Ad Valorem Tax Deduction Deadline Approaching

Dear HBAA Member:

This year, the Alabama Legislature passed Act 2011-544 (“Act”) that reduces ad valorem taxes by 50% on inventoried houses and underlying lots for a period of 24 months by changing the classification from class II to III. Such change in classification is dependent on the taxpayer filing an application to claim the reclassification.

There are serious differences of opinion and interpretation between the HBAA and the Alabama Department of Revenue. The Department of Revenue has interpreted the Act to be considered only for subsequent tax years, i.e., 2011 and 2012.

On the issue of inventoried houses and underlying lots, it is the view of our tax counsel, advisors and the leadership of the association that any builder currently holding an inventoried house or a house that was under construction prior to 9/1/11 needs to file a reclassification form with their county tax office by 9/30/11 in order to even argue for reclassification for the current year.

The Department of Revenue is responsible for guidance in the processing of this Act; however, they have yet to release an application or information about the process. As a result, the HBAA suggests that you use the attached checklist in applying for the property reclassification for your inventoried house(s) to your respective tax office.

Attached is the checklist that we suggest you use. Your tax official has no formal application or application process for this reclassification. Since the deadline for reclassification of property must be applied for by 9/30/11, you cannot wait until they do. YOU WILL HAVE TO MODIFY THEIR EXISTING APPLICATION OR PROVIDE THEM WITH THE INFORMATION CONTAINED IN THE ATTACHED CHECKLIST IN ORDER TO GET THIS RECLASSIFICATION!

Another provision of the Act provides for a two year window that reduces the tax rate on inventoried lots by 50%. The reduced rate for lots will be for the 2011 and 2012 tax years according to the Act.

We understand that this process is complex and potentially confusing. If you have questions, call me or Jason Reid at 1-800-745-4222.


Russell Davis
Executive Vice President

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