With the intense focus on creating jobs and economic development, the Alabama Legislature is considering a number of incentives bills aimed at attracting businesses to the state and also retaining jobs already in Alabama. Governor Robert Bentley, House Speaker Mike Hubbard (R- uburn) and Senate President Pro Tem Del Marsh (R-Anniston) have made job creation and economic development their top priority this legislative session. This SALT Alert summarizes some of the incentive bills currently being debated, which range from research and development tax credits to withholding incentives designed to attract or retain jobs in Alabama.
Income Tax Withholding Incentives
On February 14, two landmark incentive bills passed the House of Representatives. HB 159 (enabling bill) and HB 160 (constitutional amendment) authorize an incentive program that the state may use for the purpose of creating or retaining jobs and promoting economic and industrial development in Alabama. Under this proposal, the Governor would have the discretion to offer income tax withholding incentives to qualifying industries in an amount up to the capital costs of the project. Under the proposed legislation, companies that build a new or expanded facility would be able to retain up to 90 percent of the state income taxes withheld from their eligible employees’ wages. For job “retention projects,” the Governor could allow a company to retain up to 75 percent of the state income taxes withheld from its eligible employees. To qualify as a retention project, the company must generally spend at least $2 million to renovate or expand an existing facility in most areas of the state and agree to retain no less than 80 percent of its eligible employees employed by the company in Alabama as of the date the qualifying project agreement is executed.
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