Tax Incentives

Click the tabs below to read more about the available tax incentives in Alabama.

Corporate Income Tax Deductions and Abatements

The following deductions and abatements apply to this tax:

  • Net Operating Loss Carryforward:
    State law includes a 15-year carryforward of net operating losses.
  • Pollution Control Equipment
  • Income Tax Capital Credit (see below)
  • Enterprise Zone Credit (see below)
  • Basic Skills Educational Tax Credit
  • Coal Credit

Capital Credit

New and expanding companies in Alabama may qualify for the capital credit incentive. This incentive gives businesses up to 5% credit of capital costs for qualifying projects that can be applied to the Alabama income liability generated by the project income. This incentive is available every year for 20 years.

Favored Geographical Areas

Favored Geographical Areas are defined as either State Enterprise Zones and/or Less Developed Counties. New and expanding companies within counties that have both designations can qualify for the capital credit incentive at a lower investment ($500,000) and new employee (5) threshold.

PowerSouth counties/cities that are designated as Favored Geographical Areas include:

  • Barbour County*
  • Bullock County*
  • Butler County*
  • Chambers
  • City of Montgomery
    (Enterprise Zones only)
  • Clarke County*
  • Clay County*
  • Conecuh County
  • Coosa County
  • Covington County
    (Enterprise Zones only)
  • Dallas County*
  • Escambia County
    (Enterprise Zones only)
  • Etowah County
    (Enterprise Zones only)
  • Lowndes County*
  • Macon County*
  • Monroe County*
  • Pike County
    (Enterprise Zones only)
  • Randolph County*
  • Russell County
    (Enterprise Zones only)
  • Talladega County
    (Enterprise Zones only)
  • Tallapoosa County
    (Enterprise Zones only)
  • Washington County
  • Wilcox County*

*Has both qualifications for the Favored Geographical Areas designation.

Enterprise Zone

Enterprise Zone

Additional incentives are available for qualifying new and expanding companies located in State Enterprise Zones. Incentives in this program include an up to $2,500 tax credit for each new permanent employee (applied against income and/or business privilege tax liability), as well as exemptions for income, sales & use, and business privilege tax liability.

PowerSouth counties that are included in this program are:

  • Barbour
  • Bullock
  • Butler
  • Clarke
  • Clay
  • Covington
  • Covington
  • Dallas
  • Escambia
  • Etowah
  • Lowndes
  • Macon
  • Monroe
  • Pike
  • Randolph
  • Russell
  • Talladega
  • Tallapoosa
  • Wilcox

Business Privilege Tax Deductions and Abatements

The following deductions and abatements apply to this tax:

  • Pollution Control Equipment
  • Air Carrier with Hub Operations
  • Enterprise Zone Credit

Property Tax Deductions & Abatements

The following deductions and abatements apply to this tax:

  • Abatements
  • Pollution Control Equipment
  • Inventory: Alabama does not levy property tax on inventory. Exemptions are also available for raw materials inventory.
  • Additional Incentives for Specific Industries: Various other exemptions are available to certain industries, as well as all taxpayers.
  • Local Incentives: Special incentives are available from Class 6 municipalities. This includes the following municipalities in the PowerSouth coverage area:
    • Alexander City (Tallapoosa County)
    • Auburn (Lee County)
    • Enterprise (Coffee County)
    • Opelika (Lee County)
    • Ozark (Dale County)
    • Prattville (Autauga County)
    • Sylacauga (Talladega County)
    • Talladega (Talladega County)

Sales and Use Tax Deductions and Abatements

The following deductions and abatements apply to this tax:

  • Abatements
  • Vendor Discount: A 5% discount on the first $100 of tax due and 2% of all tax over $100 ($400 maximum per month) is available for vendors who pay their sales taxes on time.
  • Exemption for Raw Materials
  • Sales and Use Tax Reciprocity
  • Pollution Control Equipment
  • Exemption for Quality Control Testing and Donations to Charitable Entities
  • Utility Gross Receipts Tax Exclusions
  • Exclusion for Poultry Houses
  • Enterprise Zone Credit
  • Film Productions

Renewal Communities (Federal Program)

This federal program creates four incentives – employee tax credit, commercial revitalization deduction, enhanced IRC section 179 deduction, and exclusion of capital gain.

PowerSouth counties included in this program are:

  • Butler
  • Conecuh
  • Dallas
  • Lowndes
  • Monroe
  • Wilcox

Foreign Trade Zones

Montgomery and Dothan, two of the PowerSouth communities in Alabama, have designated foreign trade zones. Foreign merchandise that is stored in these zones and merchandise that is being held for export is exempt from state and local ad valorem taxes.