The Gadsden-Etowah County Industrial Development Authority will help you obtain all the incentives for which your project qualifies. However, it is essential for state notification requirements to be fulfilled and for approvals to be in place before you incur project costs. Our staff can accomplish this quickly with a little information from you. The state also requires applicants to be enrolled in the federal E-verify program. Our local and state governments have a pro-business attitude, and have quickly approved 100% of the incentive applications submitted by the IDA for new and expanding companies.
Federal Income Tax Credits
Companies can obtain federal income tax credits worth up to $9,000 per eligible new employee for up to 20% of new hires. To qualify, an employee must be in an eligible group, which includes but is not limited to: a member of a family that is a qualified food stamp recipient; a member of a family that is a qualified Aid to Families with Dependent Children recipient; veterans; pardoned, paroled or work release individuals; vocational rehabilitation referrals; summer youths; Supplemental Security Income recipients; or long term family assistance recipients.
TaxBreak LLC, headquartered in Gadsden, handles all information and documentation to certify the benefits for companies, and provides monthly reports outlining the credits earned. More details are at www.taxbreakllc.com.
State Income Tax Capital Credit
A credit of 5% of the capital costs of an eligible project can be applied against the Alabama income tax liability generated by the project’s income, each year for 20 years. These credits cannot be carried forward or back (unless the project investment is at least $100 million and employment is at least 100) or be used to obtain a refund. The credits follow the income generated by the project and they pass through such entities as S corporations, partnerships and limited liability companies.
To qualify, a project must meet four criteria:
(1) It must be an industrial, distribution, data processing, research or headquarters facility.
(2) The capital cost must be at least $2,000,000 for new and expansion projects; $1,000,000 for small business addition projects; or $500,000 for projects in an enterprise zone (most industrial sites in Etowah County are in a zone). Distribution centers must invest at least $5 million, or $1 million if located in an enterprise zone.
(3) Distribution centers and headquarters facilties must employ at least 50. For other new and expansion projects, at least 20 new jobs must be created; or 15 new jobs at small business addition projects; or 5 new jobs at projects in an enterprise zone.
(4) Companies must pay a minimum average hourly wage that varies by geographic location, and which is indexed annually. For projects in an enterprise zone, the average wage requirement for 2013 is $12.69 per hour. The average wage for distribution centers within two years of opening must be at least $15.00 per hour, or $12.00 per hour if in an enterprise zone, indexed annually. The average annual compensation, including benefits, for new jobs created at data centers must be at least $40,000 per year.
There are penalties if a company does not meet the minimum employment and wage requirements during any year the credits are in force. For complete details, click www.ador.state.al.us/Taxincentives/capcrsummary.htm.
Other State Income Tax Credits
Under the Full Employment Act of 2011, a company with less than 50 employees can qualify for a $1,000 state income tax credit per new job created. The credits can be obtained after the new employees have been on the payroll for one year, making at least $10.00 per hour. Additional details are here.
In addition, the "Heroes for Hire" Tax Credit Act of 2012 allows an employer to claim a credit of $1,000 for each new, full-time employee hired who was a resident of the state at the time of entry into military service or was mobilized to active service while a member of a National Guard or reserve unit located in Alabama; who received an honorable or general discharge within a two-year period preceding the date of hire; and who has been certified by the state as being unemployed. Unused credits may be carried back one year and forward 20 years.
These two incentives can be used together, providing a combined benefit of $2,000 per eligible new employee. The contact for more information is Ann Winborne, Assistant Director, Individual & Corporate Tax Division, Alabama Department of Revenue, 334-242-1101, firstname.lastname@example.org.
Business Privilege Tax Credits
Under Section 5 of the Alabama Enterprise Zone Act, an employer locating a new plant or expanding an existing one in a zone can obtain tax credits of up to $2,500 per new permanent employee hired, in any combination of the following three ways:
(1) If an employer can certify that at least 30% of new permanent employees hired pursuant to the act were formerly unemployed for at least 90 days prior to this employment, then the employer may receive the following credits on taxes due from zone operation: 80% in the first year of operation, 60% in the second year, 40% in the third year, and 20% in the fourth and fifth years.
(2) If at least five new permanent employees are hired, then employers may receive the following tax credits for new investments or improvements to existing facilities: 10% on the first $10,000 invested, 5% on the next $90,000 invested, and 2% on the remaining investment.
(3) For expenses of training employees in new skills, employers may receive a tax credit of $1,000 per new permanent employee.
More information is here: www.ador.state.al.us/Taxincentives/buspriv.html. Also, investments in pollution control equipment are deductible in computing Business Privilege Tax liability.
Real and Personal Property Tax Exemptions
New industrial, data processing, headquarters or research enterprises may obtain non educational property tax exemptions for 10 years. (The abatement period is longer for data centers which invest at least $200 million and have an average compensation of at least $40,000.) Data centers must create at least 20 jobs, and headquarters facilities must create at least 50 jobs. Distribution centers which invest at least $5 million (or $1 million if located in an enterprise zone) and employ at least 50 within two years of opening also qualify for these exemptions.
Expanding companies may obtain the same exemptions if the new capital investment amounts to 30% of the original cost of the currently existing industrial property, or $2 million, whichever is less.
In the City of Gadsden, the combined state, county and city tax rate is 49 mills on 20% of assessed value, of which 25 mills are for schools. For example, real property taxes on land and a building valued at $1 million would be computed as follows:
- $1,000,000 x .20 x .049 = $9,800 per year, before exemptions
- $1,000,000 x .20 x .024 = $4,800 per year, exempted for 10 years
- $1,000,000 x .20 x .025 = $5,000 per year in school assessments to be paid
Personal property taxes on machinery and equipment are computed with the same tax rates but use a composite factor (which varies by the kind of equipment) to account for depreciation. A sample computation on a hypothetical investment of $1 million follows. A total of 24 mills is exemptible and 25 mills in school assessments are non-exemptible, so $1,000,000 x .20 x mills x composite factor = amount per year:
|Year||Composite||Amount Exempted||School Assessment|
Pollution control equipment is exempt from property taxes.
Click www.ador.state.al.us/Taxincentives/abatecover.htm for more details about abatement procedures and to download application forms.
Sales and Use Tax Exemptions
New and expanding industrial, distribution, data processing, headquarters or research enterprises may obtain non-educational sales tax exemptions on the purchase of construction materials, furnishings and fixtures. They can also obtain use tax exemptions on the purchase of machinery and equipment. The same thresholds apply as for property tax exemptions.
In the City of Gadsden, the combined state, county and city sales tax rate is 9%; of that, 0.5% is earmarked for schools. Assuming a purchase of $1 million in construction materials:
- $1,000,000 x 9.0% = $90,000 before exemption
- $1,000,000 x 8.5% = $85,000 exempted
- $1,000,000 x 0.5% = $ 5,000 school assessment to be paid
In the City of Gadsden, the combined state, county and city use tax rate is 3.25%; of that, 0.125% is earmarked for schools. Assuming a purchase of $1 million in machinery and equipment:
- $1,000,000 x 3.250% = $32,500 before exemption
- $1,000,000 x 3.125% = $31,250 exempted
- $1,000,000 x 0.125% = $ 1,250 school assessment to be paid
Parts, components and systems used in the conversion, reconfiguration or maintenance of fixed or rotary wing military aircraft or of certified transport category aircraft, whose FAA registrations are outside the state, may be exempted from state and local sales taxes.
Pollution control equipment also is exempt from sales and use taxes. In addition, no sales or use taxes are assessed on manufacturers’ purchases of raw materials and component parts.
For more details, click www.ador.state.al.us/Taxincentives/sales&useincentives.htm.
No Inventory Taxes
There are no state, county or city inventory taxes on raw materials, component parts, work in process, finished goods or goods in transit.
Utility Gross Receipts Tax Exclusions
Certain types of manufacturing and compounding processes are excluded from the state gross receipts tax on utility services. For example, water used in manufacturing, in which 50% or more is used in processing, is excluded from the gross receipts tax. Electricity used for electrolytic or electrothermic processes is excluded from the tax. Also excluded is natural gas when it becomes a component of tangible personal property (but not as fuel) and gas used to chemically convert raw materials for electrolytic or electrothermic processing.
Business License Fee Credits
Companies locating within an enterprise zone may receive credits against payment of City of Gadsden business license fees, amounting to 80% in the first year of operation, 60% in the second year, 40% in the third year, and 20% in the fourth and fifth years.
Building Permit Fee Reduction
Companies building a new plant or expanding an existing one within an enterprise zone may receive a 50% reduction in the City of Gadsden’s building permit fee.
Site Preparation Grant
State grants can be made to counties, municipalities, industrial development boards, airport authorities, port authorities, public corporations or political subdivisions holding title to the sites that qualifying projects will occupy.
To qualify, a project must be an industrial, warehousing, research or headquarters facility. In general, funds can be used to pay for surveying, clearing, excavating, grading and providing drainage. Grant amounts, based on the following capital investment ranges, are shown below:
|Capital Investment||Grant Amount|
|Less than $200,000||5.0%|
|$200,000 - 499,999||3.5% (minimum $10,000)|
|$500,000 - 999,999||2.5% (minimum $20,000)|
|$1,000,000 - 1,999,999||1.5% (minimum $28,000)|
|$2,000,000 - 9,999,999||1.0% (minimum $32,000)|
|$10,000,000 - 24,999,999||0.75% (minimum $100,000, maximum $150,000)|
|$25,000,000 or greater||$150,000|
This is a retroactive grant, and construction must be completed in order for an application to be submitted. Today, it is taking at least a year for enough earmarked tax revenues to accumulate to enable the awarding of such grants.
Free Employee Training
The Alabama Industrial Development Training Institute, in conjunction with Gadsden State Community College and the Alabama Technology Network Center in Gadsden, conducts pre-employment training programs for new and expanding companies to ensure they have a suitable workforce in place when needed.
AIDT assumes all reasonable costs of program development, instructors, training space, equipment, consumable supplies, and training aids such as manuals, workbooks, videotapes and films. More information is at www.aidt.edu.