Alabama adds sunset dates to tax breaks

Gov. Kay Ivey last week signed into law a measure that could end some tax incentives.

Senate Bill 299, sponsored by Sen. Arthur Orr, R-Decatur, would add sunset dates to multiple tax incentives and amend the Coal Production Tax Credit.

Orr said in an interview last week the bill began with sunsetting tax incentives because some incentives did not have sunset dates.

“So we wanted to sunset them so the Legislature could evaluate them in five years to see what the costs were,” he said. “Was the state getting a good return on this investment, or is it just a subsidy that everyone had forgotten about, and we weren’t evaluating them, and we weren’t getting reporting from them as to what kind of benefit they were serving the state?”

He said the coal industry also approached him and wanted to “revamp” their tax credit program because it wasn’t working as it should. Orr gave the bill to the Legislative Fiscal Office and Kirk Fulford. The office told him the bill wasn’t going to cost the state more money.

“So, I told the coal tax group or coal industry I would just put that in this sunset bill, since they were already in there, and it would be one less bill floating around, and so that’s what we ended up doing,” he said.

The Legislature can extend any tax credits if they vote to do so.

Orr said he’s proposed a sunset bill in the past, but time ran out before it passed.

It’s unclear how much money the state would save if all of the tax incentives in the bill did sunset. Not all of the incentives have a capped spending amount.

He said the Alabama Enterprise Zone Act is from the 1980s and has not been used “in some time.” But he recently learned the Irrigation credit began paying for itself in the third or fourth year.

“So that was certainly something that we can look at very positively, but we still need to formally evaluate it and then the Legislature at the time make that conscious decision: this is a good investment for the state, we need to draft a new bill and we need to pass it,” he said.

Messages seeking comment were left with the Alabama Department of Commerce.

Earlier in the session, Orr spoke strongly against tax incentives in the state, referring to the passage of some as repugnant.

The senator recently said much of his concern came from those specific bills and their providing incentives to industries already in the state.

“If I’m recalling the day of my speech on tax credits, it generally was related to that tourism component in the Jobs Act that had a retroactive feature to it where you could have already placed your hotel or whatever amusement in place, already be selling tickets or beds or whatever, and here the taxpayers were going to come write you a check or after you’d already made your investment and that’s a subsidy, not an incentive,” he said. “And that’s the reason I was really frosted at having that in the Jobs Act, and the reason I voted against it.”

He said the issues that angered him were remedied in a later bill. He said those concerns were what he would call a subsidy, not an incentive.