The Alabama Innovation Commission has released an incentive-heavy set of proposals to promote innovation and entrepreneurship in the state. The recommendations from the Commission’s 2021 report include:
- Create two Alabama Innovation Corporation-managed seed capital funds
- Create a $2 million annual grant program to provide nondilutive working capital targeted at high-growth companies within targeted industries
- Partner with the state to apply for and implement the federal State Small Business Credit Initiative (SSBCI)
- Create an angel investor tax credit that would equal 25% of an equity investment made into a qualifying high-growth business that has been preapproved by the Alabama Innovation Corporation
- Create an R&D state tax credit for 5-10% of qualified research expenses for certain targeted, high-growth industries
- Create a program under the Alabama Innovation Corporation focused on incentivizing workers with requisite credentials and entrepreneurs with records of success to move to Alabama
- Create a tax credit program under the Alabama Innovation Corporation that would enable Alabama taxpayers to fund activities of nonprofit programs focused on recruiting and retaining talent in Alabama
- Create Regional Innovation Hub designations that will fund and incentivize collaboration to build and advanced innovation-focused ecosystems
These recommendations build on past incentive initiatives including:
- Establishment of a Small Business Innovation Research and Small Business Technology Transfer Research (SBIR/STTR) program providing a state match to federal awardees.
- Passage of and updates to the Alabama Incentives Modernization (AIM) Act. In 2021, the Growing Alabama tax credit cap was raised from $10 million to $20 million per year, and the Jobs Act program was expanded to reduce eligibility requirements and enhance benefits for underrepresented companies and technology projects in targeted counties.
The Commission’s work was grounded in a study by Stanford University’s Hoover Institution on ways to advance Alabama’s innovation ecosystem. The Hoover Institution team wrote the report “to assess Alabama’s infrastructure in its educational, legal, financial, governance, and physical aspects – all of which are necessary components to transform the state into an innovation hub.” The full report addresses the role of universities, outdoor recreation, advanced manufacturing, tax policy, education, and broadband.
The chapter on tax policy and incentives calls into question the utility of Alabama’s jobs credit programs. The authors also recommend establishing venture capital funds to match private investments in companies seeking to move to Alabama, citing the Launch Tennessee INCITE Co-Investment Fund and Impact Fund as a model.
For more information, please follow the links to access Innovate Alabama. Alabama Innovation Commission Report, October 2021 and Innovative Alabama. A Report by the Hoover Institution Prepared for the Alabama Innovation Commission.
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