New and expanding industries have access to a variety of incentives to support business growth and profitability in Sumter County, Alabama. Both tax and non-tax incentives are available and include tax abatements and credits, financing resources, and workforce training services. The Division of Economic and Workforce Development will be pleased to work with you to maximize project savings through local, state and federal incentives

Opportunity Zones

The Opportunity Zones program is a new alternative economic development program established by Congress in the Tax Cuts and Jobs Act of 2017 to foster private-sector investments in low-income rural and urban areas. The Opportunity Zones program allows individuals and corporations to take capital gain incurred from the sale or exchange of property – appreciated stocks, buildings, family businesses, and more – and roll the gain into businesses or projects located within Opportunity Zones.

Opportunity Zones offer unique economic development possibilities in West Alabama, including Alabama’s largest geographic zone encompassing five counties – Sumter, Marengo, Greene, Hale
and Perry counties.

l. Alabama Taxes and Tax Incentives

  • Income Taxes

    • Corporations’ income tax based on net taxable income derived only from business conducted within the state determined by applying a four-factor formula of property, payroll, and double-weighted sales to total net income.

    • Corporate income tax rate of 6.5 percent (Individuals taxed at a rate of 5 percent).

    • Full deduction for all federal income taxes apportioned to Alabama creating a significantly reduced net effective rate.

    • 15-year carry-forward of net operating losses. 

  • Property Taxes

    • Constitutional limit of the state mileage rate on both real and personal property to 6.5 mills (of which 3 mills are dedicated to education).

    • Business property, both real and personal, taxed on 20 percent of fair market value.

    • Inventories and goods-in-process are not taxed.

    • Pollution control equipment statutorily exempt from property taxation.

    • Exemption of all tangible personal property being warehoused in Alabama for shipment to a destination outside the state. 

  • Alabama Reinvestment and Abatements Act

    • New Facility and Expansion

      • Abatement of non-educational portion of sales and use taxes on construction materials.

      • Abatement of non-educational portion of property tax for up to 20 years.

    • Existing Facility: Refurbishments, Upgrades, or Placed Back in Service

      • Abatement of non-educational sales and use taxes on construction materials and equipment.

      • Abatement of non-educational property taxes for up to 20 years of the incremental property tax increases.

      • Exemption from taxes for increased utility services for up to 10 years.

      • AIDT worker training. 

  • Jobs Act Incentives

    • Jobs Credit

      • Annual cash refund up to 3 percent of the previous year’s gross payroll for up to 10 years.

      • For companies employing at least 12 percent veterans, up to an additional 0.5 percent credit is available for the wages of veterans.

      • Up to an additional 1 percent job credit is available for companies in targeted counties. 

  • Investment Credit

    • Credit of up to 1.5 percent of the qualified capital investment expenses for up to 10 years. Credit can be taken against the Alabama income tax liability and/or utility tax liability.

    • Credit is available for up to 15 years for companies selling their output nearby.

    • Five-year carry forward, three-year transferability.

  • Alabama Renewal Act
    • Port Credit
      • One-time tax credit of up to $50 per TEU, $3 per net ton of bulk cargo of $0.04 per net kilogram for air cargo.
      • Credit against Alabama income tax liability.
      • Credit can be carried forward for 5 years. 
      • New distribution or warehouse shippers investing at least $20 million and creating at least 75 net new jobs are eligible to receive up to $100 per TEU over a 3-year period if entering into a project agreement with the state. 
    • Growing Alabama Credit
      • Approved projects are funded when taxpayers make contributions to a local economic development organization.
      • Taxpayers receive a tax credit equal to their contributions. The tax credit may offset up to 50% of the taxpayer’s income tax liability.
      • Credit can be carried forward for 5 years. 
  • Sales and Use Taxes

    • Four state rate differentials, which include:

      • A 1.5 percent rate for manufacturing and farm machinery;

      • A 2 percent rate for automotive vehicles;

      • A 3 percent rate for food sold through vending machines; and

      • A 4 percent general rate for all other items.

    • Raw materials used by manufacturers or compounders specifically exempt from sales and use taxation.

      • Pollution control equipment statutorily exempt from taxation.

      • Credit for sales and use tax paid to another state and its subdivisions.

      • Exemption for quality control testing and donations to charitable entities.

      • Abatements by cities, counties, and public authorities may include:

        • For qualifying industries, all state and the local non-educational portion of construction related transaction (sales and use) taxes associated with constructing and equipping a project. For coal mining projects, half of the state sales and use tax may be abated.

    • Utility gross receipts tax exemptions for:

      • Sewer costs;

      • Water used in industrial manufacturing in which 50 percent or more is used in industrial processing;

      • Exclusions for utility services used in certain types of manufacturing and compounding processes;

      • An electrolytic or electro-thermal manufacturing or compounding process;

      • Natural gas which becomes a component of tangible personal

      • property manufactured or compounded (but not used as fuel or energy);

      • Natural gas used to chemically convert raw materials prior to the use of such converted raw materials in an electrolytic or electro-thermal manufacturing or compounding process.

      • Increased utility tax for refurbishments, upgrades, or reopening of a facility. 

  • Business Privilege Tax

    • Replaces the former franchise tax.

    • Capped at $15,000 except for financial institutions and insurance companies. 

  • Income Tax Capital Credit (available through December 31, 2015)

    • Five percent (5%) of the total capital costs of a qualifying project, available each year for twenty (20) years. Projects with certain investment and employee levels may carry forward the capital credit up to four years and delay the start of the credit up to three years.

    • Credit begins in the year the qualifying project is “placed in service.”

    • The qualifying project must constitute:

      • An “industrial, warehousing, or research activity” defined in the 2007 North American Industry Classification System (NAICS) as listed in the legislation;

      • Any process or treatment facility which recycles, reclaims, or converts materials which include solids, liquids, or gases, to a reusable product;

      • Headquarters facilities as defined in NAICS 551114;

      • Data processing centers;

      • Certain warehousing and logistics projects in NAICS Subsector 493;

      • Renewable energy facilities;

      • Research & development facilities;

      • Projects owned by utilities that produce electricity from alternative energy resources; or

      • Projects owned by utilities that produce electricity from hydropower production.

  • Certain investment, employment and minimum wage thresholds apply but most project thresholds are reduced within “Favored Geographic Areas.” 

  • Enterprise Zone Credit/Exemption

    • Under certain conditions, an enterprise zone credit (Section 5) or exemption (Section 11) for income tax, sales and use tax, and/or business privilege tax is available for qualified participants. 

  • Full Employment Act of 2011

    • Businesses with 50 or fewer employees may receive a one-time income tax credit equal to $1,000 per new job paying over $10 per hour. 

  • Heroes for Hire Credit

    • A one-time $1,000 income tax credit for each recently deployed, and now discharged, unemployed veteran hired and a $2,000 income tax credit to recently deployed, and now discharged, unemployed veterans who start their own businesses. Employer must also meet the requirements of the Full Employment Act of 2011. 

  • “Made in Alabama” Jobs Incentive Act

    • Qualifying companies may receive a transferable income tax credit to offset import tariff costs during local construction process.

Source: Alabama Department of Commerce, www.madeinalabama.com

 

ll. Other Incentives

  • Alabama Enterprise Zone

    • Twenty-eight Enterprise Zones (including Sumter County) across the state of Alabama encourage economic growth in areas considered to have depressed economies. In addition, each area offers innovative packages of local tax and non-tax incentives to encourage businesses to locate or expand in that area’s Enterprise Zone. 

  • Favored Geographic Areas

    • Are defined as State Enterprise Zones and Less Developed Counties, the Department of Labor determines these counties based on percent change in population, personal per capita income in the last calendar year, and average percent employed in the last 12 months.

    • Allows broader access to the Income Tax Capital Credit because companies in the county can utilize lower threshold requirements for investment ($500,000), new employees (5), and average hourly wage. 

  • New Market Tax Credit

    • To attract investment capital to operating businesses and real estate projects located in low-income communities by permitting investors to receive a tax credit against their State of Alabama tax liability in exchange for making qualified equity investments in certified community development entities (“CDEs”).

Source: Alabama Department of Commerce, www.madeinalabama.com

lll. Non-Tax Incentives, Grants, and Loans 

  • Alabama Tombigbee Regional Commission 
    • a sub-state regional, planning and development organization that promotes area-wide progress through regional planning and development concepts in such areas as local planning, economic and community development and Human Resources coordination.
  • (ADECA) Community Development Block Grant
    • Provide a flexible source of annual grant funds for local governments-funds that they, with the participation of local citizens, can devote to the activities that best serve their own particular development priorities, provided that these projects either (1) benefit low and moderate- income persons; (2) prevent or eliminate slums or blight; or (3) meet other urgent community development needs. 
    • Types of CDBG Program Funds include Competitive( for large city, small city, and county activities), Community Enhancement, Planning and Economic Development Funds. 
  • (ADECA) Economic Development Fund
    • ​​​​​​​This 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.
    • Grant Ceiling: varies depending on the type of project. 
    • Typical activities: Economic Development Incubator ($250,000), Economic Development Float Loans ($10 million), Economic Development Grants ($200,000 subject to waiver).
    • A 20 percent local match is required, and construction cannot begin prior to grant award or release of environmental conditions.
  • Industrial Development Grants
    • Certain municipalities, agencies or departments (Grantees) may apply to the State Industrial Development Authority (SIDA) for industrial development grants. SIDA is authorized by Alabama Act No. 91-635 to issue grants for the preparation of Project Sites.
    • In order to be eligible for an industrial development grant, the activity occupying the project site must be a Qualifying Project. Qualifying Project is defined as: A project to be sponsored or undertaken by one or more investing companies (i) at which the predominant trade or business activity conducted will constitute industrial, warehousing or research activities, or (ii) which qualifies as a headquarters facility. ​​​​​​
  • (ADECA) Float Loan Program
    • ​​​​​​​This program is a low interest construction loan. It is a $200,000 loan (with a possibility of an increase in the amount) at a .5 percent to 1 percent interest rate for year with an additional one-year extension. You do not make a payment until the end of the one or two-year loan (depending on whether or not you apply for the extension). Job creation is required; the average is $35,000 awarded for every 1 job created. A bank Letter of Credit is also required. 
  • (ADECA) State Small Business Credit Initiative 
    • ​​​​​​​You make application for a small business loan through a local or regional bank; the State or ADECA guarantees 50 percent of the loan; the loan is for 60 months at a low interest rate. 
  • Industrial Access Road and Bridge Grant
    • ​​​​​​​Provide adequate public access to new or expanding distribution, manufacturing and industrial firms. 
    • Limited to construction, construction engineering and inspection costs.
    • Must be on public right of way for public use (state, city or county) and the project sponsor (city or county) must maintain the completed facility unless the facility consists of turn lanes, crossovers, etc., that are located on state highways. 
  • USDA Business and Industry Loan Guarantee
    • ​​​​​​​Objective: Create jobs/stimulate rural economies by providing financial backing for rural businesses. 
    • Uses: Real estate buildings, equipment, supplies, working capital and some debt refinancing. 
    • Population: All areas except  cities over 50,000 and their contiguous urbanized areas. 
    • Loan/Grant: Loan guarantee; Lender and borrower negotiate terms. Up to 30 years for real estate, 15 years for machinery and equipment and 7 years for working capital.
  • ​​​​​​​Internal Revenue Bonds
    • ​​​​​​​May be used as long-term financing of up to 100 percent of a project
      • Acquisition of land, buildings, site preparation and improvements. 
      • Construction of buildings.
      • Acquisition and installation of furnishings, fixtures and equipment.
      • Capital soft costs (e.g., architectural and engineering, interest incurred during construction, cost associated with bond issuance, etc. ) 
    • Political subdivision issuing the IRB retains ownership of the bond-financed facility and leases it back to the company at a rate sufficient to pay the principal and interest on the bonds. 
    • Tax-exempt IRBs issued at rates lower than conventional sources because the interest paid on the bonds is exempt from both federal and state income tax. 
  • Alabama SAVES (Sustainable and Verifiable Energy Savings) Loan Program
    • ​​​​​​​Provides 2 percent interest-rate loans of $250,000 to $4,000,000 to help existing industries finance energy-saving improvements to their facilities. 
    • Loans may cover up to 90 percent of total project costs and may allow the borrower up to 10 years to repay.