Republican Gov. Kay Ivey signed H.B. 170, which exempts funds received from the Coronavirus Aid, Relief and Economic Security Act
, and H.B. 192, which reinstates an expired tax credit for cash contributions to local economic development organizations. Ivey also signed a third bill enacting legal immunity for certain claims related to the pandemic."Thanks to [the Legislature's] work, the people of Alabama who received any type of CARES Act dollars will not pay one penny in state income taxes on that relief," Ivey said in a statement.
The Senate and House of Representatives overwhelmingly voted to pass the bills after Ivey called on the Legislature in her State of the State address to prioritize the measures.
H.B. 192, sponsored by Rep. Bill Poole, R-Tuscaloosa, reinstates an expired tax credit for cash contributions to local economic development organizations and doubles the annual credit cap to $20 million, according to a fiscal note.
The bill also creates a new jobs credit against the utility taxes for underrepresented businesses and some medical companies and modifies the requirements and limits of other credits. The bill defines "underrepresented businesses" as those majority-owned by underrepresented people, which means women or African-Americans.
H.B. 170, sponsored by Rep. Danny Garrett, R-Trussville, provides a state income tax exclusion for federal tax credits, subsidies, grants, loans, loan forgiveness and other aid from federal pandemic relief legislation.
The bill also includes provisions to decouple the state from the federal treatment of global intangible low-taxed income, adopt a single-sales-factor apportionment and create a state and local tax cap workaround.
Under the bill, pass-through entities can elect to pay income tax at the entity level, an effort to prevent the tax from flowing through to owners, who would be subject to the $10,000 federal deduction cap for state and local taxes.
The measure also excludes qualified consolidated groups from the business interest deduction limit under Section 163(j)
of the Internal Revenue Code and replaces the current income apportionment formula — which uses property, payroll and sales factors — with a single-sales factor.Garrett put forward legislation with many of the same policies last year to implement the recommendations of a task force he co-chaired, which was commissioned to study the effects of the 2017 Tax Cuts and Jobs Act
. None of the bills advanced beyond the House.Alabama is one of a handful of states that haven't fully decoupled from GILTI, and it does not offer a full dividends-received deduction. GILTI, a provision of the TCJA, was meant to target income earned from intangible assets — such as patents or other intellectual property — in foreign jurisdictions with low tax rates.
Garrett told Law360 that he is currently focusing on three separate bills that would provide credits for research and development activities, investments in certain agricultural and other businesses and participation in an Achieving a Better Life Experience account.
The offices of Ivey, Poole and leadership of the majority in the House and the majority and minority in the Senate did not immediately respond to requests for comment.
The House minority leader was not immediately available for comment.
--Additional reporting by Paul Williams, Natalie Olivo, Maria Koklanaris and Daniel Tay. Editing by Neil Cohen.
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