Greg Reed: Bill incentivizing tech companies to ‘stay and grow’ in Alabama could ‘help jump-start the entire state’
MONTGOMERY — After the Alabama Senate on Wednesday unanimously passed a bill aimed at bringing more rural and high-tech jobs to Alabama, Senate Majority Leader Greg Reed (R-Jasper) said that the state is poised to be nationally competitive in the “technology startup scene.”
HB 540, one of the top remaining priorities for lawmakers and industry recruiters as the 2019 session winds down this week, is known as the “Alabama Incentives Modernization Act.” Sponsored by State Rep. Bill Poole (R-Tuscaloosa), the bill seeks to bring the Yellowhammer State’s economic incentives up to speed with what other states are doing to attract jobs.
Previously passed by the House of Representatives on a unanimous 98-0 vote, the bill was carried in the upper chamber by Reed.
After the Senate passed the bill as amended on Wednesday, the House on Thursday afternoon concurred with the amended version of HB 540, sending the legislation to Governor Kay Ivey’s desk.
Speaking to a Senate committee on Tuesday, Reed emphasized the importance of attracting and keeping entrepreneurs and job creators in Alabama. He said that the state could miss out on the next Facebook or Apple because its incentives system is currently out-of-date.
On the floor, Reed outlined the three core tenets of HB 540: building rural communities; recruiting and keeping tech companies in Alabama; and enhancing existing opportunity zones.
In a statement after the Senate passed the legislation, Reed advised, “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.”
To encourage economic growth in Alabama’s outer-lying areas, the bill 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 HB 540, 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 the Yellowhammer State with populations of 50,000 or fewer people had a poverty rate of 23.7% from 2012-2016, while larger counties’ poverty rate was only 15.6%. Similarly, counties with 50,000 or fewer people had a much lower median household income over the same years: $33,865, versus the median household income rate of $44,547 for larger counties.
This was bipartisan legislation, supported also by Senate Minority Leader Bobby Singleton (D-Greensboro).
“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,” Singleton remarked. “This bill can have tremendous impact on rural counties throughout the state.”
He added, “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 HB 540, 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 order to attract technology companies to Alabama, the bill eliminates the tax on capital gains for investors and employees of technology companies that move to Alabama, with the caveat that the companies must re-locate to the state at least three years before being sold and stay in the state 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 after the original company is sold.
“Right now, three states – California, New York, and Massachusetts – dominate the technology startup scene. 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,” Reed emphasized.
He added, “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.”
HB 540’s passage came the same day that Ivey signed into law two major bills to expand high-speed, affordable broadband access across the state of Alabama.
Sean Ross is a staff writer for Yellowhammer News. You can follow him on Twitter @sean_yhn