Tax incentives are available for new and expanding companies in the City of Madison, Alabama. A summary of those incentives can be found below. Additional information can be found on the Alabama Department of Revenue website or the Alabama Department of Commerce website.
In addition to state-level tax incentives, incentives at the local level may be available. For help determining tax rates and finding available incentives, contact the City of Madison IDB at (256) 772-2897.
Unlike many other states, Alabama DOES NOT levy property tax on inventory. There are also exemptions for raw materials inventory and finished goods inventory.
Corporate Income Taxes
- The corporate income tax rate is 6.5%.
- Based on the net taxable income of business done in Alabama.
- Businesses are permitted to deduct all of their federal taxes apportioned to Alabama.
- Potential incentives include: Net-operating loss carry forward; Pollution-control equipment deduction; income tax capital credit (see below); Basic skills educational tax credit.
Income Tax Capital Credit
- Available to qualifying all new and expanding companies and industries.
- Gives businesses up to 5% credit for capital costs.
- Can be applied to the Alabama income liability generated by the projected income.
- Available annually for a maximum of 20 years.
For more information, see the Capital Credit Information section on the Alabama Department of Revenue website.
Business Privilege Tax
- Based on a company's net worth in Alabama and the company's ability to pay.
- Rate ranges from $.25 to $1.75 for each $1,000 of net worth in Alabama.
- Available non-tax incentives include Pollution-control equipment deduction; Air carrier with hub operations deduction.
- Alabama state property tax rate is 6.5mills (.0065%).
- County and city rates vary and current rate information can be found in the Property Tax Section of the Alabama Department of Revenue website.
- Possible incentives include Abatements for non-educational property taxes; Pollution-control equipment exemptions; No property taxes on inventory; Raw materials inventory exemptions.
Sales and Use Tax
- State sales and use tax rates are 2.5%.
- County rates vary and current rate information can be found in the City and County Tax Rates Section of the Alabama Department of Revenue website.
- Available incentives include Abatement of state and non-educational local construction-related taxes; Raw materials, pollution control equipment, quality control testing, and donations to charitable entities exemptions; Utility gross receipts tax exclusions; Discount if sales tax is paid promptly.
State Unemployment Tax
- The employer requirement for the state unemployment tax is based on the first $8,000 of each employee's compensation.
- Rates vary from 0.5% to 5.4%.
- The new employer rate is 2.7%.
- Rates are based on the employer's experience rating.
- Employees do not contribute.
Jobs Act Incentives
- Jobs credit annually for a cash refund of up to 3% of the previous year's gross payroll for up to 10 years.
- Companies employing at least 12% of veterans, receive up to an additional 0.5% created for the wages of veterans.
- Investment credit of up to 1.5% of the qualified capital investment expenses for up to 10 years.
- Investment credit can be taken against the Alabama income tax liability and/or utility tax liability.
- Credit is available for up to 10 years for companies selling their output nearby.
- Five-year carry forward, 3-year transferability.
Foreign Trade Zones
Madison County has a designated foreign trade zone that was developed for the existing industry and granted by the Huntsville-Madison County Airport Authority. Learn more about foreign trade zones by viewing the Foreign Trade Zones brochure (PDF) on the Economic Development Partnership of Alabama website.
Full Employment Act of 2011
Businesses with 50 or fewer employees may receive a one-time income tax credit equal to $1,000 per new job paying over $10 per hour.
Heroes for Hire Credit
A one-time $1,000 income tax credit for each recently deployed, and now discharged, unemployed veteran hired and a $2,000 income tax credit to recently deployed, and now discharged, unemployed veterans who start their own businesses. The employer must also meet the requirements of the Full Employment Act of 2011.
Work Opportunity Tax Credit (WOTC)
The WOTC originally expired in 2015 but was extended to December 2019, for new employees hired on or after January 1, 2015. The program is a Federal tax credit available to employers who hire veterans and individuals from other eligible target groups with significant barriers to employment (service-connected disabled veteran or someone who receives food stamp benefits). WOTC can reduce an employer's federal income tax liability by as much as $9,600 per veteran hired. For more information, visit the WOTC Summary, or the U.S. Department of Labor, Employment and Training Administration.
Rebuild Alabama Act (RAA), Annual Grant Program
The RAA grant funds eligible projects through the state Department of Transportation. Grants are awarded for eligible economic and industrial development projects that require, or could benefit from infrastructure improvements such as roadways or bridges.