Alabama Administrative Code Chapter 810-17-1 — Economic Tax Incentives

810 Alabama Department of Revenue

Ala. Admin. Code r. 810-17-1-.01 Economic Tax Incentives Reporting

(1) Scope. This rule sets forth guidelines and procedures to be used by State Agencies that are required to file annual Economic Tax Incentive reports to the Legislature as required by Act 2016-389.

(2) Definitions. For purposes of this rule, these terms shall be defined as follows:

(a) Department. The Alabama Department of Revenue.

(b) Economic Tax Incentive or Tax Incentive. Any tax credits, deductions, exemptions, abatements, preferential rates, rebates, or other benefits where the government promises to forgo tax revenues, and in exchange the taxpayer agrees to take some action that contributes to economic development.

(c) State Agency. Any office, department, board, commission, institution, or division within the executive branch of state government, excluding the Alabama Department of Revenue, which administers an Economic Tax Incentive by a legal requirement or authorization to undertake any of the following actions:

1. Promulgation of rules or regulations related to the Economic Tax Incentive;

2. Determines, reviews, or confirms eligibility or qualification of the Economic Tax Incentive;

3. Enters into contracts with an entity or individual related to a Tax Incentive;

4. Facilitates Economic Tax Incentives by distributing funds to non-state agencies; and

5. Conducts oversight or substantial administrative functions for an Economic Tax Incentive when the public purpose associated with the Economic Tax Incentive is within the core mission of the agency.

(3) Reporting Requirements. Each Economic Tax Incentive shall be reported separately. If more than one State Agency is required to file a report on the same Economic Tax Incentive, the report shall be prepared collaboratively, by such State Agencies. If such State Agency does not know or cannot determine the answer to any of the information requested, the State Agency should state that the answer is unknown and further state whether it is unknown because the underlying source data does not exist or because the State Agency lacks the expertise to provide the data. Each State Agency that administers a Tax Incentive shall prepare and submit an annual report to the Legislature regarding the Tax Incentive based on the following format and criteria:

(a) Section One shall encompass the purpose of the Economic Tax Incentive and shall report whether or not each Economic Tax Incentive has been successful in meeting the purpose for which it was enacted, in particular, whether each Economic Tax Incentive benefits those originally intended to be benefited, and if not, those who have benefited. This shall include, but is not limited to:

1. A description of the Tax Incentive. The description shall include the initial statement of purpose of the Tax Incentive as provided for in the enabling legislation, the name(s) of the agency administering the Tax Incentive, a description of the Tax Incentive and how it is calculated or awarded, the history of the Tax Incentive which shall include when and under what authority the Tax Incentive was created, including any amendments to the statute and any departmental rules associated with the Tax Incentive;

2. The goals of the Tax Incentive and whether or not the Tax Incentive has been successful in meeting these goals. For example, if a job creation incentive includes wage thresholds for a business to qualify, a goal for the tax incentive program would be to create high-paying jobs;

3. A description of the intended beneficiaries of the Tax Incentive, including any tax types to which the Tax Incentive applies to or is designated. This description shall include the activities the Tax Incentive is intended to promote and the effectiveness of the Tax Incentive in promoting those activities. Describe how and why such recipients benefit from such Tax Incentive.

(b) Section Two shall encompass the impact of the Economic Tax Incentive and shall report whether or not the state receives a positive return on investment, specifically the direct and indirect impact on state and local tax revenues, from the business or industry for which the Economic Tax Incentive is intended to benefit and any other economic benefits produced by such Tax Incentive. If applicable, this shall include, but is not limited to:

1. The number of taxpayers applying for, qualifying for and claiming the Tax Incentive, and the Tax Incentive amounts (in dollars) claimed by taxpayers in the reporting year;

2. The number of taxpayers applying for, qualifying for and claiming the Tax Incentive, and the Tax Incentive amounts (in dollars) claimed by taxpayers since the creation of the Tax Incentive, if available;

3. The amount of Tax Incentives that could be carried forward and the length of time the Tax Incentive can be carried forward;

4. The amount of Tax Incentives that have been transferred, if applicable, and the amount that the credit(s) were discounted when they were transferred;

5. The amount of fees and/or other transaction costs associated with the Tax Incentive, including but not limited to application fees and transferability fees;

6. The estimated cost of administering the Tax Incentive;

7. The number of direct jobs created by the Tax Incentive;

8. The timing between awarding the Tax Incentive and creation of jobs and/or investment, and the maintenance of any job creation requirement;

9. Describe any caps associated with the Tax Incentive (identify if fiscal year or calendar year) and whether or not the cap was met for each year the Tax Incentive was in existence. Include the number of taxpayers who were denied a Tax Incentive due to the cap being in place;

10. Describe any penalties, including clawback provisions, associated with noncompliance of the Tax Incentive;

11. Provide an estimate of the indirect economic activity stimulated by the Tax Incentive. This shall include an estimate of any tax benefits that have been sourced outside of Alabama; and

12. Any other information necessary for the State Agency to comply with the requirements of the Act.

(c) Section Three shall encompass the economic results of each Economic Tax Incentive, taking into account the extent to which the Tax Incentive successfully changes business behavior, and the unintended or inadvertent effects, benefits, or harm caused by the Economic Tax Incentive, including whether the Economic Tax Incentive conflicts with other state laws or regulations. This shall include, but is not limited to:

1. Any results the Tax Incentive has on Alabama’s economy. Indicate whether or not the Tax Incentive is successfully influencing business decisions and describe how this is being determined;

2. Any evidence that the Tax Incentive is or has changed business behavior, as opposed to rewarding businesses for what they would have done anyway;

3. How the Tax Incentive is effecting businesses beyond those that benefit directly from the Tax Incentive;

4. Any potential changes to the design or administration of the Tax Incentive that could lead to better results. If possible, indicate if the Tax Incentive could be made more effective through legislative changes;

5. State whether or not the State Agency could accomplish the same purpose or goal of the existing Tax Incentive through a non-tax incentive or subsidy, such as a normal budgetary expenditure, and do it more effectively or efficiently. Explain your reasoning; and

6. The methodology and assumptions of the review, analysis, and evaluation of the Tax Incentive.

(4) The Department shall, when available and upon written request, provide State Agencies, the total amount of Tax Incentives claimed, number of taxpayers claiming the Tax Incentives, calendar year for which the Tax Incentives are claimed and any other information needed in preparing the report. State Agencies must submit the request by November 1 of each year, beginning in 2017. The Department shall notify the State Agency in a timely manner if such Tax Incentive information is not available. The tax information shall be provided to the State Agency in the aggregate to protect the confidentiality of the taxpayers provided for under Section 40-2A-10, Code of Ala. 1975.

(5) Economic Tax Incentive Reports shall be submitted no later than the second Legislative day of each Regular Session beginning in the 2018 Regular Session of the Legislature and each year thereafter. Such reports shall be provided to the Clerk of the House of Representatives and Secretary of the Senate with a copy to the Legislative Fiscal Office and the Alabama Department of Revenue.

(6) The Department shall prepare, beginning with the 2018 Regular Session of the Legislature, a four-year schedule of all the Economic Tax Incentives to be reported. Each State Agency must provide the Department with a list of Tax Incentives it administers, the name of the administering agency(ies), the statutory authority authorizing the Tax Incentive, the effective date and expiration date, if applicable of each Tax Incentive. The list shall be provided to the Department prior to January 1, 2018, and every fourth year thereafter.

History

• Author: Kelly Graham
• Authority: Code of Ala. 1975, §§40-2A-7(a)(5), and Act 2016-389.
• New Rule: Filed February 24, 2017; effective April 10, 2017.

Ala. Admin. Code r. 810-17-1-.02 Sweet Home Alabama Tourism Investment Act – General Guidelines

(1) Purpose. This rule sets forth guidelines and procedures to be used by the department in the administration of the Sweet Home Alabama Tourism Investment Act, as codified in Article 22A of Chapter 18 of Title 40, Code of Ala.1975, which provides for a tax rebate to qualifying approved companies.

(2) Definitions. For purposes of this rule, all terms except the terms explicitly provided below, are defined in §40-18-470.

(a) DEPARTMENT - The Alabama Department of Revenue.

(b) PROJECT – Certified Tourism Destination Project as defined in §40-18-470.

(c) TRANSACTIONAL TAXES – State and local sales tax, state and local lodgings tax, and state and local rental tax, generated by or arising within the approved tourism destination project.

(d) TOURISM FUND - Tourism Project Sales Tax Incentive Fund.

(3) Local Resolution. The municipality or taxing district issuing the resolution in support of the project within their jurisdiction must specify the percentage of municipal taxes committed to the project.

(a) Non-state administered localities must outline in their resolution the mechanism by which they intend to disburse the rebates within their jurisdiction to the approved company for those local transactional taxes not administered by the department.

(b) Within 30 days of receiving approval for the project from the Tourism Department, the approved company must submit a copy of the local resolution to the department.

(4) Tourism Project Tax Accounts. Once the project phases open for business, the approved company must provide the department with a list of all state and local transactional tax accounts associated with the project online through the department's My Alabama Taxes. In the month following this notification from the approved company, the department shall begin making the required diversions into the Tourism Fund.

(a) The department shall divert 100% of the state transactional taxes generated by or arising within the project to the Tourism Fund until 80% of the state’s maximum annual diversion is reached.

(b) (i) Unless otherwise specified in the local resolution, the department shall divert 100% of the state administered local transactional taxes generated by or arising within the project to the Tourism Fund until the 20% of the municipality’s maximum annual diversion is reached.

(ii) The department shall make reports available to each state administered locality on the total monthly amounts diverted to the Tourism Fund and the tax accounts for which the diversions were made. The department shall notify each state administered locality on the total rebate amount and related tax accounts issued to the approved company 14 days after each rebate is issued.

(c) (i) If a local transactional tax is non-state administered, the locality must provide a mechanism to disburse the rebate, within their jurisdiction, generated by or arising within the project to the approved company no later than July 31 and December 31 of every year the rebate is valid.

(ii) The department shall make reports available to each non-state administered locality on any monthly amounts and accounts filed in One Spot that are identified as attributable to the project.

(d) The department shall only redirect transactional taxes from state and local sales tax accounts with permanent presence within the project. Taxes from temporary or passing vendors, such as those setting up booths for specific events, will not be diverted to the Tourism Fund.

(e) The approved company bears the responsibility of promptly notifying the department of any changes to the state and local transactional tax accounts associated with their project within 14 business days of the change.

(5) Rebate Disbursement. To initiate the rebate process, the department must receive the certification from The Alabama Tourism Department approving the project, a copy of the corresponding resolution from the local municipality, and the list of state and local transactional tax accounts from the approved company. The certification must include the maximum rebate awarded to the approved company.

(a) The department shall issue two rebate payments each year on July 31 and December 31 over a period of 10 years commencing on the date the tourism attraction opens for business and begins collecting transactional taxes generated by or within the project, or until the full certified award has been rebated to the approved company. All tax rebates must be first applied to any outstanding tax obligations of the approved company that is due and payable to the state. An approved company may receive a total rebate up to the amount certified by the Tourism Department, with a maximum annual rebate in a calendar year of up to $1,000,000.

(b) The approved company must provide any new or updated state and local transactional tax account numbers to ensure rebate payments are made from those accounts.

(c) Non-state administered localities must certify to the department, on or before the rebate due date, the amounts of local rebates to be issued and the scheduled date for rebate payments to the approved company.

(d) In no event will any rebates be issued until the project is certified by the Tourism Department and before the project commences business and begins to collect taxes generated by or within the tourism destination project.

(6) Examination of Records. The department may examine records, books, or other relevant information maintained by the taxpayer for the purpose of computing and determining the correct amount of the rebate.

History

• Author: Preeti Gratz and Kelly Graham
• Authority: Code of Ala. 1975, § 40-2A-7(a)(5), and Title 40, Chapter 18.
• New Rule: Published November 27, 2024; effective January 11, 2025.

Ala. Admin. Code r. 810-17-1-.03 Rural Hospital Investment Tax Credit - General Guidelines

1. Purpose. This rule sets forth guidelines and procedures to be used by the department in the administration of the Rural Hospital Investment Tax Credit as codified in Article 29 of Chapter 18 of Title 40, Code of Ala. 1975.

2. Definitions. For the purposes of this rule, all terms except the terms provided below, are defined in §40-18-551, Code of Ala. 1975.

3. 1. TAX YEAR – The calendar year or fiscal year used by a qualified donor to file their Alabama state tax return.

4. Tax Credits. A qualified donor may claim a tax credit to offset eligible taxes for each qualified donation as follows:

5. 1. A donor filing Single, Head of Household, or Married Filing Separately may claim 100 percent of the qualifying donation, not to exceed $15,000.
6. 1. A donor filing Married Filing Jointly may claim 100 percent of the qualifying donation, not to exceed $30,000.
7. 1. A pass-through entity may claim 100 percent of the qualifying donation, not to exceed $450,000.

i. The credit shall be allocated to the owners of the pass-through entity on a pro rata basis. Owners receiving an allocated share of the credit may claim the credit subject to the applicable limitations provided in this section.

1. 1. A corporation may claim the lesser of 100 percent of the qualifying donation or 75 percent of their income tax liability, not to exceed $500,000.
2. 1. A financial institution may claim the lesser of 100 percent of the qualifying donation or 75 percent of the state portion of their financial institution excise tax liability, not to exceed $500,000.
3. 1. An insurance company may claim the lesser of 100 percent of the qualifying donation or 75 percent of their insurance premium tax liability, not to exceed $500,000.
4. 1. A donor holding a utility tax direct pay permit may claim 100 percent of the qualifying donation against the utility taxes levied in §§40-21-82 through 40-21-107, Code of Ala. 1975, not to exceed their utility taxes paid.

5. Donation Conditions. A donation must be monetary in value and may not include services, forgiveness of debt, barter, or non-cash assets. A donor may not claim an income tax deduction on their state tax return for the same donation for which the credit is utilized.

6. Credit Reservation. To be eligible for the tax credit, a qualified donor must first reserve a tax credit by pledging a donation.

a. Reservations must be made through the department’s online system and shall be awarded on a first-come, first-served basis, subject to the annual aggregate limits set by the Act.

b. A donor may make a credit reservation for a specified eligible rural hospital subject to the maximum amount of contributions for such eligible rural hospital.

c. A donor intending to make an unspecified monetary donation may make a reservation to a listed third party. Such donation shall be allocated by the third party according to the ranking provided by the Rural Hospital Investment Program Board to an eligible rural hospital that has not yet received the maximum amount of contributions.

6. Credit Award Process. A donor must make a monetary donation to the eligible rural hospital or third party no later than 30 days after reserving the credit through the department’s online system.

a. The monetary donation must be equal to the amount reserved through the department’s online system. A credit cannot exceed the reserved amount, regardless of whether the monetary donation is greater than the reserved amount.

b. Within 30 days of receiving the monetary donation, but no later than 60 days of the donor’s reservation date, the eligible rural hospital or third party must certify to the department that it has received the donation before the credit will be awarded to the donor. A third party must report the allocation of the donation to the department.

c. A monetary donation that is not certified by the eligible rural hospital or third party within the provided timeframe shall be voided and the funds originally reserved will revert to the annual fund.

7. Claiming the Credit. The credit is available each year beginning January 1, 2026, for the 2026 tax year. No credit may be claimed after tax year 2028. However, any unused credit may be carried forward for up to three years but shall not be transferable. The credit is effective in the tax year that the credit reservation is made.

8. Alabama Special Mental Health Fund. The tax credit shall not reduce the distribution for the Alabama Special Mental Health Fund.

History

• Author: Mollie Harry and Preeti Gratz
• Authority: Section 40-2A-7(a)(5) and Article 29 of Chapter 18 of Title 40, Code of Ala. 1975
• New Rule: Published October 31, 2025; effective December 15, 2025.