We expect the following 2011 bills or similar proposals to be re-introduced, perhaps with amendments, next session:

HB 485 – Alabama Data Processing Center Economic Incentive Enhancement Act of 2011: In order to encourage large data centers to locate in Alabama, this bill would extend the time period for abatements of certain noneducational sales, use, and property taxes from the current 10 years to as long as 30 years, depending on the total capital investment, and would also allow abatements for recurring capital investment in a data center during the abatement period. Thus, if the aggregate capital investment in a data center is more than $100 million during the 10 years after it is completed, the abatement period would be extended from 10 to 20 years. If the aggregate capital investment in the data center is more than $300 million during the 20 years after it is completed, the abatement period would be extended to 30 years. This bill would also reduce the employment threshold from 50 new jobs to a minimum of 20 new jobs in order for a data center to qualify for sales, use, and property tax abatements, as well as capital credits.

HB 478 and SB 373 – Jobs Creation and Retention Act: would allow companies that undertake certain qualifying projects, similar to those listed in TIRA, to also qualify to receive “withholding incentives.” If passed, new businesses would be entitled to retain up to 90 percent of the state income taxes withheld from the wages of its eligible employees and existing businesses could retain up to 75 percent. The incentives are designed to encourage the retention of existing jobs and create new jobs by increasing development and growth of industry within the state. Several competitor states offer these. The State Industrial Development Authority, the Governor, the ADO, and the ADOR would determine whether a project qualifies for the withholding incentives.

SB 15 and SB 50 – Tax Incentives for Companies that Create Jobs: These bills would provide a variety of tax incentives to Alabama companies that hire new employees if certain requirements are met. For instance, depending on the county in which the business is located, a job tax credit of between $1,500 and $8,000 per new employee would be available to taxpayers that increase employment by 10 or more full-time jobs and maintain that employment level. Moreover, if the employer has 99 or fewer employees, a job tax credit of between $750 and $4,000 per new employee is allowed if the employer increases employment by two or more full-time jobs, but only if the gross wages paid to the new employee are equal to or exceed 120 percent of the county’s or state’s average per capita income. Additional income tax credits would be available to taxpayers that employ persons who meet certain criteria prior to employment (e.g., recipients of welfare benefits, unemployed disabled veterans, disabled persons, persons with felony convictions, and recipients of SSI).

SB 150: would allow a taxpayer that has operated an existing manufacturing, shipping, receiving, telecommunications, or support facility in Alabama for the previous three years to obtain a sales and use tax credit in an amount equal to five percent of the cost of all qualified investment property purchased or acquired by the taxpayer during the year. However, the sales and use tax credit would equal eight percent if the property purchased was recycling machinery or equipment, or pollution control or prevention equipment or machinery. To qualify for the sales and use tax credit, the purchase of the qualified investment property must occur after January 1, 2012; the aggregate cost of the property must exceed $50,000; and the purchase must not result in the loss of jobs at the location where the qualified investment property will be used. In addition, this bill would provide nonrefundable tax credits (presumably against the income tax, although the legislation does not specify) to employers that provide or sponsor one or more re-training programs approved by the Alabama Technology Network. The tax credit per employee would equal the lesser of one-half of the per employee cost of re-training or $500, subject to other limitations.  

SB 126 – R&D Credit: would allow a nonrefundable research and development income or financial institution excise tax credit for qualified research expenses (“QREs”) (as defined in I.R.C. § 41) that occur within the State of Alabama. The credit would be equal to 6.5 percent of the QREs, or 15 percent of the QREs that are incurred pursuant to written contracts with chartered universities within the state that provide the R&D. The R&D tax credit would also flow through to owners of pass-through entities, such as LLCs and S corporations, which qualify for the credit. Any unused credits may be carried forward for up to 10 years.