Incentives

Incentives Summary

To lower the cost of building and equipping a project in Alabama:

Alabama offers a non-educational Sales and Use Tax Abatement on material and equipment needed to construct and equip a new facility or major expansion. For more information visit the following website:
www.ador.state.al.us/Taxincentives/abatecover.htm

The industrial development boards of Mobile County can provide an Industrial Revenue Bond Inducement to facilitate the company’s use of tax-free bonds. If the company qualifies and chooses to finance with tax-free Industrial Revenue Bonds, the cost of debt can be reduced significantly. For more information visit the following website: www.mobilechamber.com/incentives3.asp

Alabama Site Preparation Grants are available to reimburse some of the cost to prepare a site for industrial use. This program offers a qualified company approximately 5% rebate (see web site for details) up to $150,000 of the cost of the project for greenfield site development costs. For more information visit the following website: www.mobilechamber.com/incentives3.asp

To lower the operating cost in Alabama:

Alabama offers a non-educational Ad Valorem Tax (property tax) Abatement for up to ten years from the time the plant is placed in service. With the approval of the Industrial Development Board, a company can enjoy approximately 50% reduction in property taxes during the abatement period. Note all taxes associated with education funding are not abatable by law. For more information visit the following website: www.mobilechamber.com/incentives3.asp

The Alabama Enterprise Zone program makes tax credits available to companies hiring and training disadvantaged workers. For more information visit the following website: www.mobilechamber.com/incentives3.asp

The City of Mobile as grantee offers Foreign Trade Zone 82 for companies that have the need and opportunity for import tariff relief. Much of Brookley Industrial Complex is currently designated as a Foreign Trade Zone. For more information visit the following website: www.ftzcorp.com

To promote the profitability of the Alabama operation:

The State of Alabama offers a Corporate Income Tax Credit of 5% of the total capital investment per year for 20 years. This program is granted by statute. The minimum investment and hiring requirements for the program can be as little as $500,000 and 5 new employees. With the maximum tax rate for corporate income tax at 6.5% and ability to deduct federal corporate income tax, the net taxable rate in Alabama is approximately 4.6%.

This credit virtually eliminates Alabama Corporate Income tax from all but the most profitable companies. For more information visit the following website: www.ador.state.al.us/Taxincentives/capcreditforms.htm

Renewal Community Zone (RC) – portions of the Mobile/Prichard area (Brookley Industrial Complex included) were recently designated as a Renewal Community by the Federal Department of Housing and Urban Development. This designation will run through 2009 and is designed to help alleviate chronic poverty and unemployment by providing incentives to businesses to locate within the zone and hire employees who live in the zone. Some of the benefits are:

Renewal Community Employment Credit – A Credit against Federal taxes up to $1500 for each year of Renewal Community Designation for every existing employee and new employee who lives and works in the RC.

Additional Section 179 Deductions – Allows businesses to claim increased Section 179 deduction (up to $35,000) on certain depreciable property such as equipment or machinery in the year it is placed in service. Businesses can do this instead of recovering cost by taking depreciation deductions over a specified recovery period.

Zero Percent Capital Gains Rate – The holder, for a minimum of 5 years, will not have to include in its gross income any qualified capital gain from the sale or exchange of the asset.

Environmental Cleanup Cost Deduction (brownfields) – Businesses can elect to deduct qualified cleanup costs of hazardous substances in certain areas (brownfields) in the tax year the business pays or incurs the costs. More in-depth descriptions of each facet of the RC program can be found at the following website: www.hud.gov/offices/cpd/economicdevelopment/programs/rc/index.cfm

To secure a strong and stable workforce:

In 1971, Alabama created Alabama Industrial Development Training (AIDT). With over 30 years of experience, AIDT has become a proven method of recruiting, screening, and training a company’s startup and expansion workforce. This program is available to all companies with significant hiring needs (usually a group of 10 workers of a single job classification). AIDT has screened and trained for hundreds of different companies of all sizes. This program is free to the participating company and custom tailored to company’s needs each and every time. For more information visit the following website: www.aidt.edu

Mobile Works offers on-the-job training compensation to assist the company in recruiting and training their workforce. For more information visit the following website: www.mobile-works.org

* Each of these incentives require company compliance/qualification for the program's specific guidelines.

Site Preparation Grant Program

(Industrial Development Grant)

Alabama Act No. 97-645 authorizes the State Industrial Development Authority to sell bonds to make grants to counties, municipalities, local industrial development boards or authorities or economic development authorities, airport authorities, port authorities or public corporations to pay for site preparation for land owned or possessed by lease by these entities.

Requirements:

Counties, municipalities, local industrial development boards or authorities, economic development councils or authorities, airport authorities, port authorities, public corporations, or certain state agencies or departments (Grantees) may apply to the State Industrial Development Authority (SIDA) for industrial development grants.

A company must be the headquarters for a national, regional, or state investing company serving as the principal office of the principal operating officer.

A company must be a process or treatment facility which recycles, reclaims, or converts materials to a reusable product.

A company described in Standard Industrial Classification Major Groups 20 to 39, inclusive, Major Groups 50 and 51, Industrial Group 737, and Industry Numbers 0724, 8371, 8733, 8734. This category of business includes most manufacturers and wholesalers, as well as computer, research, development, and testing service providers.

Grant funds provided to a Grantee for use in the preparation of a Project Site may be utilized for the following:

Preparation of a means of access to the site;

Provision for adequate drainage of the site to prevent the accumulation of excess natural waters thereon;

Boundary and topographical surveying, clearing and grubbing, and excavating;

Reasonable rehabilitation of buildings and other structures; and,

Other work relative to site preparation deemed necessary or appropriate.

The level of grant funding varies with capital investment as follows:
Capital Costs Percent of Capital Cost or Limit (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 -     $1,999,9991.5%  (minimum $28,000)
$2,000,000 -     $9,999,999 1.0%  (minimum $32,000)
$10,000,000 - > .75%  (minimum $32,000)

Capital Investment Tax Credit

The Capital Investment Tax Credit program allows a corporate income tax credit of up to five percent (5%) of the initial capital cost per 20 years of qualified projects to new and expanding companies. The 5% is applied against earnings before taxes (EBT) on the corporate income statement.

This credit effectively eliminates the Alabama income tax liability generated by the project. Therefore, the exact value of the credit depends totally upon the level of profitability that the company achieves with the new project.

Requirements:
Manufacturing, warehousing, research and computer service entities described in the 1987 Standard Industrial Classification (SIC) Major Groups 20 to 39 inclusive, Major Groups 50 and 51, Industrial Group 737, and Industry Numbers 8731, 8733, and 8734. In addition, headquarters facilities may qualify.

Small Business Additions - (with 100 or fewer full-time employees prior to date addition placed in service):
  • Creation of 15 new jobs
  • Investment of $1,000,000
Large Businesses -
  • Creation of 20 new jobs
  • Investment of $2,000,000
Headquarters Facilities -
  • Creation of 20 new jobs
  • Investment of $2,000,000
All Businesses -

A minimum wage requirement of $8.00 per hour or an average of $10.00 per hour, including benefits, is required. There is an exception for processors of agricultural products.

Prior to the date the qualifying products are "placed in service," the company must notify the Alabama Department of Revenue of its intent to claim the incentives under Act #95-187.

Local Property Tax Abatements

(Ad Valorem)

Property tax abatements are available for qualifying projects for a ten-year maximum period excluding school millage. All non-exempt property in Alabama is classified and assessed at twenty percent (20%) of fair and reasonable market value for manufacturers. The rate of tax per hundred dollars of assessed value is $0.65 (includes $0.30 for schools). Generally, the project is titled in the public body and leased to the private user with an option to purchase for a nominal sum at the end of the lease term.

Requirements:

Subject to approval by the appropriate industrial development board (i.e., City of Mobile or Mobile County); the Chamber’s Economic Development Department provides staff support to both industrial development boards.

Manufacturing, warehousing, research and computer service entities described in the 1987 Standard Industrial Classification (SIC) Major Groups 20 to 39 inclusive, Major Groups 50 and 51, Industrial Group 737, Industry Number 0724, and Industry Numbers 8731, 8733, and 8734. In addition, headquarters facilities may qualify.

There is no minimum amount of investment required to qualify a new project for exemption. An addition, however, to an existing project requires an investment of at least the lesser of 30% of the original cost of the existing facility or $2 million.

Projects must create a substantial economic impact on the area including significant job creation and capital investment.

Exemptions:

Raw Materials and Finished Products

Air and Water Pollution Control Devices

Sales & Use Tax Exemptions

Credit is permitted for sales and use taxes paid to another state or subdivision thereof. The total credit allowed cannot exceed the amount of state or local sales and use tax liability.

Sales and use tax exemptions are available on the purchases of construction materials and machinery and equipment purchased to use in the new facility. Materials or products that become an ingredient or component part of products sold by a manufacturer are treated as purchased at wholesale and are exempt from tax at that time.

Requirements:
Manufacturing, warehousing, research and computer service entities described in the 1987 Standard Industrial classification (SIC) Major Groups 20 to 39 inclusive, Major Groups 50 and 51, Industrial Group 737, Industry number 0724, and Industry Numbers 8731, 8733, and 8734. In addition, headquarters facilities may qualify.

There is no minimum amount of investment required to qualify a new project for exemption. An addition, however, to an existing project requires an investment of at least the lesser of 30% of the original cost of the existing facility or $2 million.

Subject to approval by the appropriate industrial development board (i.e., City of Mobile or Mobile County); the Chamber’s Economic Development Department provides staff support to both industrial development boards.

Projects must create a substantial economic impact on the area including significant job creation and/or capital investment.

Exemptions:
If a company qualifies for a tax abatement under Act No. 92-599 (see discussion under eligible companies), construction-related sales and use taxes, and mortgage and recording taxes can be abated.

Any tax that is used for educational purposes can not be abated.

Air and water pollution control devices are exempt from sales and use taxes.

Industrial Development Bond Financing

Tax exempt, industrial revenue bond financing is available in keeping with the recent federal guidelines. Additionally, many companies are taking advantage of taxable bond issues to realize significant savings on their ad valorem taxes. There is no ad valorem tax assessment made on land, building, and/or equipment when a new and/or expanding industry is financed with such bonds. Sales and use tax on all building materials, machinery, and equipment for an industrial project may also be exempt when financed with Industrial Development Bonds. (Note: The state of Alabama does not maintain an inventory tax.) The term of exemption is limited to 10 years and the school millage is not exempt. Length of project is the time allowed for the announced jobs level to be reached. Exemptions are tied specifically to permanent jobs created by the business applying for the exemption and no other multiplier.

Alabama Industrial Development Training

Alabama Industrial Development Training (AIDT) was established by legislative funding in 1971, and is designed to recruit and train a company’s entire work force to company specifications at no cost to the company. Over the past 20 years, more than 100,000 Alabamians have learned the skills they need for better paying jobs through programs designed and conducted by AIDT.

These training programs are designed not only to meet the specific job needs of each business, but also to improve potential employee’s skills, knowledge and economic status. Alabama Industrial Development Training has three main divisions - Industrial Recruitment, Industrial Training and Industrial Support Services - each providing in-house capabilities for every phase of training.

Requirements:
Minimum of 10 full time employees within one employment class (i.e., warehouse worker)

Minimum of $6.50/hour starting wages for OJT or minimum of $7.00/hour starting wages for pre-employment

Pre-employment training for companies engaged in manufacturing, warehouse/distribution, and select telemarketing operations

AIDT’s Total Delivery system utilizes over 30 high tech and conventional mobile training units to bring training for any company on-site. These capabilities are expanded through leased facilities, as well as through permanent technology transfer centers. Companies utilizing the total delivery system have, after one year of operation, turnover rates of less than 1 percent and absenteeism rates of less than 2 percent.

Alabama Industrial Development Training constructed a permanent facility in Mobile. The 8,500 square-foot center includes three classrooms/computer laboratories and a shop training area. This facility was constructed to provide support services for employee selection and training for Mobile area companies.

Courses supported at the center include:

Aviation
  • Airframe blueprint reading
  • Thin wall aluminum welding
  • Bucking & riveting
  • Avionics
  • Hydraulic & pneumatic systems
  • Tool design
  • Aircraft sheet metal, welding & composites
  • Precision electronics fabrication/assembly
  • Commercial quality standards
  • Military specifications
  • High reliability soldering
Distrib. Control Sys./Instrumentation
  • Control room operations
  • Laboratory procedures
  • Instrumentation/electrical
  • Electronic and mechanical maintenance
  • Quality assurance
  • Product and process flow orientation
  • Safety
  • Principles of technology-applied physics
  • System parameters, set points
Management Training
  • Distributive Control System
  • Programmable logic controllers
  • Total quality management
  • Team Building
  • Concepts of management
Electromechanical Maintenance
  • Single-phase & three-phase motors
  • Electric motor cotrol
  • Solid-state & SCR controls
  • PLC operating systems
  • AC and DC drives
  • Lubricants/lubrication systems
  • Hydraulic systems
  • Pneumatic systems
  • Shaft drives & gear drives
  • Flexible couplings
  • Belts and pulleys
  • Pumps
  • Test and measurement instruments
Office Automation/Desktop Publishing
  • Intro to DOS
  • Advanced DOS
  • Lotus 1-2-3
  • DBase III & IV
  • R:Base for DOS
  • Claris MacDraw II
  • Microsoft Excel
  • Microsoft Word
  • Conventional process control systems

Enterprise Zone

The Alabama Enterprise Zone Program was created to help attract new businesses to Alabama. The Alabama Enterprise Zone Act was passed by the Alabama Legislature in 1987, and authorizes state tax and non-tax incentives, which are some of the best in the country.

Mobile has three Enterprise Zone designations, each offering these innovative packages of incentives. Under the program, an employer’s maximum tax credit of operations in the zone shall not exceed $2,500 per new permanent employee hired pursuant to the act. This tax credit may be applied in all three Mobile zones to any Alabama income tax liability or any Alabama corporate franchise tax liability.

Additionally, employers may receive an exemption from Alabama sales and use tax on the purchases of the materials used in the construction of a building, or any addition or improvement thereon for housing any legitimate zone business and on machinery and equipment used in the zone. (Certain requirements for business participation apply.)

Renewal Community Zone

Portions of the Mobile/Prichard area (Brookley Industrial Complex included) were recently designated as a Renewal Community (RC) by the Federal Department of Housing and Urban Development. This designation will run through 2009 and is designed to help alleviate chronic poverty and unemployment by providing incentives to businesses to locate within the zone and hire employees who live in the zone. Some of the benefits are:

Renewal Community Employment Credit – A credit against Federal taxes up to $1500 for each year of Renewal Community Designation for every existing employee and new employee who lives and works in the RC.

Additional Section 179 Deductions – Allows businesses to claim increased Section 179 deduction (up to $35,000) on certain depreciable property such as equipment or machinery in the year it is placed in service. Businesses can do this instead of recovering cost by taking depreciation deductions over a specified recovery period.

Zero Percent Capital Gains Rate – The holder, for a minimum of 5 years, will not have to include in its gross income any qualified capital gain from the sale or exchange of the asset.

Environmental Cleanup Cost Deduction (brownfields) – Businesses can elect to deduct qualified cleanup costs of hazardous substances in certain areas (brownfields) in the tax year the business pays or incurs the costs.

Foreign Trade Zone

The Mobile Foreign Trade Zone is located within the Brookley Industrial Complex and Airport. It is served by public utilities, paved roads, and rail spurs. Approved usages include storage, processing, manufacturing, and display of merchandise.

Zone development provides for general warehouse facilities and open storage space. In addition, ground leases are available so individual firms can construct manufacturing plants to their own design specifications within the Zone. This makes the Mobile Zone accessible to substantial manufacturing operations that would not be feasible in the older conventional zones, which can only offer space in a general warehouse building.

Alabama taxation laws provide for ad valorem tax exemption for property in transit through the state in a public or private warehouse, for a shipment that has an ultimate destination outside the state. This exemption lasts for 36 months.

Foreign Trade Subzone

A foreign trade subzone can delay duties associated with many imported products, and if the finished product is re-exported, duties can often be avoided completely. Companies with multiple U.S. plant sites can often participate in zone-to-zone transfers, which can even further delay duties. In addition, due to the United States inverted tariff system, many finished products are assessed a lower duty than the raw materials that were used in composing the final product.

Companies within a foreign trade zone often have the luxury of choosing the lower of the two duty rates (i.e., raw materials or finished products) when the finished product exits the zone.

The Mobile area is home to Foreign Trade Zone No. 82.

Companies such as Atlantic Marine, Degussa, and Zeneca are all active subzone users.

The Chamber works closely with Mr. Greg Jones, who operates all of the foreign trade zones in Alabama.

Workforce Investment Act

Job Training funds are made available through the federal Workforce Investment Act. These funds are administered locally by the Mobile Consortium dba Mobile Works, an entity formed by agreement between the city of Mobile and Mobile County.

The Workforce Investment Act offers education and training programs designed to prepare individuals for entry into occupations that are in demand in Mobile. Additionally, it assists local employers in their efforts to fill their labor force needs by identifying and training potential workers.

Two sources of funds are available through the Workforce Investment Act: Title IIA funds entry level training and Title III provides training funds for workers who have become unemployed due to plant closures and layoffs. Both sources of funds can provide the following services:

Referrals of trained, work-ready applicants for job openings.

On-the-job training that compensates an employer for the extraordinary costs of hiring and training a new employee. This compensation can be up to 50 percent of an employee's wages for a training period based on the complexity of the skills to be learned.

Pre-employment training customized to meet the specific needs of a plant, business, or industry.

Coordination with the Targeted Job Tax Credit (TJTC) program.