As we mentioned last month, our Georgia clients frequently ask us to investigate potential credits and incentives in other states where they have operations, potential acquisitions or strong relationships with customers or vendors. In addition, private equity groups ask us about potential $$ for their portfolio companies.
We were recently asked about credits and incentive in Alabama. I spoke with Linda Swann and Pete Schaum of the Alabama Dept. of Commerce (clickhere), and learned some of their details.
Alabama’s tax credits and incentives cover new capital investments, new jobs, property and sales tax abatements, workforce training, R&D activities, energy saving activities, and other categories. Incentives and credits are available to a fairly wide range of targeted industriesthat include manufacturing, warehousing, R&D, information technology, mining, telecom, and others, including cotton ginning!
Alabama’s credits and incentives are pretty complicated — multiple categories and exceptions mean that each “project” will turn out to be effectively unique.
- Capital Investment tax credits are blended with job increases and are tied to threshold levels, which are lower for Favored Geographic Areas. Base wage requirements also apply. These credits can go up to 5% of initial costs and last up to 20 years. Great benefits for just the right situation, but watch out for the exceptions!
- Local property and sales tax abatements are very generous and widely available, but come with strings and exceptions
- Credits, services, and reimbursements are available for increasing employment by 10+ jobs and contracting with AIDT (click here for info)
- Enterprize Zone credits and exemptions involving a complex requirement and approval process administered by the Alabama Dept. of Economic and Community Affairs ADECA (click here).
Compared to Georgia, Alabama has:
- Lower (net effective) corporate and personal tax rates, but still enough that state tax credits are beneficial to business owners.
- A broader range of companies eligible for major credits, and anarrower range for smaller credit categories, especially training credits
- More exceptions and gotchas when planning company qualifying activities
- Few, if any, credits or incentives without some form of state pre-approval
To summarize, Alabama is very welcoming to new and expanding businesses. Representatives at the state and local level seemed eager to help any company interested in starting a new or expansion project. But, realize that no activities count unless coordinated and approved by the appropriate official.
Do any of your clients have Alabama connections? If so, Alabama economic developers will be very helpful in finding incentives. But make sure you start early in the planning process!