Corporate Tax

The legislator is striving to revise the incentives for company tax on the state capital

Legislation to renew and revise state tax incentives for businesses in Alabama includes new loans to women and minority companies that raise the cap on one of the state’s “backbone” incentives and allow automakers who haul vehicles out of port a break from Mobile.

House Bill 192, which is expected to be a high priority for passage when the 2021 legislature begins next week, was pre-tabled Thursday.

“The bill restores and builds on the success of Alabama’s performance incentive tools,” said Secretary of Commerce Greg Canfield. “And these are specifically addressed in the Alabama Jobs Act, Growing Alabama Credit, and Alabama Port Credit.”

The growing Alabama loan expired in September, and the larger Alabama job and investment loan expired in late 2020. They weren’t renewed at the 2020 session before COVID-19 derailed him. In December, Governor Kay Ivey used her emergency services to extend the loans temporarily. However, legislative action is still required.

Rep. Bill Poole, R-Tuscaloosa, sponsored the bill in the house. Senator Greg Reed, who is expected to be elected Pro Tem Senate President next week, will carry the bill in this chamber. Reed said Tuesday he sees his work on incentive packages and tools for industry recruitment in Alabama as a hallmark of his tenure in the legislature.

“Creating new, high-paying jobs and generating economic growth are the most important ways we can improve the quality of life for Alabamians,” Reed said. “Re-approving these bills to provide the recruiting options and incentives necessary for Alabama’s industry to grow in this competitive environment will be a legislative top priority at this session.”

According to Commerce, the new bill will:

• Increase the annual caps on Alabama Jobs Credit and sister investment credit by $ 25 million in 2021 and 2022, increasing the current cap from $ 300 million to $ 350 million.

• Raise the cap on the growing Alabama loan from $ 10 million to $ 20 million. With the growing Alabama loan, local business development organizations can use government funds to build industrial parks or other job-generating locations. Alabama income taxpayers can receive tax credits for donations they make to business development organizations. The new legislation would allow banks and insurance companies to donate and receive their financial institution’s excise tax and premium tax credits.

• Incentives for minority- and women-owned companies with work credit against utility taxes. The credit would be worth 4% of the wages paid to eligible employees in the previous year.

Canfield said this is similar to what is offered to businesses based in rural counties.

“We are basically following the rural incentive strategy and expanding it so that we can apply it to minority and women-owned businesses,” Canfield said.

Companies that “re-design” critical supply chains in pharmaceuticals, life sciences, medical technology, personal protective equipment, and medical research and development will receive the same job credit. Medical device manufacturing has moved overseas, and Canfield said the state wants to do more of it here.

Nothing is changed in the cap or limits for the port loan, except to make automobile shipping a creditworthy activity. With the current port loan, shippers receive a tax credit on their state income tax liability for imported and exported goods.

Last year, the Alabama State Port Authority announced a $ 60 million auto terminal in Mobile. This allows vehicles to roll on and off ships. The 57 hectare terminal can handle 150,000 vehicles annually with connections to rail transport and highways.

“For the first time, the Port of Mobile can serve the export needs of Alabama automakers,” Canfield said. The largest car exporter in the country is Mercedes with vehicles in more than 130 countries.

“None of them could flow through Mobile, but now they will,” he said.

The new law would expire on July 31, 2023, allowing a newly elected legislature to review and renew it that year.

Poole said the legislation in recent years has redoubled efforts to be sensible and to examine the incentives the state is offering businesses. Those included in its new legislation are unique in that the incentives are not provided in advance like many incentives, but when certain benchmarks are met.

“These come in the form of a minimum number of jobs and minimum income thresholds to ensure that jobs achieve the desired wage and investment levels,” said Poole. “This enables the state to ensure that the projects meet the conditions that the state would like to see in order to be of benefit to the entire state.”

The retroactive use of incentives is a departure from the way Alabama attracted new businesses.

“The state used to borrow money to create these industrial incentives,” Poole said.

When the Employment Act was created in 2015, the five year sunset allowed for a review and renewal. The process is now taking place.

Canfield described the loans as sustainable incentives for the allocation.

Between 2015, when they came into effect, 184 projects under the Alabama Jobs Act have landed in Alabama by the end of 2020, the COVID-hit year. That’s 32,043 new jobs, $ 15.7 billion in new and expansion investments, and $ 15.2 billion in payroll over a 10-year period, Canfield said.

He said the state’s return on investment on Jobs Credit over 10 years is 57%.

Canfield also notes that the incentives attract higher-paying jobs. Projects secured in 2020 pay an average pre-performance wage of $ 22.52.

“I think this is very powerful as part of our strategy to raise the income level for the average Alabamian,” Canfield said. “I think this proves that the types of projects that have won with these incentives are doing just that.”

On Tuesday, Poole and other lawmakers received a report on some of the tax incentives offered by the state, many of which are ahead of current legislation. The aim of the report is to find out if incentives are working as intended.

“We’ve discovered a lot of older incentives that are on the books that don’t go under or otherwise expire, and that’s a concern we have,” Poole said. “I think there will be a lot of discussion going on about A that no longer allows it to take this form and B, how do we essentially put this into a review schedule as we create new incentives.”

Canfield said there would be no problem putting the 2021 legislation retrospectively to 2020 if several of the loans have expired. But the legislature who reacts quickly to this legislation will be good news for their ministry and the state.

“We never want to feel insecure in the marketplace when we are competing for investment and jobs,” he said. “Bringing this up at the beginning of the session will remove any uncertainty.”

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