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AL Re-employment Act of 2010 Tax Alert
May 2010 – May 25, 2010
The Alabama Re-employment Act of 2010 offers an income tax deduction of up to 50% of the gross wages paid to each qualified person hired during 2010 and 2011. All Alabama employers can potentially take advantage of the new deduction.
The tax deduction is for Alabama employers that create jobs for unemployed persons and is tied to wage rates paid to each qualified employee hired and retained as a full-time employee for at least 12 months. Qualified employees are employees working at least 37.5 hours per week and who, at the time of employment, were drawing unemployment compensation or whose benefits had expired. The one year testing period begins immediately, but the tax deduction is essentially effective for tax years 2011 and 2012.
The allowable deduction is limited as follows:
1) A 50% deduction for wage rates of $14 per hour and above
2) A 40% deduction for wage rates between $12 and $14 per hour
3) A 35% deduction for wage rates between $10 and $12 per hour
4) No deduction for jobs paying less than $10 per hour
For "qualified investing companies," this deduction may be in addition to Alabama's Capital Credit. "Qualified investing companies" are companies making an investment in the state that meet project requirements for capital costs incurred, number of jobs created and base wage requirements. If the Alabama Capital Credit requirements are met, it is possible for a business investing in Alabama to receive both the Capital Credit (equal to 5% of the total capital costs of the qualifying project) and a tax deduction equal to 50% of gross wages paid to new workers.
