USA – ALABAMA Law and Practice Contributed by: Adam J. Sigman, Crystal H. Walls, Nathan Stotser, Katie Sinclair and Courtney Bradshaw, Dentons
If the lienor’s work is commenced prior to the “creation” of a mortgage on the property, the lien will take priority over the mortgage; otherwise, the lien will be junior to the mortgage (Section 35-11- 211). Liens may be removed from the property by transferring the lien to a bond using the statutory framework found in Section 35-11-233. 7.7 Requirements Before Use or Inhabitation Each governmental jurisdiction has a building inspector’s office, which must issue a certificate of occupancy prior to the project being inhab - ited, and which establishes standards for con - struction in its respective jurisdiction. Inspec - tions are typically required to be conducted, and passed, prior to each phase of the work. Alabama imposes a recording tax upon the fil - ing of a deed or similar instrument conveying an interest in real estate with the county probate court where the real property is located (Section 40-22-1 et seq); the tax is USD0.50 per USD500 (rounded up) of value for the property conveyed. The obligation to pay the recording tax is on the buyer. However, the parties do commonly negotiate the economic burden in real estate sales contracts. Under Alabama law, a deed or other instrument conveying such property must include a Real Estate Sales Validation Form (RT-1) provided to the county probate court at the time the instrument is presented to the probate court for recording. This form must include either proof of the actual purchase price (if the property is being sold) or the actual value of the property (which 8. Tax 8.1 VAT and Sales Tax Recording Tax
may be evidenced by a licensed appraisal or the assessor’s current value for the property). Income Tax Alabama imposes an income tax that is similar to the federal income tax system (Section 40-18-1 et seq). The maximum Alabama marginal income tax rate on taxpayers other than C corporations is 5%. The maximum Alabama marginal income tax rate on C corporations is 6.5%. The seller must report the gain on the sale of the real prop - erty in its annual income tax return. Unlike fed - eral income tax law, Alabama’s income tax law does not contain a preferential rate for long-term capital gains. Withholding of Income Tax Alabama imposes a withholding of income tax in connection with sales by non-Alabama resident taxpayers (Section 40-18-86). No withholding is required if the seller is an Alabama resident or “deemed” resident, provided the seller provides a duly completed affidavit confirming such resi - dency (AL Form NR-AF1). Certain limited types of transactions are exempt from non-resident withholding under Section 40-18-86 (AL Form NR-AF3). If the seller is not an Alabama resident, and if the transaction is not an exempt transaction, the buyer is generally required to withhold either 3% (where the buyer is an individual) or 4% (where the buyer is an entity) of the purchase price. However, if the gain recognised on the sale is less than the purchase price, and the seller provides the buyer with an Affidavit of Seller’s Gain (see AL Form NR-AF2), the buyer may withhold 3% or 4% of the amount of the gain. If the amount to be withheld, as based on the purchase price or the gain, is greater than the net proceeds of the trans - fer, then only the net proceeds need to be with -
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