Alabama received its nicknames “The Heart of Dixie,” and “Yellowhammer” state from its historical civil war involvement. The State has come a long way from its troubled past to be a state in the forefront of innovation. In our focus of the month, we highlight the current contributions of the State to our community. Alabama has not only given us dynasty in college football (for those Crimson Tide fans), but it also has given as a foundation for a steady economic presence internationally.
Business Climate
Alabama’s economic growth is a result of its development as a manufacturing hub for transportation and technology. The State has managed to attract automotive companies such as Mercedez-Benz, Toyota, Hyundai, and Honda. These four companies alone, produced more than 1 million vehicles (valued at $7 billion) in Alabama in 2015. These vehicles are the State’s main exports delivered to over 70 countries.
In addition, Alabama is also thriving in the aerospace industry. It is the home for major manufacturers of commercial flight airplanes such as Airbus and Boeing. Other companies like Raytheon and Lockheed Martin develop aerospace and defense technology which aid our military. These manufacturing facilities require a skilled workforce which Alabama is able to provide. The State is able to lure companies by meeting their demands and ensuring a friendly environment to do business. Alabama is continuously pushing for advancements in technology and expanding its reputable industry sectors.
Tax Climate
According to the Tax Foundation’s 2016 State Business Tax Climate Index, Alabama ranks 29th out of 50 states. The State imposes a flat rate of 6.5% in corporate income tax, which is the 25th lowest among states that levy this type of tax. Alabama’s state and local corporate income tax collections per person were $86 in 2012 which ranked 13th lowest nationally.
Alabama’s personal income tax is comprised of three brackets starting at 2% and having a top rate of 5%. The State’s top rate ranks 20th lowest among states that levy an individual income tax. Alabama’s state and local income tax collections per person were $648 in 2012 which ranked 15th lowest in the nation.
In addition to the physical nexus standards, Alabama passed a new economic nexus standard law which took effect last January 1, 2016. The new economic standard subjects out-of-state businesses to sales and use tax if it generates more than $250,000 in sales in the previous year. This controversial law conflicts with the substantial nexus ruling of the Supreme Court in Quill Corp. v. North Dakota. Unfortunately for out-of-state business, nexus in Alabama can now be created without a physical presence in the state.
Tax Credits & Incentives
Income Tax Capital Credit: The capital credit is a credit of up to five percent (5%) of the capital costs of a qualifying project, to be applied to the Alabama income tax liability or financial institution excise tax generated by the project income, each year for 20 years. With the exception of certain projects, this credit cannot be carried forward. Unfortunately, the income tax capital credit program sunset on January 2, 2016. Projects that filed a Form INT with the Alabama Department of Revenue on or before January 2, 2016, have been grandfathered into the program.
Tax Incentive Reform Act of 1992: This Act gives cities, counties, and public industrial authorities the ability to abate property and sales tax from qualifying new and expanding projects. The appropriate authority can grant abatement periods for up to 30 years in some cases. To see a list of qualified business activity classifications, click here.
- 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 million and projects which produce electricity from hydropower production must have capital costs of at least $5 million.
- The additional capital investment by an industry that is expanding their current facilities in Alabama must be at least $2 million or 30% of the original cost of the currently existing industrial property
Random Facts
- Alabama workers built the first rocket to put humans on the moon.
- The Alabama Department of Archives is the oldest state-funded archival agency in the nation.
- In 1836 Alabama became the first state in the United States to declare Christmas a legal holiday.
- The first 911 call in the United States was made in Haleyville, Alabama on February 16, 1968.
- Rosa Park’s refusal to change seats on a Montgomery, Alabama, bus begins the Montgomery Bus Boycott, one of the landmarks in the American civil rights movement.
- Mail is delivered by boat in Magnolia Springs, Alabama. This city has the only all-water mail route in the United States.
