Bradley Partner Bruce Ely Quoted in Law360 on Two Alabama Tax Bills Introduced in the House

Bradley attorney Bruce Ely was quoted in Law360 on two tax bills introduced in the Alabama House of Representatives. H.B. 419 would update the state's financial institution excise tax while decoupling from certain federal code provisions. H.B. 424 would establish the state’s first research and development tax credit, awarding up to $25 million in annual R&D credits for financial institutions and corporations.

H.B. 419 specifies that IRC references would mean the code of 1986, a clarification that some thought was needed because the statute never officially adopted the code past 1954, explained Ely, who helped author the bill. Ely said the bill should appease the state’s banking community, which has been clamoring for consistency and simplification of the financial institution excise tax through the modernizing of the statute.

“Although the bill strives to be revenue-neutral, I think over time it may be somewhat of a tax increase, but the banks are generally OK with that because of the trade-off for simplicity and just knowing what the rules are,” said Ely, who is also an adjunct professor in the University of Alabama’s graduate tax accounting program.

The tax credits offered under H.B. 424 would be limited to $25 million per year, with individual taxpayers eligible for up to $2 million. The credit would be 25% of expenses for new research conducted at universities, two-year public colleges and publicly owned hospitals in the state, and 10% of expenses for all other qualified research. While previous iterations of the bill failed to gain traction over budgetary concerns, Ely said he was optimistic that the state’s education fund was on solid enough footing to absorb the costs of offering the credits. He added that Alabama was an outlier, as it is one of the few states in the Southeast that does not offer a research and development credit.

“The hope is this will be an economic tool to incentivize companies to move their research folks to Alabama,” he said.

The complete article, “Ala. Seeks Bank Tax Revamp, Research And Development Credit,” first appeared in Law360 on April 15, 2019.