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Innovating Alabama Tax Credit

  • Innovating Alabama Tax Credit

Section 41-10-840 through Section 41-10-847

Act 2023-33 provides a tax credit against the following tax types to qualifying donors who donate to economic development organizations (EDOs) that create, operate, or support certain programs relating to technology accelerators and underrepresented companies:

  • Income Taxes (Chapter 18)
  • Financial Institution Excise Tax (FIE) – State Portion (Chapter 16)
  • Insurance Premiums Tax
  • 2.2% State Utility License Tax

Innovate Alabama is the administering agency for the Innovating Alabama Credit. All inquiries regarding eligibility and qualifications for prospective projects should be addressed to incentives@innovatealabama.org.

Additional information on the credit

Provisions of the Innovating Alabama Credit include:

  • The tax credit is equal to 100 percent of the donating taxpayer’s contribution (up to the reserved amount) to an approved EDO for qualifying projects.
  • The tax credit can offset up to 50 percent of the donor’s state tax liability, including individual and corporate income taxes, the state portion of the financial institution excise tax, insurance premium tax, and state utility license tax.
  • The tax credit may pass through to owners of a pass-through entity.
  • The tax credit is only available to donating taxpayers and cannot be transferred or assigned.
  • Any unused tax credits can be carried forward for a period of five years.
  • The tax credit may not be claimed for contributions for which a separate itemized deduction is claimed.

Additional provisions include:

  • Reservations for qualifying EDO projects can only be made when the project has been approved by Innovate Alabama, the Innovate Alabama Funding Agreement has been executed, and the online project reservation has been opened by the Alabama Department of Revenue (ALDOR).
  • Donating taxpayers must reserve the Innovating Alabama tax credit online using instructions provided below. See “Donor Information” for detailed instructions.
  • Donors have 30 days from the date the online reservation for the project is opened to reserve the Innovating Alabama tax credit. To inquire about any open and active projects, email incentives@revenue.alabama.gov.  
  • Reservations are granted on a first-come, first-served basis, and once the 30-day reservation period has ended, no further reservations will be accepted.
  • Within 21 calendar days from the date of online reservation, the donor must make the cash contribution to the approved EDO for the specified project.
  • Within 60 days after the project has been opened, the EDO must confirm to ALDOR that the cash donation has been received, the project has been funded, and the EDO will undertake the project.
  • The donor will be entitled to the reserved tax credit only after the EDO’s confirmation is received by ALDOR.

Instructions for Donors: Reserving an Innovating Alabama Credit

Additional Resources

Act 2023-33