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?

Plain-English summary

This ruling is the abatement-eligibility side of Alabama's 1992 Tax Incentive Reform Act (the grandfather-clause side appears in Revenue Rulings 92-001 and 93-013).

Company A, a Virginia corporation, announced plans to build an ~$8,000,000 regional distribution center in the City of Gadsden. As in a typical bond-financed incentive deal, a public authority would own the facility and lease it to the company. The center would wholesale motor vehicle supplies, accessories, tools, equipment, and new parts to Company A's own retail stores across the Southeast. The company asked whether that property qualifies as "private use industrial property," which is the gateway to an abatement.

The Act (§ 40-9B-1 et seq.) lets a taxpayer abate noneducational ad valorem taxes and construction-related transaction taxes on "private use property" (§ 40-9B-4(a)) — but only if the property is private use industrial property. The definitions chain together:

• § 40-9B-3(m) — "private use industrial property" is private use property that also constitutes industrial development property;
• § 40-9B-3(e) — "industrial development property" is property acquired in connection with establishing or expanding an industrial or research enterprise in Alabama; and
• § 40-9B-3(f) — "industrial or research enterprise" is defined by reference to specific 1987 Standard Industrial Classification (SIC) codes: Major Groups 20–39, 50 and 51, Industrial Group No. 737, and industry numbers 8731, 8733, and 8734.

So eligibility turned on classifying Company A's business under the SIC Manual. Major Group 50 is "wholesale trade — durable goods" ("establishments primarily engaged in the wholesale distribution of durable goods"), and within it industry No. 5013 — "Motor Vehicle Supplies and New Parts" covers "establishments primarily engaged in the wholesale distribution of motor vehicle supplies, accessories, tools, and equipment; and new vehicle parts." The distribution center fit squarely within Major Group 50, one of the groups § 40-9B-3(f) lists.

Holding: Company A's planned project qualifies as an industrial or research enterprise under § 40-9B-3(f); because the property and construction are for establishing that enterprise, the real and personal property is private use industrial property — and therefore eligible for the Act's abatement of noneducational ad valorem and construction-related transaction taxes.

What this means for you

A distribution/warehouse operation can be "industrial" for abatement

You don't have to be a factory. Alabama's abatement statute defines "industrial or research enterprise" by SIC code, and wholesale-trade durable-goods operations (Major Group 50) — like a regional parts distribution center — can qualify. If your business fits one of the listed SIC groups, the leased-from-a-public-authority property can be private use industrial property eligible for abatement.

Nail down your SIC classification first

The whole determination runs through the 1987 SIC Manual. Identify the industry number that best describes the facility's primary activity (here, 5013, motor vehicle supplies and new parts) and confirm it sits in one of § 40-9B-3(f)'s listed groups (20–39, 50, 51, 737, or 8731/8733/8734). Classification, not the "industrial" label in ordinary speech, decides eligibility.

Eligibility is not the whole abatement

This ruling decides only that the property qualifies as private use industrial property. The Act abates noneducational ad valorem and construction-related transaction taxes — educational portions and other taxes are not abated — and an actual abatement requires the granting authority to approve it under the statute's procedures. Treat this as clearing the threshold, not as the finished abatement.

One taxpayer, one project

Under § 40-2A-5 the ruling is not precedent and binds the Department only as to Company A's facts. Your project's SIC classification and structure need their own analysis.

Common questions

Q: Can a wholesale distribution center get an Alabama tax abatement?
A: Yes, if it qualifies as "private use industrial property." Under this ruling, a center classified in SIC Major Group 50 (wholesale trade — durable goods; here No. 5013, motor vehicle supplies and new parts) is an "industrial or research enterprise" under § 40-9B-3(f), so its property is private use industrial property eligible for abatement.

Q: What taxes can the 1992 Act abate?
A: Noneducational ad valorem taxes and construction-related transaction taxes on qualifying private use property (§ 40-9B-4(a)). Educational portions are not abated.

Q: How does Alabama decide if a business is an "industrial or research enterprise"?
A: By its 1987 Standard Industrial Classification code. Section 40-9B-3(f) lists the qualifying groups: Major Groups 20–39, 50 and 51, Industrial Group 737, and industry numbers 8731, 8733, and 8734.

Q: Can I rely on this ruling for my facility?
A: No. Ala. Code § 40-2A-5 makes revenue rulings non-precedential; this one is limited to Company A's facts. Confirm your own classification and abatement.

Citations and references

Statutes and classification manual:

• Ala. Code 1975 § 40-9B-1 et seq. — Tax Incentive Reform Act of 1992
• Ala. Code 1975 § 40-9B-4(a) — abatement of noneducational ad valorem and construction-related transaction taxes for private use property
• Ala. Code 1975 § 40-9B-3(m) — definition of "private use industrial property"
• Ala. Code 1975 § 40-9B-3(e) — definition of "industrial development property"
• Ala. Code 1975 § 40-9B-3(f) — "industrial or research enterprise" defined by 1987 SIC Major Groups 20–39, 50, 51, Group 737, and Nos. 8731/8733/8734
• 1987 Standard Industrial Classification Manual (U.S. Office of Management and Budget), Major Group 50 (wholesale trade — durable goods), Industry No. 5013 (motor vehicle supplies and new parts)
• Ala. Code 1975 § 40-2A-5 — revenue rulings are not to be used or cited as precedent

Source

• Landing page: Alabama Department of Revenue -- Revenue Rulings
• Original PDF: https://www.revenue.alabama.gov/wp-content/uploads/2022/06/2017_05_RR-93-008.pdf

Original ruling text

ALABAMA DEPARTMENT OF REVENUE
REVENUE RULING 93-008

This document may not be used or cited as precedent. Code of
Alabama 1975, §$40-2A-5(a).

REQUESTOR: Company A

SUBJECT: Qualifications for tax abatements pursuant to
840-9B-1, et seq., Code of Alabama 1975 (Cum.
Supp. 1992).

DATE: August 3, 1993

FACTS

Company A (Taxpayer), a Virginia corporation, has announced
its plans to acquire, construct and equip a regional
distribution center to be located within the city limits of the
City of Gadsden. The capital investment involved is estimated
to be approximately $8,000,000.00. A public authority will own
the facility and lease it to the Taxpayer.

The Taxpayer owns and operates its own retail
establishments throughout the Southeast which will be served by
the facility when completed and placed in service. The facility
will be primarily for the distribution of motor’ vehicle
supplies, assessories, tools, equipment and motor vehicle parts

to the retail locations of the Taxpayer.

ISSUE
Whether private use property to be used by the Taxpayer to
engage in the distribution of motor vehicle supplies,
assessories, tools, equipment and new motor vehicle parts, to

retail establishments owned by the Taxpayer, but located

elsewhere, both within and without Alabama, qualifies as private
use industrial property in accordance with 840-9B-3(m), Code of

Alabama 1975, (Cum. Supp. 1992).

LAW AND ANALYSIS

The Tax Incentive Reform Act of 1992, §40-9B-1, et seq.,

Code of Alabama 1975, CCum. Supp. 1992), provides for the

abatement of noneducational ad valorem and construction related
transaction taxes with respect to private use property
(§40-9B-4(a)). In order for property to qualify, it must be
private use industrial property. Section 40-9B-3(m) defines

private use industrial property as "Private use property that

also constitutes industrial development property.” Section

40-9B-3e) defines industrial development property as "Real

and/or personal property acquired in connection with
establishing or expanding an industrial or research enterprise

in Alabama." Industrial or research enterprise is defined at

8G0-9B-3(f) as "any trade or business described in 1987 Standard
Industrial Classification Major Groups 20 to 39, inclusive, 50
and 51, Industrial Group No. 737, and industry numbers 8731,
8733, and 8734, as set forth in the Standard Industrial
Classification Manual published by the United States Government
Office of Management and Budget.”

In order to determine whether or not Company A's planned
acquisition and development qualifies as = an industrial or
research enterprise, its standard industrial classification must
be determined. The 1987 Standard Industrial Classification

Manual published by the United States Office of Management and

Budget, classifies major group 50 - wholesale trade - durable
goods - as “establishments primarily engaged in the wholesale
distribution of durable goods."™ Within that major group, under
industry group No. 501, the manual provides as follows:

5013 Motor Vehicle Supplies and New Parts

Establishments primarily engaged
in the wholesale distribution of
motor vehicle supplies,
assessories, tools, and equipment}
and new vehicle parts.
Based on the facts as presented, it appears that Company
A's planned project falls squarely within a major group

specified in §840-9B-3(f).

HOLDING
Company A's planned project qualifies as an industrial or

research enterprise as defined by 8460-9B-3(f), Code of Alabama

1975 (Cum. Supp. 1992). The property and equipment to be
acquired as well as any construction to be accomplished is for
the purpose of establishing this enterprise. Therefore, the

real and personal property is private use industrial property.

GEORGE Er ay M apiciedsper, Ill
Actiffig Commissiomér of Revenue

GEM:CEP:eb80