On February 12, 2021, Alabama Gov. Kay Ivey signed legislation, House Bill 192 (HB192), renewing the Growing Alabama Act and the Alabama Jobs Act, which both expired last year. Both programs are vital to Alabama’s ability to continue to attract innovative industries and high paying jobs to the state.
Growing Alabama Tax Credit Program
The Growing Alabama credit is a tax credit provided to certain taxpayers who make contributions to economic development organizations for approved qualifying projects. The new legislation extended the program until July 31, 2023, as well as increased the annual cap from $10 million to $20 million, reserving $5 million for rural counties in the first six months and $4 million for technology accelerators. The allocation dedicated to technology accelerators highlights the importance of those accelerators to Alabama’s economic future and their increasing presence in the state, such as the Birmingham Bronze Valley and Huntsville MidCity accelerators.
As a result of HB192, additional taxes are also now eligible for offset allowing taxpayers to utilize the credits against the financial institution excise, insurance premiums and utility taxes – in addition to income tax. This allows for financial institutions, insurance companies and utility providers to increase their participation as potential donors.
Additionally, now limited liability companies and entities subject to other pass through taxation may make contributions to economic development organizations for approved projects – and receive the commensurate tax credit benefits.
Alabama Jobs Act
The Alabama Legislature reauthorized the Alabama Jobs Act through July 31, 2023, and increased the annual cap from $300 million to $325 million for 2021 and $350 million for 2022, $20 million of which must be used for projects in jumpstart counties. All tax credits under the new legislation may be carried forward for up to five years.
- Medical Research and Development Tax Credit - The new legislation includes a tax credit for companies involved in pharmaceutical, biomedical, medical technology or medical supplies manufacturing or related research and development activities. These companies may receive a jobs credit against their utility taxes in an annual amount up to 4% of the wages paid to eligible employees during the prior year. The credit can be available to these companies for up to 10 years.
- Public Utilities License Credit - The reauthorization also included a new credit for the public utilities license tax. This is in addition to credits allowed against income taxes, financial institution excise taxes, insurance premium taxes and other utility taxes provided for under the prior legislation.
- Increase in Eligible Tech Accelerator Employees Required - The legislation increased the number of employees required to be working at an accelerator project from five to 10 positions. A technology company may receive a jobs tax credit against utility taxes in an annual amount equal to 4% of the wages paid to eligible employees during the prior year. Technology companies may also receive an investment tax credit in an amount equal to 1.5% of the capital investment made to offset income tax liability or other types of taxes as provided for by the statute.