HB416

ENGROSSED

A BILL TO BE ENTITLED AN ACT

To enact the Alabama Renewal Act; to enact new programs for the growth of business and industry in Alabama; to create tax credits for increased use of the state’s port facilities; to create the Growing Alabama Act tax credit to address economic development needs in Alabama that cannot be solved with traditional tax incentives; to cap the credits; to provide for the carryforward of certain earned but unused credits; to provide methods for claiming certain credits; to provide for proof that credits are due to be granted; to provide for the promulgation of forms; to create new Articles 18 and 19 of Chapter 18 of Title 40; to provide for the promulgation of regulations; to provide for the severability of invalid provisions; to provide for the repeal of conflicting laws; to provide for effective dates.

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:

Section 1. This act shall be known as the “Alabama Renewal Act”.

Section 2. A new Article 18 of Chapter 18 of Title 40, Code of Alabama 1975, is created to read as follows:

§ 40-18-400. For the purpose of this article, the following words and phrases shall have the following meanings:

(a) BASE CARGO VOLUME. The average cargo volume of a port facility user in the five years prior to the year for which the commission has granted approval for the company to claim the port credit.

(b) CARGO VOLUME. The total amount of net tons of noncontainerized general cargo or containers, measured in TEUs or in net tons, transported by way of a waterborne ship, air cargo aircraft, or railroad through a port facility; provided that such cargo shall be owned by the port facility user at the time the port facility is used.

(c) COMMISSION. The Renewal of Alabama Commission created by Section 40-18-402.

(d) COMPANY. Anyone or anything which has the powers to conduct the activities required to claim the port credit.

(e) PORT FACILITY. Any publicly-owned facility located within this state’s ports of entry through which cargo is transported by way of a waterborne ship, air cargo aircraft, or railroad, to or from destinations outside this state and which handles cargo owned by third parties in addition to cargo owned by the port facility's owner.

(f) PORT FACILITY USER. A company engaged in manufacturing, warehousing, or distribution which uses a port facility.

(g) PORT CREDIT. The credit provided for in Section 40-18-403.

(h) TEU. A “twenty-foot equivalent unit” volumetric measure based on the size of a container twenty feet long by eight feet wide by eight feet, six inches high.

§ 40-18-401.

(a) The port credit provided for in Section 40-18-403 is created by this article and is allowed upon strict compliance with the provisions herein.

(b) Prior to the allowance of the port credit, an application shall be filed with the commission, on a form promulgated by the commission.

(1) The application shall be filed by the port facility user desiring to claim the credit.

(2) The commission shall establish deadlines for applications. Such applications shall solicit whatever information the commission deems important to its determination of whether granting a port credit will create new, high-paying jobs in the state, bring substantial capital to the state, increase the usage of a port facility, promote the development of clusters of businesses in the state, or promote the economic development efforts of the state.

(3) Upon review of such applications, the commission shall approve such applications as shall result in port credits being awarded so as not to exceed $8 million. In addition, the commission may grant conditional approval to applications above the amounts provided herein. Thereafter, if applications which were initially approved do not result in a claim of port credits, conditionally approved applications may be granted approval. The calculations required to be made by the commission shall be based on the initial returns filed by companies which had port credits approved. No company may amend a return to claim an approved port credit which was not claimed on its initial filed return, unless such amendment is to claim a credit which was conditionally approved initially.

(4) The commission shall charge application fees to offset the costs of administration of this article.

(c) Prior to claiming a port credit, the company shall submit to the Department of Commerce a certification containing information adequate to prove that the company is entitled to the credit. Following such examination as it deems necessary, the Department of Commerce may certify the information and deliver the same to the Department of Revenue. Thereafter, the Department of Revenue shall allow the tax credit.

(d)(1) Nothing in this article shall be construed to constitute a guarantee or assumption by the state of any debt of any company nor to authorize the credit of the state to be given, pledged or loaned to any company.

(2) Nothing in this article shall be construed to make available to any company any right to the benefits conferred by this article absent strict compliance with this article.

(3) All filings made by a private party with the commission or any department of the state government shall be made using forms promulgated by such commission or department. Any such filing shall be treated as a tax return, subject to penalties imposed by the Department of Revenue.

(4) Nothing in this article shall be construed to limit the powers otherwise existing for the Department of Revenue to audit and assess any company claiming a port credit.

§ 40-18-402.

(a) There is hereby created the Renewal of Alabama Commission.

(b) The commission shall be comprised of all of the following persons:

(1) The Finance Director, or his or her designee;

(2) The Secretary of Commerce, or his or her designee;

(3) One person appointed by the Governor;

(4) One person appointed by the Speaker of the House; and

(5) One person appointed by the President Pro Tempore of the Senate.

(c) All persons appointed to the commission shall have one or more of the following qualifications:

(1) Members must be knowledgeable in the management of money and finance;

(2) Members must have experience in innovative technologies or products;

(3) Members must have experience in international trade; or

(4) Members must have experience as chief executive officers, chief financial officers, or other executive-level management roles in businesses in this state which employ Alabama residents.

(5) The Commission shall be inclusive and reflect the rural, gender, geographic, urban and rural, and economic diversity of the state.

(d) The Secretary of Commerce, or his or her designee, shall be the chairman of the commission and shall preside over all meetings of the commission. The commission may elect such other officers as it may find necessary or desirable; provided that the commission shall have a board secretary to keep minutes of its proceedings. No officer of the commission other than the chairman need be a member of the commission.

(e) No member of the commission shall vote or participate in any matter in which the member or a family member of the member has any financial gain or interest.

(f) Members of the commission shall serve without compensation.

(g) The commission shall meet at the call of the chair or any majority of members thereof; provided that the commission shall meet at least two times annually.

(h) The commission shall adopt its own rules of procedure for the transaction of its business, and a majority of the members present shall constitute a quorum for the purpose of transacting or performing authorized duties. Meetings of the commission are exempt from Chapter 25A of Title 36, provided that the minutes of each meeting shall be made available for public inspection. In order to balance the privacy needs of companies with openness to the public, the commission may use code names in its deliberations about various applicants and in the minutes of its proceedings.

(i) The Department of Commerce shall provide administrative and staffing support for the commission. The Department of Revenue shall disclose to the commission whatever information it may possess which would allow the commission to fulfill this article; provided, however, that such information shall only be disclosed and discussed in a closed session. The Department of Revenue may require members of the commission to execute confidentiality agreements before the disclosure of information.

(j) The commission shall make an annual report on the use of funds pursuant to this article. Such report shall be made to the Joint Legislative Advisory Committee on Economic Incentives established by Section 40-18-379, at the times and in the manner requested by the Committee. Any publicly-available version of the report may redact information which the Department of Commerce believes would place the state at a competitive disadvantage.

(k) The commission and the Departments of Commerce and Revenue are authorized to promulgate regulations as necessary to implement and administer the provisions of this act.

§ 40-18-403.

(a) If approved by the commission, a port credit is allowed, in an amount equal to $50 per TEU or $3.00 per net ton, multiplied by the following:

(1) The port user’s cargo volume in the year for which the commission has granted approval for the port user to claim the port credit, minus

(2) The port user’s base cargo volume.

(b) The commission may decrease the amount of the port credit to ensure that the anticipated revenues for the port facility and state will exceed the amount of the port credit sought. The port credit may be conditioned on whatever requirements the commission shall impose.

(c) The following methods may be used to realize the port credit:

(1) The port credit may offset the tax levied by Chapter 18, but not below zero. The port credit may also offset the estimated payments of the tax levied by Chapter 18, but not below zero; provided that, in no event shall the port credits be allowed to reduce any estimated payment of the tax levied by Chapter 18 before October 1, 2016. In any one year, if the port credit exceeds the amount of tax liability, the port user may carry forward the unused port credit. No carryforward shall be allowed for more than five years. Rules similar to those used for Section 40-18-15.2 shall be applied.

(2) Port credits earned by a flow-through entity may be allocated among some or all of the owners of such entity in any manner specified, regardless of whether the allocation follows rules similar to 26 U.S.C. § 704(b) and the regulations thereunder. The owners may then use their allocated share of the credits to offset the tax levied by Chapter 18, using the methods otherwise provided in subsection (b).

(3) A company may assign and convey a port credit to another company if substantially all of the assets of the company are assigned and conveyed in the same transaction. Proof of such transfer shall be submitted to the Department of Revenue.

(d) To the extent that the port credit is utilized by the port user or by a transferee company, no deduction for the related expenses shall be allowed.

(e) For any company which enters into an economic development project agreement with the state, the project agreement may provide for an allocation to the company of any port credits which have not been allocated pursuant to this article. Allocations made pursuant to this subsection shall meet all of the following requirements:

(1) Allocations shall be made by the Governor and approved by the commission;

(2) Allocations shall not in the aggregate exceed $1 million;

(3) Allocations shall be granted only to a new warehouse or distribution facility which commits to investing at least $20 million at a single site and to creating 75 jobs;

(4) Port credits may not be used until the Department of Commerce has received satisfactory proof that the capital investment and job creation requirements have been satisfied; and

(5) Any port credit granted by this procedure shall not be granted for more than a 3-year period.

Section 3. A new Article 19 of Chapter 18 of Title 40, Code of Alabama 1975, is created to read as follows:

§ 40-18-410. For the purpose of this article, the following words and phrases shall have the following meanings:

(a) ADDITIONAL ALLOCATION AMOUNT. An amount for the current year which is determined after all amounts in paragraph (f)(2) are verified for the current year, equal to the excess of:

(1) The cap amount, minus

(2) The contribution amounts for all taxpayers for the current year.

(b) ADDITIONAL ALLOCATION SHARE. All or part of the additional allocation amount allocated by the Department of Revenue to taxpayers with carryforward amounts existing after all amounts in paragraph (f)(2) are verified for the current year. The amount of the additional allocation share for any taxpayer shall not exceed such taxpayers’ carryforward amounts but may exceed, for each taxpayer, the lesser of $10 million or the cap amount. Allocations of the additional allocation amount shall be made to taxpayers starting with the earliest issuance times, until the total allocations of Growing Alabama Credits for the current year should equal the cap amount.

(c) APPROVED ACTIVITY. An activity predominantly constituting one or more of the following:

(1) Described by NAICS Code 1133, 115111, 2121, 22111, 221330, 31 (other than 311811), 32, 33, 423, 424, 482, 4862, 48691, 48699, 48819, 4882, 4883 (other than 48833), 493, 511, 5121 (other than 51213), 51221, 517, 518 (without regard to the premise that data processing and related services be performed in conjunction with a third party), 51913, 52232, 54133 (if predominantly in furtherance of another activity described in this article), 54134 (if predominantly in furtherance of another activity described in this article), 54138, 5415, 541614, 5417, 55 (if not for the production of electricity), 561422 (other than establishments that originate telephone calls), 562213, 56291, 56292, 611512, 927 or 92811.

(2) The production of biofuel as such term is defined in Section 2-2-90(c)(2).

(3) The conduct of original investigations undertaken on a systematic basis to gain new knowledge or the application of research findings or other scientific knowledge to create new or significantly improved products or processes.

(4) The national or regional headquarters for a company that conducts significant business operations outside the state and that will serve as the principal office of the company’s principal operating officer with chief responsibility for the daily business operations of the company.

(5) A target of the state’s economic development efforts pursuant to the Accelerate Alabama Strategic Economic Development Plan adopted in January 2012 by the Alabama Economic Development Alliance, created by Executive Order Number 21 of the Governor on July 18, 2011, or any amended version or successor document thereto.

(6) A type listed in a regulation adopted by the Department of Commerce, other than a regulation submitted as an emergency rule.

Notwithstanding the foregoing, an approved activity shall not predominantly include farming activities involving trees, animals or crops or the retail sale of tangible personal property or services. This provision shall not be deemed to exclude customer service centers, call centers or headquarters otherwise allowed as an approved activity.

(d) CAP AMOUNT. For the 2016 calendar year, $5 million; for the 2017 calendar year, $10 million; and for calendar year 2018 and each year thereafter, $15 million per year.

(e) CARRYFORWARD AMOUNT. As to a taxpayer for any given year, the excess of:

(1) All amounts contributed under paragraph (f)(2) during the given year and the 10 years preceding the given year; minus

(2) The credit amounts allowed during the given year and the 10 years preceding the given year.

(f) CONTRIBUTION AMOUNT. As to a taxpayer, the sum of:

(1) The first-day allocation for the current year; plus

(2) Contributions made during the current year which are shown in online filings with the Department of Revenue, but not including any amount which is not received by an economic development organization within 15 days of the issuance time, as verified to the Department by the economic development organization within 20 days of the issuance time.

Although a taxpayer may, in paragraph (2), contribute to a statewide organization any amount of cash or property, in no event shall the contribution amount for the taxpayer exceed, for the current year, the lesser of $10 million or the cap amount, and the taxpayer’s contribution amount shall not cause the contribution amounts for all taxpayers to exceed the cap amount for the current year.

(g) CREDIT AMOUNT. As to a taxpayer, the lesser of:

(1) 50% of the taxpayer’s tax liability for the current year; or

(2) The contribution amount for the current year plus the additional allocation share for the current year.

Contributions will be deemed to be part of the credit amount on a first in, first out basis.

(h) ECONOMIC DEVELOPMENT ORGANIZATIONS. One or more organizations, each of which is determined by the Department of Commerce to meet the following criteria:

(1) The organization is exempt from federal income tax under section 501(c)(6) of the Internal Revenue Code of 1986, as amended;

(2) The organization was organized at least 20 years prior to the effective date of this article to lend support to economic development initiatives in the state;

(3) The organization has a record of supporting recruitment, retention, and innovation activities in Alabama;

(4) The organization provides the means by which the private sector collectively participates in economic development initiatives throughout the state; and

(5) The organization will not employ or retain registered lobbyists during the time that it is designated as an economic development organization.

(i) FIRST-DAY ALLOCATION. For a taxpayer, the carryforward amount existing at the end of the prior year, as calculated after any additional allocation shares for the prior year are allocated by the Department of Revenue. In no event shall the first-day allocation for a taxpayer exceed, for the current year, the lesser of $10 million or the cap amount. The taxpayer’s first-day allocation shall not cause the first-day allocations for all taxpayers with an earlier issuance time to exceed the cap amount for the current year.

(j) GROWING ALABAMA CREDIT. The credit provided for in Section 40-18-411(a).

(k) ISSUANCE TIME. As to a taxpayer, the moment in time at which the taxpayer files with the Department of Revenue a request for Growing Alabama Credits or makes a request for prior approval of a contemplated transaction pursuant to Section 40-18-412(c).

(l) PRIVATE LANDOWNER. An individual or entity receiving a benefit from an economic development organization, which benefit does not relate to an approved activity. The term shall not include entities listed in Section 40-18-414(a)(2).

(m) QUALIFYING PURPOSE. Any activity for the benefit of Alabama or any community therein which constitutes any of the following:

(1) Promoting the state as a place for the location or expansion of industries or businesses conducting approved activities;

(2) The identification, acquisition, preparation, and rehabilitation of sites and the construction or rehabilitation of vacant buildings, which sites and buildings could reasonably be anticipated to be used by any type of industry or business which conducts an approved activity;

(3) The creation of public infrastructure in Alabama which could reasonably be anticipated to be in support of any type of industry or business which conducts an approved activity;

(4) The revitalization of downtown areas, including the renovation, upkeep and preservation of buildings in downtown areas;

(5) Preserving and expanding the missions and activities conducted at military bases and installations in Alabama;

(6) Creating and promoting mechanisms to match workforce needs with the state’s education system;

(7) The placement of high-technology devices in Alabama classrooms; and

(8) An activity described in a regulation issued by the Department of Commerce, other than a regulation submitted as an emergency rule.

(n) RENEWAL OF ALABAMA COMMISSION. The Renewal of Alabama Commission created by Section 40-18-402.

§ 40-18-411.

(a) A taxpayer is allowed a Growing Alabama Credit in an amount equal to the credit amount. The Growing Alabama Credit shall be applied against the tax levied by Chapter 18, or used as an estimated payment of the tax levied by Chapter 18, but not below zero. In no event shall Growing Alabama Credits be allowed to reduce any estimated payment of the tax levied by Chapter 18 before October 1, 2016.

(b)(1) Real or tangible personal property may be donated only if it would be used directly to accomplish a qualifying purpose. Donated property shall be valued at its fair market value using the “qualified appraisal” standards set forth by the IRS.

(2) In calculating any of the amounts in Section 40-18-410, the amounts may not be less than zero, and they shall not be calculated to cause a violation of the caps in subsection (c).

(3) In the event that the limitation in Section 40-18-410(g)(1) should apply to a taxpayer, the Department of Revenue shall make any resulting computational changes that impact the taxpayer, but no other taxpayer shall be disadvantaged thereby.

(c) The Department of Commerce shall name at least one economic development organization on the effective date of this article.

§ 40-18-412.

(a) The Growing Alabama Credits shall be granted to taxpayers using an online system administered by the Department of Revenue. The online system shall allow taxpayers to file applications showing the amount of the total contributions of cash and property which the taxpayer expects in good faith to contribute to one or more economic development organizations, and contributions to economic development organizations shall be permitted even if in excess of the various limitations in this article.

(b) The online filing system shall first be available in January 2016, but shall not be available during January of any other year.

(c) A taxpayer contributing property that would be used directly to accomplish a qualifying purpose may propose the contribution and effectuate it upon prior approval of the project by the economic development organization and the Renewal of Alabama Commission. The economic development organization and the Renewal of Alabama Commission may grant prior approval to multi-year contributions as a part of a plan to accomplish a qualifying purpose.

§ 40-18-413.

(a) A taxpayer may not restrict a contribution to any specific purpose.

(b) An economic development organization may refuse to accept any contributions it wishes to refuse.

(c) Individual donors shall not be dependents of other taxpayers.

(d) A taxpayer, including a corporate taxpayer, an individual, or a married couple filing jointly, may claim an allowable credit only once. To the extent that a Growing Alabama Credit is claimed by a taxpayer, the taxpayer shall not be allowed any deduction which would have otherwise been allowed for the taxpayer’s contribution.

(e) Credits may only be claimed by the donating individual or corporate entity and may not be assigned or transferred to any other taxpayer except as a part of a sale of substantially all of the assets of the taxpayer. A taxpayer may not claim a credit for a donation made by any other entity, including an entity taxed under subchapter S or subchapter K of which the taxpayer is an owner, shareholder, partner or member.

§ 40-18-414.

(a)(1) For any contribution of property or cash for which a Growing Alabama Credit has been granted, an economic development organization shall use such contributions solely for one or more qualifying purposes, following approval of the use by the Renewal of Alabama Commission.

(2) In furtherance of paragraph (1), an economic development organization may use subsidiaries, partnerships, and disregarded entities and may act in conjunction with other organizations exempt from federal income tax under section 501(c)(3), 501(c)(4), or 501(c)(6) of the Internal Revenue Code of 1986, as amended, with an Alabama municipality or county, or with an entity organized by one or more of them.

(b) In conducting the activities specified in Section 40-18-410(m)(2), (3), or (4), an economic development organization shall not use any contribution of property or cash for which a Growing Alabama Credit has been granted in any manner that primarily benefits a private landowner, other than the acquisition of property owned by a private landowner at or below an appraised fair market value, or the sale or lease of property to a private landowner at or above an appraised fair market value. The Renewal of Alabama Commission may issue written advice on whether a proposed use of property or cash would violate this subsection, and an economic development organization may rely on that advice.

(c)(1) For any contribution of property or cash for which a Growing Alabama Credit has been granted, an economic development organization shall segregate and separately account for such contribution from all other assets of the organization. Excess funds that are not expended during any taxable year may be invested in stocks, bonds, loans, or real estate, so long as the funds are separately accounted for. Any investment income shall be reinvested or used for a qualifying purpose.

(2) An economic development organization shall not invest any contribution for which a Growing Alabama Credit has been granted directly or indirectly in the contributing taxpayer’s stocks or bonds, except through a mutual fund. If an economic development organization receives as a contribution any stocks or bonds of the contributing taxpayer or its affiliate, the organization shall, within a reasonable and commercially feasible time, sell such stocks or bonds and either reinvest in other stocks, bonds or real estate or use the funds for a qualifying purpose. The Department of Commerce may issue written advice on whether a proposed divestment would be made in a reasonable and commercially feasible time.

(3) An economic development organization may use contributed property or cash for the payment of administrative expenses, but only to the extent such expenses are incurred because of the organization’s status as an economic development organization. Such expenses may be approved in a writing by the Department of Commerce, or may be provided for in regulations promulgated by the Department of Commerce.

(d) Each economic development organization shall annually submit a report to the Department of Commerce detailing its annual qualifying expenditures. The organization shall make such other reports as may be required by the Department. The Department shall make an annual report on the use of funds pursuant to this article to the Joint Legislative Advisory Committee on Economic Incentives established by Section 40-18-379, at the times, and in the manner, requested by the Committee. Any publicly-available version of the report may redact information which the Department of Commerce believes would place the state or a community therein at a competitive disadvantage.

(e) The status of an organization as an economic development organization shall be terminated upon any of the following:

(1) A determination by the Department of Revenue that the organization has lost its tax-exempt status;

(2) A determination by the Department of Commerce that the organization has used funds for a non-qualifying purpose; or

(3) A determination by the Department of Commerce that the organization has demonstrated a lack of institutional control by failing to make timely reports required by this section.

The termination of the status of any approved economic development corporation shall not cause any taxpayer to lose any credits previously granted to the taxpayer.

(f) If an economic development organization should have received cash and property which has not become part of a taxpayer’s creditable amount at the time of the organization’s termination of its status as an economic development organization, the economic development organization shall consult with the taxpayer who made the contribution and transfer such funds to an economic development organization.

(g) An economic development organization shall be subject to the limitations in this article as to cash and property for which a Growing Alabama Credit is issued, even after the organization’s status as an economic development organization should expire or be otherwise terminated.

§ 40-18-415.

(a) All filings made by a private party with any department of the state government shall be made using forms promulgated by such department. Any such filing shall be treated as a tax return, subject to penalties imposed by the Department of Revenue.

(b) Nothing in this article shall be construed to constitute a guarantee or assumption by the state of any debt of any company nor to authorize the credit of the state to be given, pledged or loaned to any company.

(c) Nothing in this article shall be construed to make available to any taxpayer any right to the benefits conferred by this article absent strict compliance with this article.

(d) Nothing in this article shall be construed to limit the powers otherwise existing for the Department of Revenue to audit and assess a taxpayer claiming the Growing Alabama Credit.

(e) The Departments of Commerce and Revenue are authorized to promulgate regulations as necessary to implement and administer the provisions of this article.

Section 4. If a court of competent jurisdiction adjudges invalid or unconstitutional any clause, sentence, paragraph, section, or part of this act, such judgment or decree shall not affect, impair, invalidate, or nullify the remainder of this act, but the effect of the decision shall be confined to the clause, sentence, paragraph, section, or part of this act adjudged to be invalid or unconstitutional.

Section 5. All laws or parts of laws which conflict with this act are repealed.