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-.08 - Taxability Of Property - Chapter 9G

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, 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 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, Chapter 9B.