Alabama 2025: Encouraging Investment, but Compliance Hurdles Remain

A strong, pro-business environment isn’t created unilaterally through private enterprises or government action. Instead, state economies thrive when good governance joins hands with successful business ventures. In Alabama, industries that were embraced by government action flourished, and those that were handicapped by excessive regulation suffered. As Alabamans move into another legislative cycle, it’s worth noting what went right – and wrong – in 2025. 

The Wins: How Alabama has Powered Its Most Powerful Industries

Alabama has made strides in recent years to improve its pro-business environment, attracting workers, investments, and business to state. However, lawmakers did not fully avoid leveraging regulation against burgeoning businesses, threatening their bottom line and harming the state’s economy in the process. 

Defense Investment Transforms Local Economy

Alabama’s “Deal of the Year” Impact Award was awarded to Austal USA’s Expansion in Mobile, Alabama. Austal USA, a defense manufacturer, pledged a $750 million investment, estimated to create 2,000 jobs in the region. 

Alabama has long been a leader in defense manufacturing and innovation, and Austal is an integral business presence in the state. With Austal’s forthcoming Submarine Module Fabrication Facility and facility for Large Steel Ships, Alabama has become an even more significant destination in the industry.

The project includes a Submarine Module Fabrication Facility, a 369,000 square foot facility that will create over 1,000 jobs by its completion in 2026. Additionally, Austal is creating an Assembly Facility for Large Steel Ships, a 192,000 square foot assembly bay, estimated to create an additional 1,000 jobs.

In 2023 alone, over 185 of Alabama’s small businesses worked with Austal, contributing $115 million to the big corporation’s projects. About 72% of Austal’s workforce resides in Mobile County. 

A bonus? Austal’s new facilities further bolster national defense, with the facilities planning to produce Columbia-class and two Virginia-class submarines annually. 

Governor Ivey Addresses State Infrastructure Needs Through “Powering Growth” Plan

According to the Alabama Chamber of Commerce, energy availability consistently ranks as the top factor in site selection for economic development projects. Governor Kay Ivey sought, and succeeded, in delivering on this economic priority through the passage of her landmark “Powering Growth” Plan. 

Signed into law by Governor Ivey in May, the Powering Growth Plan is a three-bill package that addressed Alabama’s energy infrastructure needs by focusing on expanding energy capacity and building a robust framework for energy dominance and security across the state. The legislation has a few components.

• Cut red tape to streamline permit processes and reduce delays.  

• Fixed supply chain bottlenecks that slow down either infrastructure project approvals or site readiness. 

• Created the Alabama Energy Infrastructure Bank (AEIB). The AEIB provides flexible financing for power infrastructure, funds expansion of energy sites, strengthens energy security, and leverages state funds to unlock private and federal investment.

Energy infrastructure was identified by the Alabama Growth Alliance (AGA) as a key need for attracting businesses to the state. Among the appointed members of the AGA are executives with expertise in international trade, business advocacy and policy, banking and finance, construction, real estate, and energy. The remaining members of the AGA are political leaders like the Governor, Secretary of Commerce, and the Speaker of the House. 

Private-public partnerships like the Alabama Growth Alliance have both the required political power and business acumen to identify economic needs and follow through with solutions. Through this partnership and others like it, states yield massive benefits for both businesses and the public.

At Last, Alabama Welcomes Out-of-State Workers

Alabama passed House Bill 379, the Remote Worker Income Tax Exemption, in the spring of 2025. Previously, nonresident employees who worked in Alabama, even for one day, were required by law to file income taxes in the state. It goes without saying the difficulties, hesitancies, and burdens this requirement places on national companies and traveling employees. Often, the cost of compliance is not worth the amount of taxes leveraged.

With the passage of House Bill 379, nonresidents are exempt from Alabama state taxes for the first thirty days of work in the state. The Business Council of Alabama strongly supported the bill, as it made it possible for workers across the country to do business in Alabama without concern for undue compliance or tax burdens. 

The National Taxpayers Union Foundation took note of Alabama’s success in passing HB 379. The Foundation’s ROAM Index, which measures income tax compliance burden on out-of-state employers and employees, ranks states on an annual basis. Through the passage of HB 379, Alabama’s ranking on the ROAM Index rose from 49th to 35th. 

While One Industry was Killed by Legislative Action, Others Remain Handicapped by Inaction 

Though Alabama’s 2025 session was strongly pro-business, there were missteps due both to action and inaction. House Bill 445 effectively banned Alabama’s hemp industry, closing dozens of small businesses. Senate Bill 252 regulated Pharmacy Benefit Managers, stripping them of many of the advantages of their market position. Finally, a refusal to address ongoing regulatory burdens continues to hamper growth in the state.

House Bill 445: Restricting Hemp Shuts Down Growing Industry

Alabama’s Hemp and CBD ban, also known as House Bill 445, was signed by Governor Ivey in May and took effect in July. House Bill 445 made possession of hemp-derived THC a Class C felony and banned the sale of these products from retail stores. 

With only six weeks to comply, numerous small businesses across the state were strong-armed into closure, unable to discover or generate new revenue streams before the law took effect. The hemp industry, though small, was a growing source of revenue and employment in the state, having generated $10 million in tax revenue and 1,500 jobs in 2024. 

While the benefits of hemp and CBD are debatable, the sudden passage and implementation of this law put Alabama business owners in more than a precarious position. Concerns remain that this snap decision may set a precedent that chills investment in or the expansion of business ventures in burgeoning industries in the future.

Senate Bill 252: Regulating Drug Benefits May Not Benefit Patients or Businesses

Alabama lawmakers signed Senate Bill 252 into law in April in an effort to further regulate Pharmacy Benefit Managers, commonly referred to as PBMs. PBMs are third-party administrators who manage prescription drug benefits of insurance plans, negotiate prices with drug manufacturers, and sell prescription drugs to pharmacies for distribution to patients. 

The law mandated minimum reimbursement rates for pharmacists, included “anti-steering” provisions, preventing a PBM from preferring pharmacies which they own, and mandated disclosure of spread-pricing, a tactic PBMs use to balance fluctuating prices across dozens (if not hundreds) of pharmacy locations. 

Supporting Senators introduced this bill by citing a deep concern for independent pharmacies, many of which are at risk of closure. While protecting business interests through government action is commendable in some cases, in others it raises costs and distorts competition within industries. 

Critics argue that, by regulating the benefits provided by the scale of large companies, like PBMs, the chilling effect could reverberate through the state, leading large companies to think twice before investing further in Alabama’s economy. 

To the Ire of Many, Alabama’s E-Verify Mandate Remains

In 2012, Alabama passed the Alabama Taxpayer and Citizen Protection Act, which mandates that any business of at least one employee must register and be deemed employable under the federal E-Verify system. 

Intended to crack down on illegal immigration, the E-Verify system adds tremendous compliance cost for Alabama businesses, especially those not large enough to possess dedicated Human Resources teams. For companies with high turnover, like retail and hospitality, E-Verify constantly distracts from growth, revenue generation, and other business activities. 

While employment verification is a legitimate government interest, Alabama's approach lacks the flexibility found in other states that exempt the smallest employers or phase in requirements based on company size. States like North Carolina (25+ employees) and Georgia (10+ employees) recognize that one-size-fits-all mandates can discourage job creation at the earliest and most vulnerable stage of business formation. 

What Alabama’s 2025 Teaches Us

In a largely pro-business year, Alabama has leaned into what works. The state supported industries with existing, significant footprints in the state, better laid the foundation for future growth, and eliminated some compliance costs to better suit today’s America of remote work and travel. 

In Austal USA, Alabama has a significant partnership, and the announcement of a brand-new Submarine Module Fabrication Facility and facility for Large Steel Ships bodes well for a continued, harmonious private-public partnership. 

Governor Ivey, following the advice of the Alabama Growth Alliance and Chamber of Commerce, prioritized energy and infrastructure needs, which are crucial for continuing to compete for large-scale projects that often bring highly skilled workers to the state.

Finally, Alabama alleviated tax burdens previously placed on remote or traveling workers who worked, but did not live, in Alabama. This opens the door for continued investment in Alabama by national companies.

Though the applause is deserved, there is still work to be done. Regulations that illegitimized the hemp and CBD industry crushed a growing source of jobs and tax revenue, and additional regulations on Pharmacy Benefit Managers are likely to increase costs and lessen competition in the marketplace. 

What’s more, Alabama has yet to rid itself of burdensome, hardline regulations like E-Verify mandates. While some regulations aim to address legitimate concerns, policies that threaten economic growth should be avoided when possible and repealed when necessary. 

As we move forward into 2026, we look forward to Alabama continuing to lean into public-private partnerships that foster growth, innovation, and continued economic prosperity, and hope that lawmakers seek out and repeal existing regulations that may be locking up more economic mobility than they realize.