About
To create a flourishing ecosystem in Alabama where tech accelerators and businesses thrive, Innovate Alabama offers tax incentives to help entrepreneurial support organizations do what they do best: provide the tools, resources and opportunities that help founders level up their companies.
The Innovate Alabama Act, found in Section 41 – 10-840, et seq., of the Code of Alabama, creates an incentive mechanism to provide funds to economic development organizations (EDOs) for certain qualifying activities. Alabama taxpayers who make cash contributions to EDOs for qualifying projects receive an Innovate Alabama Tax Credit that can offset up to 50% of the following tax types:
- Income tax
- State portion of the financial institution excise tax
- Insurance premium tax
- State utility license tax
Qualifying EDOs must submit an application to Innovate Alabama, as well as commit to sending a status letter. Taxpayers donating to EDOs for approved projects receive a credit equal to their donation and may carry the credit for up to five years. The credit may be passed through to individual owners, shareholders, partners or members of an LLC.
Innovate Alabama Tax Credit Recipients
2024 Innovate Alabama Tax Credit recipients include the following EDOs. This list will continue to evolve as Innovate Alabama approves additional recipients in future rounds.
Eligibility
An “economic development organization” is a state or local development organization meeting each of these three criteria:
- Is an Alabama entity not operating for a profit; and
- Is charged with improving the state or a region of the state; and
- Has a record of supporting or otherwise participating in economic development efforts in Alabama
Apply
Successful applicants can access their funds on the My Alabama Tax Portal.
Please direct questions on the Innovate Alabama Tax Credit Program to incentives@innovatealabama.org.
Frequently Asked Questions
What is the Innovate Alabama Tax Credit Program?
The Innovate Alabama Tax Credit Program is a discretionary, application-based incentive program established by the Alabama Legislature and codified at Ala. Code § 41-10-840, et seq. The program is designed to create a thriving technology-based ecosystem throughout Alabama’s communities.
The program offers tax credits to economic development organizations to create programs that aid in the growth of small businesses and accelerators throughout the state.
What is an “economic development organization”?
An organization applying to be an economic development organization (EDO) must be an Alabama entity not operating for a profit, with its primary charitable purpose to improve the state or a region of Alabama. In addition, the EDO must have a track record of supporting or participating in economic development efforts in Alabama.
In order to be designated an EDO, the organization must first submit a status letter to Innovate Alabama (template linked here), with relevant attachments to verify the representations in the status letter.
It is recommended that organizations seeking to apply for EDO status review the applicable provisions of the Alabama Code to ensure full compliance and understanding of the relevant terms.
How can an EDO receive the Innovate Alabama tax credit?
An EDO may submit an application for tax credits that would fund one of the eligible projects listed in Alabama Code § 41-10-842.
How can the EDO monetize the Innovate Alabama tax credit?
If an EDO is awarded credits, then it can transfer those credits to an applicable donor in exchange for cash. The donor would then be able to claim the tax credits, and the EDO would be able to undertake the eligible project after receiving the cash donation.
What taxes can the Innovate Alabama tax credit offset?
The tax credit can offset up to 50% of a taxpayer’s liability for the following taxes:
a. income tax;
b. state portion of the financial institution excise tax;
c. insurance premium tax; or
d. state utility license tax.
What types of projects are qualified?
Qualifying projects typically involve activities that contribute to the growth and development of technology-focused startups or accelerator programs in Alabama’s tech ecosystem. The types of projects must meet the description provided in Alabama Code § 41-10-842(a).
Can the tax credit be carried forward?
Yes, taxpayers who receive the Innovate Alabama Tax Credit may carry it forward for up to five years.
Can the tax credit be passed through to individual partners or members of a partnership or LLC?
Yes, if earned, the tax credit is not taken at the entity level. Instead, it is allocated to the entity’s partners or members, as applicable, in accordance with the entity’s operating agreement.
How can an EDO access their awarded tax credits?
EDO can access their tax credits through their log-in credentials at the My Alabama Tax Portal.
When does the Innovate Alabama Tax Credit Program sunset?
The program will sunset on July 31, 2028.
Where should I direct questions about the Innovate Alabama Tax Credit Program?
For any inquiries regarding the Innovate Alabama Tax Credit Program, please email incentives@innovatealabama.org.
