By MARY SELL, Alabama Daily News
MONTGOMERY, Ala. – Two of the state’s major tax incentives offered to new and expanding companies expire next year and Alabama’s lead job recruiter wants lawmakers to extend them and remove the state’s ceiling on the “pay-as-you-go” tax breaks.
Created in 2015 under the Alabama Jobs Act, the Alabama Jobs Credit and Alabama Investment Credit have helped lure in some of the state’s biggest employers. The Jobs Credit gives companies cash rebates on their previous year’s payroll for qualified employees. Companies can get higher rebates if they locate in rural parts of the state or hire veterans. The Investment Credit pertains to a company’s capital investment and can be applied to several taxes, including income.
Companies can receive the incentives for up to 10 years. For example, when Alabama offered Mazda Toyota, expected to hire 4,000 workers, about $380 million in incentives in 2018, about $300 million of that was from the two Jobs Act incentives.
But state law caps the incentives at $350 million per year. On Tuesday, Secretary of Commerce Greg Canfield said his agency is approaching that cap.
“We’re modifying our offers (to prospective companies),” Canfield said, when asked by Lt. Gov Will Ainsworth about that looming limit.
Canfield told a state incentive oversight committee at the State House he’d like to see that cap removed.
“These are pay-as-you-go incentives, they are sustainable,” Canfield said later to reporters. “Pay-as-you go means companies have to perform and create new revenues before they can ever be paid an incentive. And that’s the best checks-and-balances system.”
He said the state’s recent returns on the incentives have been 168%.
Lt. Gov. Will Ainsworth, who chairs the Joint Legislative Study Commission on Renewing Economic Development Incentives, said the state has one of the best incentive packages in the country and he’d like it to be the best in the Southeast.
“I think certainly looking at potentially raising the (Jobs Credit incentive) cap makes sense because we want to make sure we continue to recruit 21st century, high-paying jobs to Alabama,” Ainsworth said. “And potentially, if the cap’s where it’s at, we might be missing out on some of that.”
Canfield also told the panel the median actual wage paid by employers under the Jobs Act is $23.44 per hour, compared to the 2021 median hourly wage of $17.91.
He said there have been instances of companies not meeting a required marker outlined in their contracts with the state, including their number of employees or paid wages. Those companies don’t get their incentives that year, per the contract.
Canfield is also asking that Growing Alabama Credit be extended and increased. It allows local economic development organizations to leverage state funds to build industrial parks or other job-attracting sites. Alabama income tax payers can receive tax credits for donations they make to the economic development organizations. Banks and insurance companies can also donate and receive the credits against their financial institution excise tax and insurance premiums tax. The credit is now capped at $20 million.
The study commission will make recommendations later this year that will likely become legislation in lawmakers’ 2023 regular session.