Alabama Administrative Code › Title 810 - ALABAMA DEPARTMENT OF REVENUE › Chapter 810-4-3 - REQUIREMENTS FOR ASSESSING AND GRANTING OF ABATEMENT OF NONEDUCATIONAL AD VALOREM TAXES ON CERTAIN INDUSTRIAL PROPERTY › Section 810-4-3-.02 - Taxability Of Property - Chapter 9B

Current through Register Vol. 42, No. 9, June 28, 2024
(1) Private use property is any real and/or
			 personal property treated as owned by a private user for Federal Income Tax
			 purposes even though title may be held by a public authority, municipal, or
			 county government. A private user is any individual, partnership, or for-profit
			 corporation treated as the owner of private use property for Federal Income Tax
			 purposes. Private use property is subject to Ad Valorem Tax, if the private
			 user held title to the property when a public authority, county, or municipal
			 government has title to or a possessory right (i.e. leasehold interest) in the
			 private use property.
(2) Private
			 use property will not be subject to Ad Valorem Tax if a private user was
			 entitled to use the property pursuant to a lease or other agreement entered
			 into before May 21, 1992 or would be entitled to use the property at some
			 future time pursuant to an inducement entered into before May 21, 1992. This
			 exemption applies only to the property and the amount of capital expenditures
			 set out in the inducement, subject to de minimis deviations. The inducement
			 must be reflected in an official document. The private use property becomes
			 taxable at the end of the lease term or the end of the lease, whichever occurs
			 earlier.
(3) The term "de minimis
			 deviations" as used in Title 40, Chapter 9B,
Code of Ala.
			 1975
, and in this rule means, the amount of capital expenditures
			 for private use property, not exceeding 10 percent in the aggregate of the
			 amount set forth in the inducement or lease or other agreement. Data processing
			 center projects as defined in §
								40-9B-3,
Code of Ala. 1975
, are subject to the investment
			 thresholds and the de minimis deviations standards do not apply.
(4) A lessee of property from a public
			 authority, county, or municipal government is treated as the owner of the real
			 and/or personal property for Federal Income Tax purposes in accordance with
			 Internal Revenue Service Rules and Regulations and Generally Accepted
			 Accounting Principles.
(5) The
			 treatment of a private user as owner for Federal Income Tax only applies to
			 property owned by a county, city, or public authority.
(6) Once property becomes private use
			 property, it will not lose its status as private use property because of a
			 change in accounting procedures or a change from a capital lease to an
			 operating lease.
(7) When any lease
			 or agreement entered into before May 21, 1992 expires, the property covered by
			 the lease or agreement will become taxable. If the old lease contains a
			 separately stated option to renew for a clearly defined and limited period of
			 time, and the option is properly exercised, the property will remain exempt for
			 the renewal period as long as it conforms precisely to the terms of the
			 option.
(8) Changes, alterations,
			 or rewrites of a lease for refinancing purposes will not alter the exempt
			 status of the property. Changes must be consistent with the original terms of
			 the lease, and not extend the term of the initial or permitted renewal
			 term.
Author:
Jennifer D. Byrd
Statutory Authority:
Code of Ala.
				  1975
, §
										40-2A-7(a)(5),
				  Title 40, Section 9B.