HB518 Alabama 2022 Session

Summary

Primary Sponsor

Jeremy GrayRepresentative

Democrat

Session

Regular Session 2022

Title

Economic development, to create a small business micro-loan program, to establish a micro-loan tax credit for the benefit of the micro-loan program, Secs. 41-10-840 to 41-10-843, inclusive, added.

Summary

HB518 would create an Alabama Small Business Micro-Loan Program funded by a micro-loan tax credit to provide up to $50,000 loans to eligible small businesses and establish related administration rules.

What This Bill Does

It establishes a micro-loan program run by the Alabama Innovation Corporation to provide micro-loans up to $50,000 for up to seven years at up to 9% interest, limited to eligible small businesses with in-state management, Alabama residency among top executives, at least 75% of employees living in Alabama, and size/revenue limits. It also creates a micro-loan tax credit for cash contributions to fund the program, with a yearly cap of $5 million, limits on how credits offset taxes (up to 50% of tax liability) and a five-year carryforward, and requires an online system for claims. The bill requires the corporation to work with nonprofits to provide financial education, reserve at least 25% of funds for certain eligible small businesses, and reinvest loan repayments back into the program, with other administration and funding rules described in the measure.

Who It Affects

• Eligible Alabama small businesses that meet the criteria (state-based management, Alabama residency of top executives and most employees, small size with limited employees and revenue) and would be eligible to receive micro-loans up to $50,000.
• Taxpayers and cash contributors in Alabama who donate to the micro-loan program and may claim a micro-loan tax credit against certain state taxes, subject to the $5 million per-year cap and 50% of tax liability limit.
• The Alabama Innovation Corporation (and potential private nonprofit administers) which would manage the program, award loans, monitor compliance, and contract with education providers and nonprofits.
• Nonprofit organizations that provide business and financial education programs, which would be identified and promoted to help borrowers access education services.

Key Provisions

• Adds Article 22 to Chapter 10 of Title 41 to create the small business micro-loan program and a micro-loan tax credit.
• Defines terms: eligible small business, micro-loan (up to $50,000, up to 7 years, max 9% interest), and the micro-loan tax credit.
• Specifies eligible small business criteria (in-state management, Alabama residency of top executives and most employees, size limits, revenue caps, ownership restrictions, and other eligibility rules).
• Allows the Alabama Innovation Corporation to issue micro-loans, set priorities, require applications, and require loan terms and conditions in notes.
• Loans may be used only for specified business expenses (inventory, supplies, equipment, rent, utilities, payroll for full-time employees, and certain non-owner-related contracted services) and not for personal investments, taxes, or debt repayment.
• Requires annual borrower reporting on loan use, employment, wages, and financials; allows immediate repayment on material default.
• Mandates the corporation to identify and promote Alabama-based nonprofits offering business education, and to reserve at least 25% of funds for eligible small businesses meeting Section 40-18-376.4(c) qualifications with provisions for reallocation if not enough eligible applications.
• Prohibits loan proceeds from being diverted for non-program uses and requires loan repayments to be recycled within the program.
• Authorizes the corporation to contract with private nonprofit entities for administration and to use various funding sources (grants, appropriations, the micro-loan tax credit).
• Tax credit provisions: eligible taxpayers can claim credits starting January 1 each year to offset specified taxes; credit limit is 50% of tax liability, with unused credits carried forward up to five years; credits are non-transferable and must be claimed via an online system; annual credit cap is $5 million.
• Credits are linked to cash contributions to fund the program; donors cannot also claim other deductions for the same contribution; certain corporate entities and tax structures are explicitly included as donating taxpayers.
• State fiscal controls require rules to ensure credits do not reduce distributions to the Alabama Special Mental Health Trust Fund.
• The act becomes effective immediately after governor approval.

AI-generated summary using openai/gpt-5-nano on Feb 22, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Economic Development