SB253

ENGROSSED

By Senators Scofield, Livingston, Reed, Albritton, Stutts, Holtzclaw, Shelnutt, Williams, Allen, Ward, Whatley, Beasley, Smith, Glover, Holley, Singleton, Blackwell, Smitherman and Waggoner

A BILL TO BE ENTITLED AN ACT

To amend the Alabama Renewal Act by adding Section 40-18-415.1 to the Code of Alabama 1975, to provide for new, qualified broadband network facilities and a nonrefundable, transferable credit against income tax liability imposed by state law; to provide an exemption from ad valorem taxation under state law and from sales and use tax levied, assessed, or payable under state law; to limit the term of the ad valorem tax exemptions and to cap the income tax credits; to provide for the carry forward of certain earned but unused credits; to provide methods for claiming the exemptions or credits; and to amend Act 2016-102, 2016 Regular Session, now appearing as Section 40-18-416, Code of Alabama 1975, to provide for the repeal of its provisions under certain conditions.

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:

Section 1. This act shall be known and may be cited as the Alabama Rural Broadband Amendment to the Alabama Renewal Act.

Section 2. The Legislature finds that the availability of high-speed broadband services in rural Alabama is important for economic development, education, health care, and emergency services in Alabama, and that incentives set forth in this act will further those objectives by encouraging new investment in broadband infrastructure.

Section 3. Section 40-18-415.1 is added to Chapter 18, Article 19, Title 40, Code of Alabama 1975, to read as follows:

§40-18-415.1.

(a) For the purposes of this section, the following words have the following meanings:

(1) QUALIFIED BROADBAND NETWORK FACILITIES. Electronics, equipment, transmission facilities, fiber optic and copper cables, fixed wireless facilities, mobile wireless facilities, and any other real or personal property forming part of a system used directly or indirectly to transmit broadband signals capable of speeds at least 10 megabits per second of download speed and one megabit per second of upload speed to end user locations in rural areas purchased, constructed, or installed for use in Alabama after December 31, 2016.

(2) RURAL AREAS. An area not in a city or town that has a population of more than 25,000 inhabitants, according to the most recent decennial Census of the United States.

(b) Notwithstanding any other provision of this chapter, and subject to the limitations of this section, for all tax years beginning after December 31, 2016, any entity operating qualified broadband network facilities for the direct provision by the entity of broadband services to Alabama consumers shall be allowed the following tax credits or exemptions:

(1) A nonrefundable, transferable credit against state income tax liability imposed under this chapter, equal to 10 percent of the new investment by the entity in qualified broadband network facilities. For purposes of this section, an entity's new investment shall include, but not be limited to, a. All funds expended for the purchase, construction, or installation of qualified broadband network facilities through grants, borrowings, gifts, contributions, capital liquidity, investments obtained from third party investors or otherwise; and b. The present value of the minimum lease payments under all real or personal property leases.

(2) An exemption from the state portion of ad valorem taxation under Chapter 21 of this chapter, and any other applicable provision of this title for any qualified broadband network facilities for a period of 10 years from the date the facilities are placed into service.

(3) An exemption for any qualified broadband network facilities from all sales and use tax levied, assessed, or payable under Chapter 23 of this title; provided there shall be no exemption of local sales and use taxes except as provided in subdivision (4).

(4) An exemption from the county or municipal portion of ad valorem taxation under Chapter 21 of this title and any county or municipal sales and use taxes shall be submitted to the local governing body and shall be effective unless disapproved by resolution of the respective local governing body within 60 days of the date a written request for an exemption is received by the local governing body.

(5) The tax credits and exemptions set forth in subdivisions (1), (2), and (4) shall only be applied for by the entity operating the qualified broadband network facilities, its parent company, or its majority-owned subsidiary, hereinafter referred to as the "operator". Contractors, vendors, and similar service providers who help build, develop, and install the qualified broadband network facility shall not have the right to apply for the tax credits or exemptions; provided, however, that an operator may obtain a refund of any sales or use taxes remitted, paid, or otherwise reimbursed by the operator to a service provider for qualified broadband network facilities and ultimately remitted by the service provider to state and local government, in the same manner and to the same extent as if the taxes had been paid directly by the operator.

(c)(1) Prior to claiming a credit or exemption under this section, an operator shall submit to the Department of Agriculture and Industries information adequate to prove that the entity is entitled to a credit or exemption provided by this section for prior or future periods.

(2) An operator seeking recognition of a credit or exemption provided by this section, following its investment in qualified broadband network facilities, shall submit the required information to the Department of Agriculture and Industries within 12 months of completion of the project or phase of the project covered by the submission.

(3) Following any necessary examination, the Department of Agriculture and Industries may issue a certification and deliver that certification to the Department of Revenue and any local governing body that has granted an exemption pursuant to subdivision (4) of subsection (b), along with sending a copy of the certification to the operator seeking the exemption or credit.

(4) Upon receiving this certification from the Department of Agriculture and Industries, the Department of Revenue and other state taxing authorities shall allow and recognize the tax credit and any exemptions provided in this section.

(5) Any local governing body that has authorized an exemption pursuant to subdivision (4) of subsection (b) shall allow and recognize any authorized exemptions upon receipt of this certification.

(d) Property exempt from ad valorem tax under this section shall be listed separately on any property tax return filed under Chapter 21 of this title, and any other applicable provision of this title.

(e) Equipment vendors and other government entities shall rely on a copy of the certifications provided by the Department of Agriculture and Industries for purposes of recognizing any tax credit or exemption provided in this section, and operators obtaining a certification from the Department of Agriculture and Industries may obtain a refund of any state sales and use or state ad valorem taxes paid for qualified broadband network facilities covered by the certification by filing a direct petition for refund that shall otherwise be subject to the procedures and limitations, as applicable, in Section 40-2A-7.

(f) The Department of Agriculture and Industries and the Department of Revenue shall develop forms and rules consistent with this section, which may not delay the effectiveness of the credits or exemptions authorized by this section.

(g)(1) The nonrefundable, transferable income tax credit provided by this section, together with any credits carried forward in any one taxable year, may not exceed the lesser of the amount of income tax due under the Code of Alabama 1975, after allowance for all other credits permitted by Article 19 of this chapter, or one of the following: (1) Seven hundred fifty thousand dollars ($750,000) per taxpayer if the qualified broadband network facility is capable of transmitting broadband signals at speeds of at least 10 megabits per second of download speed and one megabit per second of upload speed. (2) One million four hundred thousand dollars ($1,400,000) per taxpayer if the qualified broadband network facility is capable of transmitting broadband signals at speeds of at least 25 megabits per second of download speed and three megabits per second of upload speed.

(2) The total income tax credits granted in any tax year may not exceed twenty million dollars ($20,000,000).

Of this amount, eighteen million dollars ($18,000,000) shall be designated for projects in rural areas and two million dollars ($2,000,000) shall be designated for projects in areas which do not have broadband speeds of at least 10 megabits down/one megabit up.

(h) If the nonrefundable, transferable income tax credit provided by this section exceeds the limitation under subsection (g), the excess amount may be carried forward for a period that does not exceed the next 19 taxable years.

(i)(1) Any income tax credit granted pursuant to this section to an operator that is a partnership or limited liability company shall be passed through to the partners, members, or owners, including any not-for-profit private entity that is a partner, member, or owner, respectively, on a pro rata basis or pursuant to an executed agreement among the partners, members, or owners documenting an alternate distribution method, without regard to their sharing of other tax or economic attributes of the entity.

(2) The tax credit certificate shall contain a section to be completed by the operator that provides the percentage or amount of credit that will be allocated to each partner, member, or owner and the completed tax credit certificate may be provided to the Department of Revenue to transfer all or any portion of the tax credits passed through to the partner, member, or owner in accordance with this subsection.

(j)(1) Except as provided in subdivision (2), all or any portion of the income tax credits under this section shall be transferable and assignable, subject to any transfer notice and verification requirements to be determined by the Department of Revenue, regardless of whether the transferee is a provider of broadband service, without the requirement of transferring any ownership interest in the qualified broadband network facilities or any interest in the operator which originally qualified for the credits.

(2) Once a credit is transferred, only the transferee may utilize the credit and the credit cannot be transferred again.

(3) A transferee of the tax credit may use the amount of tax credits transferred to offset any state tax due under this chapter.

(k)(1) The Department of Revenue shall adopt a transfer statement form to be filed by the operator with the Department of Revenue prior to the proposed transfer of any credit issued under this chapter.

(2) The transfer statement form shall include the name and federal taxpayer identification number of the operator and each transferee listed therein, along with the amount of the tax credit to be transferred to each transferee listed on the form.

(3) The transfer statement form shall also contain any other information as the Department of Revenue may from time to time reasonably require.

(l) For each transfer, the operator shall file with the Department of Revenue all of the following:

(1) A completed transfer statement form.

(2) A copy of the certification issued by the Department of Agriculture and Industries documenting the amount of tax credits which the operator intends to transfer.

(3) A copy of the proposed written transfer agreement.

(4) A transfer fee payable to the Department of Revenue in the amount of one thousand dollars ($1,000) per transferee listed on the transfer statement form.

(m)(1) The operator shall file with the Department of Revenue a fully executed copy of the written transfer agreement it holds with each transferee within 30 days after the completed transfer.

(2) Filing of the fully executed copy of the written transfer agreement with the Department of Revenue shall perfect the transfer with respect to the transferee.

(n)(1) The Department of Revenue shall issue a tax credit certificate to each transferee listed in the agreement in the amount of the tax credit so transferred within 30 days after the receipt by the Department of Revenue of the fully executed written transfer agreement.

(2) The tax credit certificate shall be used by the transferee in claiming the income tax credit pursuant to this section.

(o) The Department of Revenue may adopt additional rules as are necessary to permit verification of the ownership of the tax credits but may not adopt any rules which unduly restrict or hinder the transfer of the tax credits.Section 4. Act 2016-102, 2016 Regular Session now appearing as Section 40-18-416, Code of Alabama 1975, is amended to read as follows:

§40-18-416.

"(a) This All provisions of this article, except for Section 40-18-415.1, shall be repealed following the close of fiscal year 2020, but the repeal shall not cause a reduction or suspension of any credits awarded for fiscal year 2020 or for prior years during which the Growing Alabama Credit was in effect.

"(b) Section 40-18-415.1 shall be repealed following the close of fiscal year 2022, but the repeal shall not cause a reduction, suspension, or early termination of any credits or exemptions authorized under the section resulting from investment occurring in fiscal year 2022 or prior years during which the laws creating those credits or exemptions were in effect, including, without limitation, the carry forward of income tax credits pursuant to subsection (h) of Section 40-18-415.1."

Section 5. This act shall become effective immediately following its passage and approval by the Governor, or its otherwise becoming a law.

Revenue Department

Agriculture and Industries Department

Telecommunications

Broadband

Tax Credits

Taxation

Corporations

Tax Exemptions

Business and Commerce

Code Added

Code Amended