ALABAMA ENACTS LANDMARK TCJA REFORM/CARES ACT EXEMPTIONS AND BUSINESS TAX REFORM LEGISLATION In this installment of the Bradley SALT Corner, we focus on Alabama Act 2021-1 (the “Act”) – a landmark piece of tax legislation that Governor Kay Ivey signed into law on February 12. The Act received unanimous votes in both chambers (94-0 in the House; 27-0 in the Senate), and was quickly signed into law only slightly more than two weeks after being introduced. The Act makes sweeping changes to Alabama’s income tax laws and is designated as three separate acts: (1) the Alabama Taxpayer Stimulus Freedom Act of 2021; (2) the Ala-
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bama Business Tax Competitiveness Act; and (3) the Alabama Electing Pass-Through Entity Tax Act. This critical legislation exempts from Alabama income tax a variety of federal CARES Act/Consolidated Appropriations Act of 2021 tax benefits, grants, loans and subsidies, while implementing other business tax reform measures, and allowing certain pass-through entities to elect to be taxed at the entity level,for Alabama income tax purposes, as a means to address the federal $10,000 annual “SALT Cap.” The latter two components were considered briefly by the
Legislature during the Spring 2020 regular session, and stem from proposals vetted by the Legislature’s bipartisan Tax Cuts and Jobs Act (TCJA) Task Force. A summary of each part of the final legislation follows, although we commend the act to your careful reading: The Alabama Stimulus Freedom Act of 2021 exempts or excludes from Alabama income tax: 1. Tax stimulus or advance refund payments received as a result of The Coronavirus Aid, Relief, and Economic Security Act of 2020 (“CARES
