2023 Alabama Legislative Update: Regular Session Resumes - Week Four

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Incentives Package

On Wednesday, the Governor’s incentives plan, championed by the Department of Commerce, was presented to the legislature. This incentives package is widely known as “The Gameplan.” As discussed in the last legislative update, the incentives package includes four principal bills: the Jobs Act & Growing Alabama; the Site Evaluation and Economic Development Strategy (SEEDS) Act; the Innovation and Small Business Act; and the Transparency in Incentives Act. 

The “Game Plan” will be the most discussed legislative topic in the coming week as legislators will take the weekend to examine the package, but generally speaking, there seems to be broad support for “The Game Plan.”

The key proposed changes to the incentive programs remain as follows:

Jobs Act & Growing Alabama:

• Establishing a sunset date of July 31^st, 2028, contingent on the Legislature further extending the date and establishing a sunset date for date center abatements of July 31^st, 2028, contingent on the Legislature further extending the date
• Increasing the incentive cap by $25 million annually for five years and increasing the amount for site development to $35 million
• Simplifying the definition of “employee” and clarifying that leased/temporary employees will not be incentivized
• Requiring that companies sharing tax credits must share 50% common ownership
• Amending the Jobs Credit so that it is only a refundable incentive rather than against utility taxes
• Expanding the transferability of ITCs from three to five years and streamlining the transfer process
• Revising the impact of reduced distribution to the Alabama Special Mental Health Trust Fund to ensure unencumbered funds are used
• Making renewable energy generation a qualifying activity

SEEDS Act

• Extending the State Industrial Development Authority’s (SIDA) authority to issue grants to local economic development authorities
• Providing SIDA with specific parameters for what is eligible for site assessment and site development grants
• Creating the Alabama Site Development Fund to aid SIDA in furtherance of legislative purposes
• Granting SIDA the ability to partner with statewide economic development organizations
• Requiring SIDA to produce annual reports to the Legislature

The Innovation and Small Business Act

• Moving the accelerator program from Commerce to the Innovating Alabama program for management
• Redefining what companies can use the Innovating Alabama tax credit
• Establishing credit availability to keep up with demand
• Amending the SBIR/STTR grant program residency requirements to attract companies to move to the state
• Establishing a sunset date of July 31^st, 2028, contingent on the Legislature further extending the date

Transparency in Incentives Act

• Enhance transparency requirements under the Jobs Act by instructing the Department of Commerce to provide information on the Commerce website for each company that enters into a project agreement with the state for jobs incentives

The Budgets

Legislators are currently reviewing the Governor’s proposed budgets. The first iteration of the modified Education Trust Fund (ETF) budget will be worked on by the Senate Finance and Taxation Education Committee chaired by Senator Arthur Orr, and the first iteration of the modified House General Fund budget will be worked on by the House Ways and Means General Fund Committee chaired by Representative Rex Reynolds.

On Thursday morning Senate Pro Tempore Greg Reed stated that the legislature is exploring various options to allocate the current budget surpluses. These comments come at a time when the state of Alabama is the most fiscally sound it has ever been. Senator Reed indicated that the legislature is exploring a variety of options. These options include but are not limited to investing the funds, cutting taxes, saving the surplus funds, spending the surplus funds, or some combination of these options.

Tax Cuts

Representative Danny Garrett has a proposal of how to deal with Alabama’s current surplus (mentioned above) as he introduced two bills cutting taxes this week, passed in the House of Representatives, and now are in the hands of the Senate.

One of these bills aims to eliminate the lowest state income tax rate of 2%, while the other seeks to reduce the highest tax rate from 5% to 4.95%. It is important to note that both tax cuts would be implemented incrementally over five years.

These cuts have been estimated to potentially reduce annual tax revenue in the Education Trust Fund by $25 million and $57.3 million, respectively, per the latest fiscal report released on Wednesday.

Other News

In other news, the legislature passed multiple bills in the House regarding the state’s “Sunset Law.” The passage of these bills permits a variety of state boards, agencies, and commissions to continue to operate. Additionally, Representative Matt Simpson’s bill imposing stricter penalties on those possessing over a gram of fentanyl passed the Senate and was signed into law by Governor Kay Ivey this week.

Conclusion

The Legislature used three legislative working days this week and has now used seven of its allotted thirty legislative working days this regular session. As of April 7, there have been 274 bills filed in the House and 190 bills filed in the Senate during the regular session. The House will reconvene on Tuesday, April 11^th, at 1:00 p.m., and the Senate will reconvene on the same day at 3:00 p.m. Next week the legislature will use three legislative working days.