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HB608 INTRODUCED
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HB608
L5F52WY-1
By Representatives Lands, Daniels, Clarke, Drummond, Travis,
McClammy, Hollis, Hall, Jones, Lawrence, Ensler
RFD: Ways and Means Education
First Read: 10-Mar-26
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L5F52WY-1 01/12/2025 RA (F)RA 2025-3517
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First Read: 10-Mar-26
SYNOPSIS:
This bill would create the R&D Tax Credit
Enhancement Act, which provides an income tax credit to
certain organizations that invest in research and
development; the creation of this act would be an
effort to support innovation, commercialization, and
job creation in priority sectors, including health
sciences, biotechnology, and university-based research.
A BILL
TO BE ENTITLED
AN ACT
Relating to income tax credits; to establish the R&D
Tax Credit Enhancement Act; to provide an income tax credit
for universities, non-profit research institutes, and
early-stage life sciences companies who invest in research and
development; and to require the Department of Revenue to
publish an annual report on the statistics of this program.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. This act shall be known as the R&D Tax
Credit Enhancement Act.
Section 2. The Legislature finds and declares that the
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Section 2. The Legislature finds and declares that the
state needs a research and development tax credit program in
order to better support innovation, commercialization, and job
creation in priority sectors, including health sciences,
biotechnology, and university-based research.
Section 3. For the purposes of this act, the following
terms have the following meanings:
(1) COLLABORATIVE RESEARCH. Any research jointly funded
or carried out by any two or more academic institutions,
hospitals, clinical research organizations, or other qualified
research organizations.
(2) DEPARTMENT. The Department of Revenue.
(3) ELIGIBLE ACTIVITIES. Early-stage product or process
development, collaborative research projects, or clinical and
transitional research.
(4) ELIGIBLE BUSINESS. A business that contracts with a
qualified research organization for investment in research and
development.
(5) QUALIFIED RESEARCH EXPENSES. Includes wages,
contract research, equipment, clinical trial costs, and other
activities consistent with 26 U.S.C. § 41.
(6) QUALIFIED RESEARCH ORGANIZATION (QRO). Any
business, university, or non-profit entity conducting research
and development within the State of Alabama, including but not
limited to, C corporations, S corporations, limited liability
corporations, or 26 U.S.C. § 501(c)(3) nonprofits with
qualifying research expenses.
Section 4. (a) For tax years beginning on or after
January 1, 2027, and ending December 31, 2031, a QRO or an
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January 1, 2027, and ending December 31, 2031, a QRO or an
eligible business may claim the R&D tax credit against its
income tax liability for the increased expenditures invested
in qualified research expenses. The amount of the tax credit
shall be equal to 10 percent of the annual qualified research
expenses unless either of the following is applicable:
(1) For collaborative research conducted with in-state
academic institutions, the R&D tax credit shall be equal to 15
percent of the total cost of the collaborative research.
(2) QROs or eligible businesses that are either a
start-up firm, defined as having existed for three or fewer
years, or a small firm, defined as having fewer than 50
full-time employees, may elect a refundable two hundred fifty
thousand dollar ($250,000) tax credit or a transferable credit
in place of the amounts provided in subsection (a).
(b) If the eligible QRO's income tax liability is less
than the tax credit amount, the difference may be carried
forward for up to five years.
(c) Except as provided in subsection (b), no R&D tax
credit provided by this act may be transferred or sold.
(d) The tax credit provided by this section shall be
limited to thirty million dollars ($30,000,000) annually. In
the event the cap is reached, the Department of Revenue shall
review all applicants and award the tax credit in an amount
proportional to each entity's contribution to the overall
amount spent on qualifying research expenses.
(e) The Department of Revenue shall create a
streamlined application process for all QROs wishing to claim
a tax credit. The application must include the following:
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a tax credit. The application must include the following:
(1) Documentation of research expenditures.
(2) A description of activities and partners involved.
(3) Verification of in-state operations.
(4) The number of employees in the QRO.
(5) The date of creation of the QRO.
(f) The department shall publish an annual report
including the following information:
(1) The number of applications and tax credits issued.
(2) The total qualified research and development
investment supported.
(3) A sectoral and geographical distribution of tax
credit recipients.
Section 5. The department shall adopt rules necessary
to implement, administer, and facilitate this act.
Section 6. This act shall become effective on October
1, 2026.
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