Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...
By Chris Marr
Alabama created another local property tax break for economic development as Gov. Kay Ivey (R) signed legislation Feb. 6 to help secure a recently announced Toyota/Mazda manufacturing plant.
Alabama S.B. 98 / Act No. 2018-53 lets counties abate the additional or rollback ad valorem taxes that property owners would normally pay when converting agricultural property to a higher-value use, such as commercial or industrial. The abatement represents a small fraction of the approximately $700 million in state and local incentives and tax breaks offered for the project, which promises to create 4,000 jobs and make $1.6 billion in capital investments.
“Alabama is a business-friendly state, and this bill is further proof that we want companies who chose Alabama to thrive,” Ivey said in a written statement Feb. 6.
Ivey signed the bill into law, which takes effect immediately, to ensure that Huntsville and Limestone County, Ala., can fulfill the tax abatement promises made to Mazda Motor Corp. and Toyota Motor Corp., her office said in a written statement. The companies announced plans in January to jointly build a vehicle manufacturing plant that is expected to produce 300,000 vehicles per year, including Toyota Corollas and a new Mazda crossover vehicle.
To attract the manufacturing plant, the state expects to provide $380 million in tax breaks and incentives, while local governments kick in another $320 million.
Of those totals, Huntsville is providing a 20-year abatement of local property taxes, excluding school taxes, that’s worth $107 million. The state incentives include projected investment tax credits of $210 million over 10 years and job tax credits of $90 million over 10 years, assuming the companies meet their promised job creation and capital investment amounts.
The state and local governments also are assisting with the cost of infrastructure improvements such as widening roads and building rail spurs.
Toyota already operates an engine manufacturing plant nearby, about 14 miles away from the site of the planned Toyota-Mazda factory.
Alabama tax laws allow owners of agricultural property to have their land assessed at a “current use” value, which saves them from paying the property taxes on a higher fair-market value.
But if agricultural land is converted to another use, then local tax assessors must reassess the land at fair-market value and require the landowner to pay back additional ad valorem taxes for the prior three years to account for the difference in current-use and fair-market valuations.
The new law that Ivey signed allows counties to abate that additional rollback ad valorem tax for any economic development project that brings at least $50 million in new capital investment and meets the job creation requirements of the Alabama Jobs Act. To qualify for the jobs act credits, companies must create at least 50 jobs. For companies in targeted industries—which include chemical manufacturing, data centers, engineering, and others—there’s no minimum number of jobs required to qualify.
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