Tax incentives are available for new and expanding companies in most counties in Alabama. A summary of those incentives can be found below. Additional information can be found on the Alabama Department of Revenue website.
In addition to state level tax incentives, incentives at the local level may be available. For help determining tax rates and finding available incentives, contact the CCEIDA office at (334) 335-4468.
Corporate Income Taxes
- Corporate income tax rate is 6.5%
- Based on the net taxable income of business done in Alabama
- Businesses are permitted to deduct all of their federal taxes apportioned to Alabama
Potential incentives include:
- Net-operating loss carryforward
- Pollution-control equipment deduction
- Income tax capital credit (see below)
- Basic skills educational tax credit
Capital Credit
- Available to qualifying all new and expanding companies and industries
- Gives businesses up to 5% credit of capital costs
- Can be applied to the Alabama income liability generated by the project income
- Available annually for a maximum of 20 years
For more information, see the Capital Credit Information section on the ADOR website.
Business Privilege Tax
- Based on a company's net worth in Alabama and the company's ability to pay
- Rate ranges from $.25 to $1.75 for each $1,000 of net worth in Alabama
Available incentives include:
- Pollution-control equipment deduction
- Air carrier with hub operations deduction
Property Tax
Alabama state property tax rate is 6.5mills (.0065%). County and city rates vary and current rate information can be found in the Property Tax Section of the ADOR website.
Possible incentives include:
- Abatements for non-educational property taxes
- Pollution-control equipment exemptions
- No property taxes on inventory
- Raw materials inventory exemptions
Sales and Use Tax
The state sales and use tax rates are 2.5%. County rates vary and current rate information can be found in the City and County Tax Rates Section of the ADOR website.
Available incentives include:
- Abatement of State and non-educational local construction-related taxes
- Raw materials, pollution control equipment, quality control testing, and donations to charitable entities exemptions
- Utility gross receipts tax exclusions
- Discount if sales tax is paid promptly
State Unemployment Tax
- Employer requirement for the state unemployment tax is based on the first $8,000 of each employee's compensation
- Rates vary from 0.5% to 5.4%
- New employer rate is 2.7%
- Rates are based on employer's experience rating
- Employees do not contribute
Jobs Tax Credit
- Cash refund of up to 3% of the previous year's gross payroll (not including fringe benefits) for qualifying new, direct jobs. Incentive period is up to 10 years.
- Up to an additional 0.5% cash refund is available on the wages of veterans, for companies, which employ a workforce composed of at least 12% of veterans.
- Up to an additional 1% cash refund for projects in counties with a population less than 25,000. Two sites per year located outside of these counties can receive this refund at the Governor's discretion.
Investment Tax Credit
- Credit of up to 1.5% of the qualified capital investment costs for a qualifying project each year for up to 10 years (Up to 15 years for projects in counties with populations less than 25,000 selling 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 cash for projects, with Department of Commerce approval.
