Alabama State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in Alabama, with full citations and the original source on every page.
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If a company owns Industrial Development Board bonds that financed its own leased facility, can it still deduct that bond investment from its franchise-tax capital, and exclude the bond interest from income tax — even after paying big dividends to its parent and even though it borrowed the money to buy the bonds?
Yes to all. In a large Industrial Development Board (IDB) bond-financed manufacturing deal, the Taxpayer owned the IDB's bonds (bought with capital contributed — and partly borrowed — by its parent) a…
If an out-of-state pension fund invests in Alabama only as a limited partner — and registers as a foreign corporation just to make its contracts enforceable — is it 'doing business' so as to owe Alabama franchise and income tax?
No to both taxes. Entity A, an out-of-state public-school retirement fund (a trust with 'corporate powers,' investing ~$64.35 million as a limited partner in a tiered partnership that owns an Alabama …
An Industrial Development Board leased property to a company before Alabama's 1992 Tax Incentive Reform Act, but the company forgot to give the written notice needed to renew the lease. Does missing that notice make the property taxable, or does the pre-1992 tax exemption continue?
The exemption continues. Company A leased Industrial Development Board (IDB) property under a 1976 lease with a written option to renew by about November 1, 1991. It forgot to give the written renewal…
Do ostriches, emus, and rheas (ratites) raised for slaughter qualify for the same Alabama tax breaks as 'poultry' — the sales/use tax exemptions, the reduced machinery rate, and the ad valorem exemption?
Yes. The Department ruled that ostriches, emus, and rheas — flightless birds called ratites, raised for slaughter for meat and by-products — are included within 'poultry' for Alabama tax purposes and …
Are the entry fees participants pay to enter a tournament subject to Alabama sales (amusement) tax when the organizer collects the fees and pays them all back out to participants as prize money?
No. A 501(c)(3) sponsor ran a national tournament hosted in one Alabama city in 1994 and another in 1997, drawing more than 50,000 entrants who each paid an entry fee. Alabama's § 40-23-2(2) imposes a…
In a bond-financed Industrial Development Authority (IDA) manufacturing project, which Alabama taxes get abated or exempted — deed recording tax, mortgage tax, sales and use tax, ad valorem tax, income tax on rent and bond interest, and the IDA's lease tax?
It depends on the tax and the document. In this IDA (Industrial Development Authority) bond-financed manufacturing project under the Tax Incentive Reform Act of 1992 (§ 40-9B-1 et seq.), the Departmen…
If a company buys or builds equipment mainly to control air and water pollution — vapor recovery systems, leak detectors, cathodic protection, double-wall tanks, cleanup gear — is that equipment exempt from Alabama sales, use, and property tax, and deductible for franchise and income tax?
Mostly yes. Company A, an Alabama petroleum business, planned to buy or self-construct five kinds of environmental equipment (vapor recovery systems, in-line leak detectors, cathodic protection, doubl…
When a state, county, city, and industrial development authorities give a company a free plant site, cash reimbursements, grants, and other incentives to locate a factory in Alabama, is the value of those inducements taxable as corporate income — or excludible as a gift?
Excludible as gifts. To induce Company A to build a production facility in Alabama, the State, a county, a city, and two industrial development authorities signed agreements giving Company A a free pl…
Does a company's new regional distribution center — one that wholesales motor vehicle parts and supplies to the company's own retail stores — qualify as 'private use industrial property' so it can get an Alabama tax abatement under the 1992 Tax Incentive Reform Act?
Yes. Company A, a Virginia corporation, planned an ~$8,000,000 regional distribution center in Gadsden — owned by a public authority and leased to the company — to wholesale motor vehicle supplies, ac…
If an Industrial Development Board buys new equipment to replace worn-out equipment at a facility it leased to a company before Alabama's 1992 Tax Incentive Reform Act took effect, is the replacement equipment still exempt from ad valorem (property) tax?
Yes. The Department held that the replacement equipment is exempt from all taxation. Company A leased an Industrial Development Board-owned brick-manufacturing facility under a 1989 lease — before the…
When a company ships everything into Alabama from out of state and makes few Alabama sales, does the corporate income tax 'throwback rule' overstate its Alabama sales factor — and can it apportion on a destination basis instead? And how is it classified for franchise tax?
The Department granted relief. Company A (an out-of-state corporation with a new Alabama distribution facility) showed that Alabama's income-tax 'throwback rule' — which attributes a sale to Alabama w…
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These are official tax letter rulings and advisory opinions issued by Alabama's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.