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Alabama Basic Business Taxes 2011

Alabama's economic development, finance and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include the Alternative and Renewable Energy Act of 2008, Net Operating Loss Carry-forward, and Small business/employee health tax deductions.

March 2011
Corporate income tax:
For domestic corporations (Alabama corporations), rate is 6.5 percent of the net income annually. Deductions are allowed for federal income tax paid or accrued. For foreign corporations (companies incorporated outside the state), rate is 6.5 percent of the income annually from business within the state. Deductions are allowed for federal income tax paid or accrued. (Capital credits may apply.)

Net Operating Loss Carry-forward:
Corporate income tax law provides for a 15-year carry-forward of net operating losses.

Small business/employee health insurance costs:
The plan allows business owners with fewer than 25 employees to deduct 150 percent of the amount they pay for employee health insurance premiums from their state income taxes. The plan also allows employees of small businesses earning $50,000 or less annually to deduct 150 percent of what they pay for health insurance from state income taxes.

Alternative and Renewable Energy Act of 2008:
Among other measures, the act provides tax credits and abatements for various energy-related expenditures.

Sales and use taxes:
A 4 percent sales tax is based on gross retail sales and gross proceeds derived by lessors for leases or rentals. A 4 percent use tax is levied on all items purchased out of state but consumed, stored, or used inside the state. Items subject to the sales tax are exempt from use tax. Manufacturing equipment is taxed at 1.5 percent. Sales and use tax on all building material, machinery, and equipment for a qualified industrial project may be exempt, except for the local educational portions of the tax. (Non-educational abatements may apply.)

Property tax:
The state tax is 6.5 mills. Additional tax may be levied by counties and municipalities and the local rate is an aggregate of all lawful levies. The assessment ratio for industrial property is 20 percent of fair market value. (Non-educational abatements may apply.)

Alabama State Contact:
Alabama Development Office
Alabama Center for Commerce
401 Adams Avenue
Montgomery, AL 36130

Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.

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