• Sectors 31 (except National Industry 311811), 32, and 33 (manufacturing);
   
• Subsector 423 and 424 (merchant wholesalers, goods);
   
• 511 (publishing industries (except internet));
   
• 927 (space research and technology);
   
• Industry Group 5417 (scientific research and development services);
   
• 5415 (computer systems design and related services);
   
• 5182 (data processing, hosting, and related services);
   
• Industry 11331 (logging);
   
• 48691 (pipeline transportation of refined petroleum products);
   
• National Industry 115111 (cotton ginning);
   
• 517110 (wired telecommunications carriers);
   
• 541380 (testing laboratories);
   
• 561422 (inbound call centers only); or,
  
  Any process or treatment facility which recycles, reclaims, or converts materials, which include solids, liquids, or gases, to a reusable product;
   

Capital Investment Requirement

New Project

There is no threshold or limiting investment amount for a new abatement project with the exception of projects owned by utilities producing electricity. 

• Projects owned by utilities which produce electricity from alternative energy resources must have capital costs of at least $100,000,000;
   
• Projects which produce electricity from hydropower production must have capital costs of at least $5,000,000.
   

Major Addition

The additional capital investment by an industry that is expanding its current facilities in Alabama must meet one of the following investment levels, whichever is less:

• 30% of the original cost of the currently existing industrial property (sum total of the original facilities and equipment and any expansions and additions prior to the current addition), or
   
• $2,000,000.

Alabama Department of Revenue Tax Abatements

Exemptions from Property Tax

All equipment, facilities, or materials constructed or acquired primarily for the control, reduction, or elimination of air or water pollution are exempt from property tax.  Section 40-9-1(20), Code of Alabama 1975, addresses the pollution control exemption.  All tangible personal property being warehoused in Alabama for shipment to a destination outside the state is exempt from property tax.

Alabama does not levy a property tax on inventory of goods, wares, and merchandise that is offered for sale.  Materials that are to be compounded or manufactured and are stocked at plants or furnaces for manufacturing purposes are also exempt from property tax. 

Exemptions from Sales and Use Tax

Equipment or materials purchased primarily for the control, reduction, or elimination of air or water pollution are exempt from sales and use tax (Sections 40-23-4(a)(16) and 40-23-62(18), Code of Alabama 1975). 

Raw materials used by manufacturers or compounders are specifically exempt from sales and use tax.

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State Income Tax and Income Tax Capital Credit

Corporations pay Alabama income tax (6.5 percent) with a significantly reduced net effective rate, based on their net taxable income derived only from business conducted within the state.  Alabama offers a full deduction for all federal income taxes apportioned to Alabama and a deduction for pollution control equipment.  There is a 15-year carry-forward of net operating losses.

Income Tax Capital Credit

The State of Alabama offers a capital investment tax credit for qualifying firms to claim tax credit against Alabama income tax liability generated by or arising out of a qualifying Alabama project.

Up to five percent (5%) of the total project capital investment can be deducted annually from the State of Alabama corporate income tax liability generated by the operation over a 20-year period.

Types of Capital Credit Projects

New Project or Expansion Project

A project consists of new investment at a new site in Alabama, or new investment that will expand the capacity and the number of employees at an existing facility.  The law allows more than one project on the same site.  A company may have any number of projects in Alabama, as long as each project meets the statutory requirements for a qualifying project.

Small Business Addition

A small business addition is an addition to an existing facility of a small business.  A small business is a business located in Alabama that has 100 or fewer full-time employees, prior to the date on which the addition is placed in service.

Statutory Requirements for Income Tax Capital Credit

Business Activity Requirement

• Sectors 31 (except National Industry 311811), 32, and 33 (manufacturing);
   
• Subsector 423 and 424 (merchant wholesalers, goods);
   
• 511 (publishing industries (except internet));
   
• 927 (space research and technology);
   
• Industry Group 5417 (scientific research and development services);
   
• 5415 (computer systems design and related services);
   
• 5182 (data processing, hosting, and related services);
   
• Industry 11331 (logging);
   
• 48691 (pipeline transportation of refined petroleum products);
   
• National Industry 115111 (cotton ginning);
   
• 517110 (wired telecommunications carriers);
   
• 541380 (testing laboratories);
   
• 561422 (inbound call centers only); or,
  
  Any process or treatment facility which recycles, reclaims, or converts materials, which include solids, liquids, or gases, to a reusable product;
   

Capital Cost Requirements

Employment Requirements

Wage Requirement

Exception:  The wage requirements for direct processors of agricultural food products shall be determined by the local labor market rate.

Alabama Department of Revenue Income Tax Capital Credit

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Alabama Re-employment Act of 2010

The Alabama Re-employment Act of 2010 (Alabama Act No. 2010-557) offers an income tax deduction for Alabama employers that create jobs for unemployed persons.  All Alabama employers can potentially take advantage of the new deduction.

The tax deduction is for Alabama employers that create jobs for unemployed persons and is tied to wage rates paid to each qualified employee hired and retained as a full-time employee for at least one year.  Qualified employees are employees working at least 37.5 hours per week and who, at the time of employment, were drawing unemployment compensation or whose benefits had expired.  

The allowable deduction is limited as follows:

1) A 50% deduction for wage rates of $14 per hour and above
2) A 40% deduction for wage rates between $12 and $14 per hour
3) A 35% deduction for wage rates between $10 and $12 per hour
4) No deduction for jobs paying less than $10 per hour.

The one-year testing period begins immediately; however, the tax deduction is essentially effective for tax years 2011 and 2012.

For "qualified investing companies," this deduction may be in addition to Alabama's Capital Credit.  "Qualified investing companies" are companies making an investment in the state that meet project requirements for capital costs incurred, number of jobs created, and base wage requirements.  If the Alabama Capital Credit requirements are met, it is possible for a business investing in Alabama to receive both the Capital Credit (equal to 5% of the total capital costs of the qualifying project) and a tax deduction equal to 50% of gross wages paid to new workers.

The Alabama Department of Revenue can provide additional information on this incentive.

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Employer Education Credit

A tax credit on an employer’s Alabama income tax liability is statutorily available to employers who provide approved basic skills education programs to Alabama resident employees. The credit is 20 percent of the actual costs, limited to the employer’s income tax liability.

The following qualifications must be met:

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Qualifying Employers Deduction for Employee Health Insurance (Small Business Health Insurance Premiums Deduction)

During the 2008 legislative session, the Alabama Legislature passed Act Number 2008-559.  This law allows qualifying employers, defined in the law as employers with less than 25 employees, a state income tax deduction, as amended by the Legislature in 2011, of up to 200 percent (200%) of the amount paid as health insurance premiums on qualifying employees in connection with an employer-provided health insurance plan.  Qualifying employees are defined in the law as those employees that are Alabama residents, earn no more than $50,000 of wages, and report no more than $75,000 of Alabama Adjusted Gross Income ($150,000 if married filing jointly).

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Industrial Development Grant

The State of Alabama has set funds aside to assist in the initial preparation of sites for manufacturing growth. Grant money provided may be used for the following purposes:

• Preparation of access to the site;
• Provision for adequate drainage to prevent the accumulation of excess natural waters;
• Boundary and topographical surveying, clearing, and excavating;
• Other work relative to site preparation deemed necessary and appropriate.

The grant is based upon total project cost with the maximum amount available capped at $150,000. (Alabama Act No. 99-591)

Industrial Development Grant Instructions
Industrial Development Grant Application

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Industrial Access and Infrastructure Programs

Several programs are available for infrastructure improvements.  The source(s) sought for infrastructure improvements are determined based on the needs of the project.

The Alabama Industrial Access Road & Bridge Program provides funding for industrial access road and bridge construction.  A local sponsor is required for an industrial access project. 

The Appalachian Regional Commission (ARC) provides supplemental funding for economic development projects.  Eligible activities include access roads, water and sewer system installation, rail spurs, and dock facilities.

The Shoals has also worked with the Economic Development Administration (EDA) for funding of economic development projects.

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Reduced Electrical Power Bills

The Tennessee Valley Authority (TVA), through local municipal distributors, provides electricity throughout The Shoals area.

Tennessee Valley Authority (TVA) Valley Investment Initiative

The TVA Valley Investment Initiative (VII) is an economic development incentive program jointly conducted by TVA and distributors of TVA power.  VII offers competitive incentives to eligible customers who make multi-year commitments to invest in the Tennessee Valley. The program has been available to existing power customers since October 2009.

Customers in targeted sectors whose facilities meet the following qualifiers may be evaluated for a Valley Investment Initiative award:

• Minimum 250 kW peak monthly demand
• Minimum 25 employees; no plans to reduce workforce by 50% or more
• Financially sound
• Projected investment over a five-year period of 25% of an existing facility’s book value or $2.5 million in a new facility
• Standard power contract with a remaining term at least as long as the five-year VII award period
   

Award amounts are based on a customer’s five-year projections and actual performance in these categories:

• Capital investment
• Energy efficiency
• Jobs added or retained
• Average wages paid
• Load factor and coincident load factor

VII awards are subject to the availability of budgeted funds and will be paid as monthly power bill credits over a five-year period.

Other TVA Programs

The Tennessee Valley Authority offers valuable demand response, energy efficiency, and alternative energy programs to customers that can reduce their bottom line.  These programs depend on the customer’s energy use and available incentives can be discussed in detail once more information is available on the project’s electrical needs and requirements.

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Utility Gross Receipts Tax Exemptions

There are several exemptions from the utility gross receipts tax.  Sewer costs are not taxed.  Water used in industrial manufacturing in which 50 percent or more is used in industrial processing is also exempt from the utility gross receipts tax.  Additionally, Alabama law allows exclusions from the utility gross receipts tax and the utility service use tax for utility services used in certain types of manufacturing and compounding processes.

The law allows exemptions for the following:

1.  The furnishing of electricity to a manufacturer or compounder for use in an electrolytic or electrothermal manufacturing or compounding process,

2.  Natural gas which becomes a component of tangible personal property manufactured or compounded (but not used as fuel or energy), and

3.  Natural gas used by a manufacturer or compounder to chemically convert raw materials prior to the use of such converted raw materials in an electrolytic or electrothermal manufacturing or compounding process.

The Alabama Department of Revenue makes the determination on this exemption.
(See Alabama Department of Revenue Rule 810-6-5-.26 Utility Privilege or License Tax)

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Tennessee Valley Authority (TVA) Economic Development Loan Fund

Economic Development Loan Funds (EDLF) $2,000,000

TVA’s Economic Development Loan Fund (http://www.tvaed.com/pdf/edlf09.pdf) encourages economic growth through job creation and capital investment in the Tennessee Valley.

TVA provides EDLF loans to established companies relocating or expanding their operations in the Tennessee Valley. Funds may be used for building expansions, equipment purchase, and other purposes. Loan amounts, terms and interest rates are dependent upon criteria such as number of jobs created, total capital investment, security provided, and impact on the community. All loans are subject to a financial and eligibility review.
 

• Loan amounts are determined based upon job growth, capital investment leveraged and identified project needs.
• Interest rates vary by project, but are typically below the prime lending rate.
• Loan terms for equipment loans may be up to 5 years, while building and real estate loans may be up to 15 years.
• Leveraging other funds is TVA’s role as a lender, and we are seeking to leverage $3 to every $1 invested through the EDLF program.
• Generally, the approval process is quicker and rates are lower for loans secured with Letters of Credit.

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Loans Administered by the Northwest Alabama Council of Local Governments

Several loan programs are offered through and administered by the Northwest Alabama Council of Local Governments (NACOLG).

1) The EDA Funded Program offers loans ranging from $10,000 to $125,000 at interest rates ranging from four percent (4%) to 10 percent (10%).  Eligibility requirements include ten percent (10%) equity and one job must be created for each $10,000 loaned.

2) The State Funded Program offers loans ranging from $10,000 to $150,000 (up to $200,000 by discretion of the Board for projects that create or retain 35 or more jobs) at interest rates ranging from four percent (4%) to 10 percent (10%).  Eligibility requirements include 10 percent (10%) equity and one job must be created for each $15,000 loaned.  Revolving Loan Program

3) The State’s Economic Development Fund is available to all eligible communities for projects supporting the creation or retention of jobs. Generally, applicants for ED assistance should have a commitment from the business to create or retain 15 or more jobs.  The business should fall within the SIC codes 20-39 or provide a significant economic benefit. Projects must not include intrastate relocation. The program is available on a continuous funding cycle.  The ED float loans can be up to $10 million with interest at or less than 2%.  The loan is for a period of one year with a possible one year renewal.  Construction cannot begin prior to award or release of environmental conditions.

Funds from these programs can be used to purchase real estate, machinery, and equipment and provide working capital.

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Industrial Revenue Bonds

Industrial revenue bonds (IRBs) are financing instruments issued by industrial development boards with rates and terms established by the marketplace.  IRBs provide financing for land, building, and equipment for new and expanding manufacturing facilities (1987 SIC Codes Major Groups 20-39, 50, 51, and Division F).  Certain expenses, such as architectural, engineering, legal, and administrative fees associated with the sale of the bonds, can be paid from the bond proceeds (subject to the limitations of the Internal Revenue Service regulations).

Bonds may be either taxable or tax-exempt. Federal law determines whether the interest on the bonds is exempt from federal income tax.  Taxable IRBs may be issued with fewer restrictions.

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Small Business Administration (SBA) Loan Programs

The Small Business Administration (SBA) is an agency of the United States Government that assists small businesses to grow and prosper.  SBA loan programs provide commercial lenders with the opportunity to offer loans to small businesses that they might not otherwise be able to make.  The SBA works with the commercial lender by providing a guaranty to the lender that, should the borrower default on the loan, the Government will reimburse the lender up to the percentage guaranteed by the SBA.  The borrower is still responsible for repaying the full amount due.

Small Business Administration

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United States Department of Agriculture (USDA) Loan Programs

The United States Department of Agriculture (USDA) has a Business and Industry Guaranteed Loan Program to strengthen the development of rural areas throughout the nation.  Businesses located in areas outside the city limits of a city of 50,000 or more in population may benefit by receiving a loan from a private lender with USDA providing the guarantee.  The guarantee is a vehicle that allows a local lender to extend its legal lending limits by the portion of loan covered by Rural Development's guarantee.  The USDA provides a guarantee to the lender of up to 80%, with a maximum loan of $10 million, unless approval for an amount up to $25 million is given by the Administrator.

Area Office Information

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Training and Workforce

AIDT

AIDT, an institute of the State's Department of Postsecondary Education, is well known as Alabama's No. 1 incentive.  AIDT will design and implement a client-approved training curriculum at no cost to the new or expanding company.  The training program can be operated on site or at a company-approved alternate facility.

AIDT offers a full range of services, including trainee recruitment and screening, customized pre-employment training, production of training materials and videos, and employee development at all levels.

AIDT has been ranked No. 1 among workforce training programs in all 50 states.

Shoals Career Center

The Shoals Career Center assists the employers in the local, intrastate or interstate recruitment of applicants, prescreens applicants to meet employer qualifications, provides interview facilities for the employers, conducts any desired testing of potential employees to measure aptitudes for specified job skills using validated tests, and performs any related service that might be needed.

The Center also offers training for both new hires and existing employees through the Workforce Investment Act (WIA) program coordinated through the Alabama Department of Economic and Community Affairs and the U.S. Department of Labor.  The Workforce Investment Act (WIA) is designed to provide training in a real labor market situation.  A portion of the trainees’ wages may be reimbursed to the employer during the training period.  To participate, applicants must meet eligibility requirements that include being economically disadvantaged and/or a dislocated worker as determined by the Alabama Employment Service.

University of North Alabama and Northwest-Shoals Community College

Locally, the University of North Alabama and Northwest-Shoals Community College  provide specialized training for persons whose skills may require additional instruction.  Both institutions have a proven track record in meeting the training needs of manufacturing in the area.

Shoals Training Alliance

The Shoals was first in the State to formally structure an alliance between industry and education where industry takes the lead role.  The Alliance’s mission is to address common, on-going training needs for industry to maintain its competitiveness in the marketplace.  Through the Alliance, existing companies have received beneficial training in PLC, blueprint reading, operator training, employee selection, presentation skills, ISO 9000, SPC, welding, schematic and basic electric wiring, and supervisor training classes. 

Alabama Technology Network (ATN)

The Center for Environmental Technology, located on the campus of Northwest-Shoals Community College, is one of 10 regional centers in Alabama forming the Alabama Technology Network (ATN).  The Center is charged with improving the effectiveness of the workforce through education, training, and technical assistance.

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Right to Work State 

Alabama is a “right to work” state.

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One-Stop Environmental Permitting 

The Alabama Department of Environmental Management (ADEM) has authority to issue the permits required by all the major federal environmental laws.  A Permit Coordination and Development Center (PCDC) facilitates the permitting process by coordinating communications, conferences, and other administrative functions between an applicant and ADEM.

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