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Houses passes bill intended to improve use of economic incentives

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The Alabama House of Representatives passed the Alabama Incentives Modernization Act on Thursday to improve the way that the state uses economic incentives. More specifically, this bill would add new tools for the attraction and expansion of businesses in rural Alabama as well as in federally designated Opportunity Zones. It also targets attracting technology companies.

House Bill 540 is sponsored by State Rep. Bill Poole, R-Tuscaloosa, who chairs the Finance and Taxation Education Committee.

Poole said the state wants to use incentives to “lure jobs to rural counties and economically distressed areas, taking advantage of new federal legislation creating opportunity zones.” It also uses incentives to target technology jobs.

Poole said there are four essential pillars to the Alabama Incentives Modernization Act. These include the Jobs Act. This expands it so that more rural counties will be eligible and makes smaller projects in rural areas eligible. The act does not increase the cap on incentives. The second pillar is the growing Alabama Act.

“Pillar 3 is the most significant part,” Poole said. “We know that enormous amounts of capital are pooling up nationally to take advantage of the tax benefits from federal Opportunity Zones.”

“We are going to have to work hard to compete; because that is what other states are doing,” Poole said.

“The education piece is broken,” said House Minority Leader Anthony Daniels, D-Huntsville. “You are not going to grow the state when the educational foundation is broken.”

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Daniels was referring to Wednesday’s report by U.S. News and World Report claiming that Alabama’s education system is the worst in the entire country. The magazine ranked the state 46th in higher education and 49th in pre-K through grade 12 education for a cumulative score of 50 out of 50.

“We are not going to break the cycle of poverty by just offering incentives and recruiting industry,” Daniels said.

“I represent a rural county (Blount), but we do not qualify under this bill,” said State Rep. David Standridge, R-Hayden.

In the bill, Poole defines a “rural” county as one that has less than 50,000 people. By that definition, Blount County, with a 2017 census estimate of 58,017, would not qualify for the enhanced incentives.

“I’m working with the sponsor to raise the population number in this bill to include more rural counties including my home county of Blount,” Standridge told the Alabama Political Reporter. “As the Rural Caucus Chairman, I support this bill because I believe it helps bring jobs and economic development to rural Alabama, but it should give the same opportunities in more of our rural counties.”

“I am from one of those economically challenged areas that lost all of their textile jobs,” said State Rep. Debbee Wood, R-Valley. “I want to thank you for offering this.”

“Part of the objective of Opportunity Zones is to encourage people to put investments where they are not the most attractive,” Poole said.

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“Detailed project agreements are required to receive these incentives,” Poole stated. “I don’t want to just recruit workforce to Alabama. I want to retain workforce in Alabama.”

Poole told legislators they need to know where the Opportunity Zones are in their districts and talk to their accountants and economic developers about those zones.

APR asked noted economic developer Nicole Jones to review the proposed legislation.

“The Alabama Incentives Modernization Act quantifies the definition of rural, which is essential in determining what areas are eligible for incentives,” Jones said. “The expansion of the Opportunity Zone program is also critical, as it is an effective strategy for long-term redevelopment of real estate, which can boost a local economy as well as aid in the beautification process.”

“Many rural Alabama counties have experienced blight,” Jones added. “Residents move to urban areas for myriad of factors including, for example, proximity to employment, family and/or health care. The new proposal is a positive step that encourages companies to consider rural areas that do not share the same local tax base as larger municipalities.”

According to the bill synopsis: “For rural parts of the state, this bill would enhance the Alabama Jobs Act incentives that are available to companies locating or expanding in rural Alabama; would extend the Alabama Jobs Act to any rural project with at least five jobs; and would extend the investment credit under the Jobs Act to fifteen years. The bill would extend the benefits of being a “rural” county to any county with population less than 50,000. For all parts of the state, the bill would allow banks and insurance companies to purchase income tax credits and would amend the definition of qualifying projects for purposes of Alabama’s incentives laws. For high-tech companies, this bill would enhance the Alabama Jobs Act incentives that are available to such companies; would allow the state to extend the Jobs Act incentives to any high tech company creating at least five jobs; would allow the investment tax credit calculation to include operating costs as well as capital costs; and would allow persons who move to Alabama to work in Alabama’s high-tech companies, as well as investors in such companies, not to pay tax upon the disposition of their ownership interests in the companies. The bill would expand the Opportunity Zone program in Alabama. The bill would create an Alabama capital gains tax reduction for investments in opportunity zone funds predominately investing in Alabama, in line with the federal Opportunity Zone law. The bill would allow various state funds to make investments into such opportunity zone funds and would guarantee principal protection or minimum rates of return for other investors in such funds, so long as extraordinary returns are allocated to such state funds. The bill would enhance the Growing Alabama Credits by creating funding mechanisms for improving industrial parks, worker and student retention, an Agricultural Center, and business accelerators.”

HB540 passed the House 98 to 0. It now goes to the Senate for consideration.

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Brandon Moseley is a former reporter at the Alabama Political Reporter.

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