Ad valorem tax rate (mills)
Sales tax percent
Note: Within the county there may be additional municipal and/or school district taxes.
OVERVIEW OF ALABAMA'S RENEWAL COMMUNITY PROGRAM
PURPOSE: The Renewal Community Program provided for the designation to 40 communities throughout the United States in order to assist in economic development and expansion through the provision of federal tax incentives for businesses located, locating or expanding in the designated areas.
In January of 2002, three areas received federal designation as Renewal Communities in the State of Alabama. These designated included nine Black Belt counties in Southern Alabama, Greene and Sumter counties and east Mobile and Prichard.
RENEWAL COMMUNITY BUSINESS DEFINITION: Generally, a Renewal Community Business is designated as a corporation, partnership, or sole proprietorship that for each taxable year actively conducts every trade or business of the entity in a Renewal Community (RC), at least 50% of the total gross income of the entity is derived from the active conduct of business within a RC, a substantial portion of the use of the tangible property of the entity is with a RC, a substantial portion of the intangible property of the business is used in the active conduct of the business, a substantial portion of the services performed for the employer by its employees occur within a RC, at least 35% of the employees reside in a RC, no more than five (5) percent of the property is nonqualified financial property except for reasonable amounts of working capital held in cash, cash equivalents, or debt instruments and no more than five (5) percent of the property is works of art or other collectibles unless held for sale to customers.
RENEWAL COMMUNITY TAX INCENTIVES:
A. Wage Credits for employing Renewal Community Residents
This credit against Federal taxes of up to $1,500 for each year of Renewal Community designation may be claimed for all existing employees and every new hire living in the designated Renewal Community. These credits are available beginning January 1, 2002 and will remain in effect through December 31, 2009. Possible exclusions to this incentive are startup businesses that may not have large tax liabilities, nonprofit organizations, or business whose employees spend the majority of their time working outside a Renewal Community location.
B. Increased Section 179 Deductions
This deduction allows businesses located in the Renewal Community area to claim increased Section 179 deductions up to $35,000 for property acquired after December 31, 2001, if the business qualifies as a Renewal Community Business. The deduction can be claimed on certain depreciable property such as equipment and machinery. Possible exclusions to this incentive are businesses that cannot meet the definition of a Renewal Community Business, consolidated companies with large equipment needs within the entire consolidated group, equipment that will be used outside the Renewal Community, companies with large expensive equipment needs on a yearly basis, startup businesses that expect tax losses or other normal business expenses to equal income and businesses with equipment that has a short economic life.
C. Commercial Revitalization Deduction
This deduction can be for on-half of the qualified construction/revitalization expenditures in the first year a building is placed in service or all of the qualified construction/revitalization expenditures on a pro-rated basis over a ten year period, if the qualified revitalization expenditure have been allocated to revitalize a commercial building located in a Renewal Community. This deduction is available for buildings placed in service after December 31, 2001 and before January 1, 2010. States may allocate up to a maximum of $12 million in deductions and not more than $10 million per project for each year from 2002 to 2009. Additionally, the business does not have to be a Renewal Community Business. Possible exclusions to this deduction are developers of residential rental projects, building acquisitions that do not involve substantial renovation expenditures, land speculation purchases, and startup or similar businesses with insufficient income to take advantage of accelerated depreciation.
D. Zero Capital Gains Rate for Renewal Community Assets
The holder, for a minimum of five (5) years, of a Renewal Community asset acquired between January 1, 2002 and December 31, 2009, will not have to include in its gross income any qualified capital gain from the sale or exchange of the asset. the following qualify as Renewal Community assets: business stock; partnership interests and business properties. Capital gains attributable to the period from January 1, 2002 through December 31, 2014 may be excluded.
A participating company must meet the definition of a Renewal Community Business and have a tax liability sufficient to write off those incentives/deductions gained as a result of the Renewal Community Program.
For additional information or assistance, please contact:
Alabama Department of Economic and Community Affairs
Technical Assistance Section
401 Adams Avenue
P.O. Box 5690
Montgomery, AL 36103-5690
Telephone: (334) 242-5823