On Friday, February 12, 2021, Alabama’s Governor, Kay Ivey, approved a tax bill (H.B. 170/S.B. 98) that provides tax benefits to both individuals and businesses.
The legislation includes the following items:
- Conforms Alabama to the CARES Act and Consolidated Appropriations Act (CAA) passed in 2020 (This includes treating PPP loan forgiveness as non-taxable income to the recipient.)
- Exempts all COVID-19 federal stimulus and relief payments from taxable income for individuals
- Conforms Alabama tax law to federal tax code section 163(j) related to business interest deductions
- Allows pass-through entities to be taxed as entities instead of owners paying tax on income passed through. This would allow the state tax paid to be deducted by the entity instead of the individual owners’ deduction being limited
- Converts Alabama to a single sales factor apportionment methodology for multi-state businesses, effective January 1, 2021
- Repeals the “throwback rule” when determining apportionment factors for multi-state businesses
- Decouples from Global Intangible Low-Taxed Income (GILTI) for International Taxpayers
According to a statement issued from the office of the governor, “…the people of Alabama who received any type of CARES Act dollars will not pay one penny in state income taxes on that relief.”
If you have questions about how this will affect you or your business, please contact your Warren Averett advisor or ask a member of our team to reach out to you.