Important Business Tax Legislation to Watch in the 2023 Alabama Regular Session

SALT Alert: Alabama Edition

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The start date for the Alabama Legislature’s 2023 regular session is near: Tuesday, March 7. As we do annually, here are some of the major items of business tax legislation we expect to see in the upcoming session. From a tax and economic development perspective, enhancement and renewal of several key Alabama incentives is at the forefront for the Governor’s Office and many business and economic development associations, including the Economic Development Partnership of Alabama, the Economic Development Association of Alabama, the Business Council of Alabama, Manufacture Alabama and the Birmingham Business Alliance.

Renewing and Enhancing the Alabama Jobs Act and Growing Alabama Credit

Alabama has a very successful and aggressive investment tax credit and jobs credit for new and expanding industry. Both of those incentives are set to sunset this year. Thus, a priority for many business groups this session is the extension of those incentives, extending the sunset dates of each programs to 2028. “Renewal of the economic incentives outlined in the Alabama Jobs Act and Growing Alabama Credit is a top priority for BCA in the 2023 legislative session, and further serves the organization’s commitment to advocating for both businesses and the workforce in Alabama.” — Helena Duncan, President and CEO, Business Council of Alabama

The incentives also have an annualized cap of $350 million, which the Governor’s Office would also like to see increased incrementally over five years. The investment tax credits can be transferable for up to three years; an extended target of five years is being studied as well.

Additionally, extending the 2023 sunset of and increasing the cap for, the Growing Alabama incentives program is also a business community priority. The program provides for state tax favored donations to certain state and local economic development organizations, essentially allowing the donor a limited dollar-for-dollar state tax credit. These donations may be used to improve challenged industrial sites and inland ports, as well as fund tech accelerator programs, and funding sources for underrepresented businesses. Like the Jobs Act incentives, it has been very successful in fostering growth across the state. 

Targeted Site Development

The State Industrial Development Authority (SIDA) program for site prep grants is a long-standing and successful program, assisting companies and communities with site preparation costs. The Governor’s Office plans to propose an expansion of the role of SIDA to give grants to local economic development authorities for site development and assembly by: (i) increasing the maximum grant amount for site development and assessment for SIDA; and (ii) allowing SIDA to draw down federal grant funding to help the state leverage several new federal opportunities (i.e., Inflation Reduction Act, Infrastructure Investment and Jobs Act).

Providing for Transparency

There have been numerous initiatives over the last few years to enhance transparency under the Jobs Act, as well as across the country. It is a recurring and important theme. Currently, several state agencies are required to deliver summary reports to the legislature on certain incentives granted by Alabama. The Governor’s Office has proposed enhancing those reports to include information such as the name of the incentivized company, the estimated capital investment, the estimated number of new jobs and related hourly wage, the estimated value of incentives, and aggregated performance data on all projects incentivized by these programs.

“Pro-economic development legislation is critical to moving our region forward,” said Jim Proctor, Vice Chair of Public Policy for the Birmingham Business Alliance. “BBA’s continued success hinges on a unified approach to advocating for key issues that advance competitive business recruitment and job creation.”

Brownfield Authority

The BBA also announced it will advocate for legislation that would expand eligibility for the Alabama Department of Environmental Management’s Brownfields Program. Such an expansion would allow local authorities to create brownfield redevelopment zones that will have the ability to compete for public and private dollars for the purpose of cataloging and examining potential brownfield projects.

Historic Preservation Tax Credits

Due to a high demand for real estate projects involving historic tax credits, we expect an effort to reauthorize and raise the cap for the rehabilitation, preservation and redevelopment of qualified properties to stimulate private investment, downtown and neighborhood revitalization, and job creation.