MONTGOMERY, Ala. - Craig Bacheler expects to offer healthinsurance benefits at his information technology business, now that Alabama's governor has signed into law a tax break for small businesses that provide the insurance to their workers. Bacheler said high insurance costs have left his five-month-old company, Bacheler Technologies in Montgomery, unable to offer such benefits to its two employees. But the new law will make the insurance more affordable, allowing him to make it available when the law takes effect. "It's hard to compete with big businesses because they can pay all or part of the cost," he said, adding new health benefits would make recruiting employees easier.

Gov. Bob Riley pushed the tax break through the recent legislative session and signed it into law Tuesday in a Capitol ceremony. Riley predicts the legislation will allow more small businesses like Bacheler's to start offering health insurance. Starting Jan. 1, the new law will permit businesses with fewer than 25 employees to deduct from their state income taxes 150 percent of the amount they pay for health insurance for employees who earn less than $50,000 annually. The deduction has been 100 percent. Small business employees who earn less than $50,000 annually will be able to deduct from their state income taxes 150 percent of what they pay toward their health insurance. To get the deduction, they have to spend more than 4 percent of their adjusted gross income on medical expenses.At the bill signing, Riley said the state has offered financial incentives to big corporations that have built plants in Alabama. Now, he said, the time has come to help small businesses, which create more than 80 percent of the jobs in Alabama.

Andy Martin, owner of Square Root Interactive in Montgomery, said his Web design company already pays part of the cost of employees' health insurance. But the tax break will help his firm make more money and possibly expand its work force of 11. He said it will also help employees with their share of insurance costs. The Legislature passed the bill after Riley made it part of his 2006 re-election platform and after business groups, including the Business Council of Alabama, spent four years promoting the idea. Martin, a BCA member, said the legislative action was unexpected. "It's almost like the feeling you have when somebody you didn't expect remembers your birthday," he said. The tax break is supposed to cost the state $33 million annually. To pay for the tax break, the Republican governor recommended and the Democrat-controlled Legislature passed a bill to close some loopholes that large national corporations use to pay less state income taxes in Alabama.

That bill, designed to raise $54 million annually, reins in the practice of national corporations paying a sister company huge amounts for use of a trademark and then using those payments to lower their state taxes on income generated in Alabama.

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