Background
All real and personal property is subject to property tax unless specifically exempted by law. The Constitution of Alabama of 1901 (the Constitution) contains various property tax provisions that may be considered as industrial incentives. For example, Section 214 of the Constitution limits the state millage rate on both real and personal property to 6.5 mills. This rate is equivalent to a tax of $6.50 for every $1,000 of assessed value. However, both counties and cities may levy millage rates in addition to the state's 6.5 mills. These local rates vary but the average millage rate for any one locality is 43 mills, including the state's 6.5 mills. Amendment 373 of the Constitution further provides that business property, both real and personal, will be taxed on 20% of its fair market value. For example, for property with a fair market value of $5,000,000, a business would pay state property taxes of $6,500 (i.e., $5,000,000 x 20% x .0065 mills).

Incentives

1. Abatements. The Tax Incentive Reform Act of 1992 (Chapter 9B of Title 40, Code of Alabama 1975) gives cities, counties, and public authorities the ability to abate: noneducational state, county, and city property taxes.

2. Pollution Control Equipment. All equipment, facilities, or materials constructed or acquired primarily for the control, reduction, or elimination of air or water pollution are statutorily exempt from property taxation (Section 40-9-1(20), Code of Alabama 1975).

3. Inventory. Unlike many other states, Alabama does not levy property tax on inventory (Section 40-9-1(23), Code of Alabama 1975). There are also exemptions for raw materials inventory (Section 40-9-1(13), Code of Alabama 1975) and finished goods inventory (Section 40-9-1(14), Code of Alabama 1975). However, it should be noted that inventory used for lease or rental purposes is subject to property tax.

4. Other Incentives. In addition to the incentives listed above, current property tax statutes contain numerous exemptions. Some of these exemptions are limited to particular organizations or industries (Section 40-9-et al, Code of Alabama 1975), but certain exemptions are relevant to all taxpayers.

Filing Requirements

Although the Department of Revenue oversees the administration of property tax, the county assessing officials are responsible for assessing property and collecting the property tax. Property taxes are paid annually to county assessing officials between October 1 - December 31 following assessment. For more information, visit www.ador.state.al.us under "Property Tax."