monthly base rate charges, provided customer enters into a 1-year Customer Service Agreement for service commencing before January 1, 2020
- Account must represent new load (merely switching locations does not qualify)
- Extension for Rate Rider CRI went into effect for January 2018 billings
Visit our economic and community development website, Amazing Alabama, for more information on:
- A state overview of primary business taxes and statutory incentive programs.
- Alabama’s Buildings and Development Sites.
- Community Demographic and Labor Force information for every community in Alabama—including the ability to compare and contrast Alabama communities with any community in the United States.
- News Impacting Economic Development in Alabama