A quiet update to Alabama's tax abatement rules could change which restaurants qualify for breaks on construction and property taxes—but only if you know to look.
Most Alabama restaurant owners don't realize their eligibility for state tax abatements may have shifted without them knowing. The reason: Alabama just updated how it classifies businesses for tax purposes, and that change could directly affect your tax bill.
Here's what happened. Alabama's tax abatement programs—which reduce taxes on construction, property, and recording fees for qualifying businesses—have long relied on a federal classification system called NAICS codes. Alabama was using the 2012 version of these codes. House Bill 393, signed into law, updates that reference to the 2022 NAICS classification system, effective June 1, 2026.
The jump from 2012 to 2022 classifications isn't just a technical housekeeping task. The federal government reclassifies and creates new industry codes every few years as the economy changes. Some restaurant-related business codes have shifted or been consolidated. For example, certain food service operations that fell under one code in 2012 may now fall under a different code in 2022—or vice versa.
This means two things could happen to your restaurant:
You might newly qualify for abatements on construction transaction taxes, noneducational ad valorem taxes (property taxes), and mortgage and recording taxes if your operation now fits a code that qualifies under the 2022 system.
You might lose qualification if your business reclassified into a code that doesn't qualify under the updated rules.
The abatements themselves haven't changed—the law still offers the same tax breaks. What's changed is which business classifications get access to them.
The provision is found in Alabama Code §40-9B-3(a)(14), on page 10 of HB393. It specifically updates the NAICS Code reference from 2012 to 2022 across all of Alabama's industrial tax abatement and tax incentive programs.
The effective date is June 1, 2026. That gives you roughly 18 months to understand whether the change affects your operation and to plan accordingly if it does.
If you currently claim a tax abatement or have considered applying for one, you should verify your NAICS code under both the 2012 and 2022 systems. Your accountant or tax advisor can help you cross-reference your business classification. If you're planning a major renovation or construction project, knowing whether you'll qualify under the new rules before June 2026 could affect your project timeline and budget.
The Alabama Restaurant and Hospitality Association and your local chamber of commerce may have resources comparing old and new codes specific to food service businesses. It's worth asking.
For a plain-English breakdown of how the 2022 NAICS codes apply to your specific restaurant operation, contact your state tax advisor or the Alabama Department of Revenue.
Source: Alabama HB393, §40-9B-3(a)(14), effective June 1, 2026.