Tax Abatements & Incentives
Dallas County and the State of Alabama offer competitive taxes and incentives to attract business, industry and create economic development. A variety of incentives can be made available to new and expanding industries. All incentives are evaluated on a project-by-project basis. The State of Alabama evaluates projects based on direct and indirect revenue returned to the State as well as the commitments from local agencies. For the State to invest, each project must be revenue-positive and the incentives offered cannot exceed or equal the tax liability of the project company.
As with all commitments of the State of Alabama to extend public funds for economic development projects, it is subject to applicable provisions of Alabama law and the Constitution of Alabama of 1901. In addition, the parties must confirm their respective obligations by the execution of written project agreement; setting out the terms and conditions unique to the project as well as those customary for undertaking of this nature. The customary obligation will include a defined employment ramp-up period, defined incentive period and compliance procedure, an appropriate jobs maintenance period, and appropriate claw backs for non-performance.
Property Tax Exemption
The Dallas County Commission has in the past and is planning in the future to provide exemptions from property taxes. This exemption may be handled through a bond issue or through a direct exemption depending on the financial structure a company chooses.
Television producers can receive financial incentives as high as 35 percent for filming a television series in Alabama.
The HUBZone Empowerment Contracting program provides federal contracting opportunities for qualified small businesses located in distressed areas. Fostering the growth of these federal contractors as viable businesses, for the long term, helps to empower communities, create jobs, and attract private investment.
New Markets Tax Credit
The New Markets Tax Credit program (“NMTC Program”) was established by Congress in 2000 to spur new investments into projects located in low-income communities (“LICs”). The NMTC Program attracts investment capital to LICs by permitting investors to receive a tax credit against their Federal income tax return in exchange for making equity investments in specialized financial institutions called Community Development Entities (“CDEs”). To date, fifteen states (including Alabama) have enacted their own versions of the Federal MNTC program.
- Project must be located in a Low-Income Community census tract determined by income and poverty from recent census.
- Projects are high-impact if they are located in rural areas or targeted distressed, low income communities.
- Project cost should be at least $5 million, for MNTCs to have a significant benefit to a project.
- Project must not be one of the following: Country Club, golf course, massage parlor, hot tub facility, suntan facility, and racetrack or other gaming facility, retail liquor store, or residential housing.
- All other funding sources known as a “leveraged loan” (exclusive of MNTC funding) should have been secured, to attract a MNTC allocation. Leverage loan sources can include traditional bank debt, Borrower self-generated funding, governmental grants, private activity, bond proceeds, and tax increment financing.
- If bank financing is required, bank must be willing to structure a leverage loan secured by other collateral and/or a leverage loan guarantee, rather than a direct first mortgage lien on the Project. Ideally bank should have prior experience with the NMTC Program.
- The MNTC loan to the Borrower must remain in place for 7 years and is subject to limited amortization of the loan and no prepayment of the loan.
- Certain other restrictions are applicable, but are rarely a problem.
- MNTCs can be allocated to third party tax credit investors (such as a commercial bank or insurance company) — the tax credits do not have to be utilized by the Borrower personally or by the Borrower’s company.