The State Senate approved the Alabama Incentives Modernization Act Wednesday to modernize Alabama’s incentives to take advantage of federal opportunity zones, recruit businesses to rural counties and attract technology companies to the state.
The bill was sponsored by State Rep. Bill Poole, R-Tuscaloosa.
The bill was carried in the Senate by Majority Leader Greg Reed, R-Jasper.
The AIM Act is a set of incentives designed to both spur job growth in counties that are experiencing sluggish economic conditions and to help bring new technology companies to the state.
“Alabama’s overall economy right now is very strong, but in some ways the most explosive job growth has been geographically-concentrated in a dozen or so counties. This measure is meant to help jump-start the entire state,” Reed said.
Alabama’s economy is booming. Madison, Limestone, Baldwin, Shelby, Lee and Cullman counties have particularly strong economies. Parts of the state have not seen the same rate of growth. To encourage economic growth in Alabama’s outer-lying areas, the AIM Act expands the number of rural counties that can qualify for incentives under the Alabama Jobs Act that was passed in 2015.
Previously, counties had to have 25,000 or fewer people to qualify as rural; under the bill passed Wednesday, counties with 50,000 or fewer people now qualify for the jobs incentives.
According to research done by Auburn University’s Government & Economic Development Institute, counties in Alabama with populations of 50,000 or fewer people had a poverty rate of 23.7 percent from 2012-2016, while the poverty rate in larger counties was only 15.6 percent. Similarly, counties with 50,000 or fewer people had a median household income of $33,865, while larger counties had a median household income of $44,547.
“I supported this legislation because it allows rural communities to take advantage of opportunity zone programs and tax incentives to give rural communities a chance to lure businesses to our areas,” said Senate Minority Leader Bobby Singleton, D-Greensboro. “This bill can have tremendous impact on rural counties throughout the state. I especially am excited about the Alabama Jobs Act component which will focus on bringing high-tech jobs to our communities so we can rebuild and grow.”
Under the AIM Act, incentives in the form of investment and tax credits will be awarded to companies that bring at least 10 new jobs to a county, whether it’s rural or urban, that has had sluggish job growth and a declining population.
The measure also creates specific incentives for technology companies, which would only need to create a minimum of 5 jobs to qualify for the investment and tax credits.
In hopes of attracting technology companies to Alabama, the AIM Act eliminates the tax on capital gains for investors and employees of technology companies that move to Alabama, with the caveat that the companies must relocate to the state at least three years before being sold, and stay in Alabama five years after the company is sold. The same restriction applies for the company’s employees to realize zero capital gains tax. For investors, the break on capital gains tax only occurs if the investors reinvest the funds in other Alabama companies for the following five years.
“Right now, three states – California, New York and Massachusetts – dominate the technology startup scene,” Reed said. “Alabama is a long way from competing at that level, but I am confident that we can compete with the second tier of states – Texas, Maryland and Colorado. The success of Shipt and the energy around startup incubators like the Innovation Depot in Birmingham signal that we have a talented and motivated workforce that entrepreneurs can tap into. More startup technology companies in Alabama will benefit nearly every business industry in the state.”
The Senate amended the bill, most notably to include counties that have lost population for the last five years and to increase accountability.
The Senate approved the bill by a 27 to 0 vote.
Thursday, the bill went back to the House of Representatives, which voted to concur with the Senate changes. The bill now goes to the governor for her consideration.