Non-Educational State and Local Property Tax Abatement

Alabama law provides that ad valorem tax abatements of up to ten years may be granted to new and/or expanding industries. The project must be defined as any trade or business described in the 1987 Standard Industrial Classification major groups 20 to 39, inclusive, 50 or 51, Industrial group number 737 or Industry numbers 0724, 4613, 8731, 8733, or 8734. These abatements apply to all real and personal property but do not include ad valorem taxes levied for educational purposes. For an expanding industry to qualify, it must invest a minimum of $2,000,000 or 30 percent of the original cost of the facility.

Industrial Development Bond Financing. The ad valorem tax on land, building, and/or equipment may be exempt when a new or expanding industry is financed with Industrial Development Bonds under the Wallace or Cater Acts, since title to such property is vested in the municipality or the local Industrial Development Board. Taxes levied for educational purposes cannot be abated.

Raw Materials and Finished Products (Code of Alabama, 1975, Section 40-9-1). “All materials to be compounded or further manufactured, when stocked at any plant or furnace, for manufacturing purposes in Alabama are exempt from ad valorem (inventory) tax.” There are no inventory taxes in Alabama.

Goods in Transit in Interstate Commerce (No Situs) (Code of Alabama, 1975, Section 40-9-6). To encourage the location in Alabama of distribution and warehousing facilities, Alabama’s “no situs” law exempts from ad valorem (inventory) taxes, for a period of three years, goods moving through the state to a final destination outside the state. Such goods may be stored, repackaged, modified, assembled, re-labeled, and shipped out of state without gaining situs in the state or being subject to ad valorem taxes.

New or expanding industry may request abatement by completing the Alabama Department of Revenue “Combined Application for Abatement of Taxes” and submitting the completed application to the Industrial Development Board, city or county with jurisdiction. BCEDA will administer the process as to the appropriate jurisdiction.

Questions may be directed to:
Alabama Department of Revenue
Ad Valorem Tax Division
PO Box 3727210
Montgomery, AL 36132-7210
334-242-1525