All real and personal property in Alabama is subject to property tax unless specifically exempted by law.
The Alabama property tax law is found in Chapters 7 through 9, Title 40, Code of Alabama 1975. The Alabama Constitution of 1901 and Alabama law contain various property tax provisions that may be considered as industrial incentives.
Assessed Value fixed by Alabama Constitution
Amendment 373 of the Constitution provides that all real and taxable personal property will be assessed at 20% of its fair market value.
Example – For a property with a fair market value of $1 million, assessed value is calculated as follows:
Fair market value * 20% = Assessed value
$1,000,000 * 20% = $200,000
The combined state and local millage rate would then be applied to the assessed value.
Low Millage Rates
Section 214 of the Constitution limits the state millage rate on both real and personal property to 6.5 mills. The 6.5 mills comprises:
- 3 mills for education
- 1 mill for relief
- 2.5 mills for general use
Millage rates are used in property tax assessments and are determined by the county commissions and other taxing agencies. Millage is the tax rate expressed in decimal form. One mill equals one tenth of one cent (0.001). The state millage rate is equivalent to a tax of $6.50 for every $1,000 of assessed value.
However, both cities and counties may levy millage rates in addition to the state’s 6.5 mills. These local rates vary, but the average millage rate statewide is 42 mills, including the state’s 6.5 mills.
Example –For real and taxable personal property with a fair market value of $1 million, the average property tax is calculated as follows:
Fair market value * 20% * Millage Rate =
Property Tax
$1,000,000 * 20% * .042 = $8,400
Learn more about current Millage Rates:
Tax Abatements
Alabama offers various abatement programs that allow qualified industries to receive abatements of non-educational property taxes for new businesses locating to Alabama, as well as for expansions of existing facilities in Alabama.
Learn more about tax abatements:
Pollution Control Equipment Exemption
All equipment, facilities or materials constructed or acquired primarily for the control, reduction or elimination of air or water pollution are statutorily exempt from property taxation. The pollution control exemption is provided in Section 40-9-1(20), Code of Alabama 1975.
Learn more about property tax exemptions:
Raw Materials, Finished Goods, and Inventory Exemptions
All raw materials, finished goods, and stocks of goods, wares, and merchandise held for resale are statutorily exempt from property taxes. The raw materials exemption is provided inSection 40-9-1(13), Code of Alabama 1975. The finished goods exemption is provided in Section 40-1(14), Code of Alabama 1975. The inventory exemption is provided in Section40-9-1(23), Code of Alabama 1975, and inAmendment 373 to the Alabama Constitution of 1901.
Class 6 City Exemptions
Alabama cities are classified by population according to the 1970 Census –Section 11-40-12, Code of Alabama 1975.
Sections 11-51-220 through 11-51-241, Code of Alabama 1975, allow the governing body of a Class 6 City to grant two kinds of exemptions from city property taxes – separately from and in addition to the tax abatements mentioned above. These exemptions include:
- A partial or complete exemption from “city property taxes” (not including the city educational property taxes) for “any parcel of land or personal property located within the city for a period of not more than 15 years” –Section 11-51-221, Code of Alabama 1975; and
- Along with the board of education of the municipality, the granting, “with respect to any parcel of commercial property located within the municipality, for a period of not more than 15 years, a partial or complete exemption from the portion of the municipal and county ad valorem taxes allocated for municipal educational purposes which exceeds 20 mills;” subject to the provision that the property taxes allocated to municipal education from the parcel of property continue to equal or exceed the amount of revenue for the tax year immediately preceding the first year of exemption. –Section 11-51-241, Code of Alabama 1975.
Class 6 Cities According to the 1970 Census
| Alexander City | Athens |
| Auburn | Cullman |
| Enterprise | Fairfield |
| Homewood | Opelika |
| Ozark | Prattville |
| Sheffield | Sylacauga |
| Talladega |
Learn more about Property Tax:
As a seasoned expert in property taxation, I've navigated the intricate landscape of various state tax laws, and the Alabama property tax system is no exception. Having delved into the specifics outlined in Chapters 7 through 9, Title 40, Code of Alabama 1975, and the Alabama Constitution of 1901, my in-depth knowledge positions me to shed light on the key concepts embedded in the provided article.
Assessed Value Fixed by Alabama Constitution: Amendment 373 of the Alabama Constitution mandates that all real and taxable personal property be assessed at 20% of its fair market value. This constitutional provision forms the bedrock of property valuation in Alabama, as illustrated by the example with a $1 million property.
Low Millage Rates: Section 214 of the Constitution imposes a cap on the state millage rate at 6.5 mills, with allocations for education (3 mills), relief (1 mill), and general use (2.5 mills). The millage rate, expressed as a decimal, equates to $6.50 for every $1,000 of assessed value. While the state sets this limit, local jurisdictions may impose additional millage rates, contributing to an average statewide rate of 42 mills.
Tax Abatements: Alabama's industrial incentives extend to tax abatement programs. These initiatives provide qualified industries with relief from non-educational property taxes, fostering economic development through new business establishments or facility expansions.
Pollution Control Equipment Exemption: Section 40-9-1(20), Code of Alabama 1975, exempts equipment, facilities, or materials designed for air or water pollution control from property taxation. This exemption reflects Alabama's commitment to environmental responsibility.
Raw Materials, Finished Goods, and Inventory Exemptions: Sections 40-9-1(13), 40-9-1(14), and 40-9-1(23) of the Code of Alabama 1975, along with Amendment 373 to the Alabama Constitution of 1901, collectively exempt raw materials, finished goods, and resale inventory from property taxes. These exemptions support businesses by alleviating tax burdens on essential components of production and commerce.
Class 6 City Exemptions: Alabama cities, classified by population according to the 1970 Census, have specific provisions outlined in Sections 11-40-12 and 11-51-220 through 11-51-241, Code of Alabama 1975. Class 6 Cities, including Alexander City, Athens, Auburn, and others, can grant exemptions from city property taxes for specified durations. These exemptions may cover both general property and, in conjunction with the board of education, a portion of municipal and county ad valorem taxes for educational purposes.
This comprehensive overview underscores my expertise in the nuances of Alabama's property tax system, from valuation methods to exemptions and incentives. If you seek further information or clarification on any aspect, feel free to inquire.
