Jan 30, 2017

New Job-Related Tax Credits Available in Alabama

Written by Karen Poist, CPA

As tax season begins again for another year, it’s time to think about your company’s available tax credits.  Two new job-related Alabama tax credits for 2017 are the Small Business and Agribusiness Jobs Act and the Apprenticeship Tax Credit Act of 2016.  Both acts are designed to help develop an increase in skilled workers in the Alabama job market and will play a role in encouraging businesses to invest in their own programs while gaining potential tax benefits.

Apprenticeship Tax Credit Act of 2016

Alabama Act 2016-134, was initiated to provide an income tax credit for employers who train qualified apprentices for at least seven (7) months during the prior taxable year.  The tax credit is up to $1,000 per year for each apprentice, with a maximum of five (5) apprentices employed per year. The total amount of tax credits distributed by the State of Alabama cannot exceed $3 million per year in total.  The credit is available beginning January 1, 2017 and is effective through the 2021 tax year unless extended by an act of Legislature.

Some highlights of the Apprenticeship Tax Credit include:

  • An employer must be registered with the Office of Apprenticeship of the Employment and Training Administration of the U.S. Department of Labor.
  • An apprentice is a worker that is at least 16 years of age and learning an apprenticeable occupation. See https://www.doleta.gov/oa/occupations.cfm for a list of occupations.
  • A written apprenticeship agreement must be in place between the apprentice and the program sponsor.
  • An employer applying for the tax credit must apply each year to receive the credit for the preceding calendar year.

The Alabama Department of Revenue has not released specific details on utilization of the credit.

Small Business and Agribusiness Jobs Act

House Bill 36 (Alabama Act #2016-188) was signed into law by Governor Bentley to provide a non-refundable, one-time credit for qualifying small business employers who hire new employees that work on a full-time basis and complete 12 consecutive months of work.  To qualify for the credit, an employer must have “net employee growth,” which is an increase in the total number of full-time Alabama employees on the last date of the tax year, over the number of full-time employees as of July 24, 2016.   The new employee must earn at least $40,000 in annual wages and cannot be claimed by another employer.  If the qualifying small business is headquartered in Alabama and has 75 or fewer employees, not counting the new hires, they can claim a credit equal to $1,500 for each new qualified employee for the tax year in which the employee was hired and completed the 12 months of consecutive work.  The new tax credit is effective for employees hired after July 25, 2016 and expires on January 1, 2019.

If you would like more information about these or other potential tax credits, please visit our website at www.bmss.com or contact your BMSS professional at (205) 982-5500.