Final vote possible today on bill changing corporate tax code, untaxing COVID-19 relief money

Final vote possible today on bill changing corporate tax code, untaxing COVID-19 relief money

By MARY SELL, Alabama Daily News

At least one of the Legislature’s priority bills could get final approval today.

House Bill 170 and Senate version SB98 clarify that Alabamians don’t have to pay income taxes on federal COVID-19 relief funds and make multiple changes to the corporate tax code. The Senate is expected to vote on the fast-tracked bills this afternoon. It’ll then go to the governor.

Rep. Andy Whitt, R-Harvest, co-sponsored the House version.

“Almost 2.5 million of Alabama’s citizens received stimulus checks,” Whitt, who represents portions of Madison and Limestone counties. “These funds were provided to help these families during difficult times, for the state to tax them would be unthinkable. 

In addition, the legislation covers the Paycheck Protection Program loans and Cares Act funding provided to businesses.

“Funds that had been provided to keep Alabamians working should not be subject to our state taxes,” Whitt said. “These funds were used to pay rent and keep 264,000 people on payrolls.” 

Rep. Danny Garrett, R-Trussville, and Sen. Dan Roberts, R-Mountain Brook, are the sponsors.

“We are not going to tax any of the stimulus monies that came in for businesses, for individuals, for anyone,” Roberts told Alabama Daily News. “That’s at least $8.7 billion which have come into our state and will not be taxed, These monies are going to do just what they were intended to do —  benefit our state, No. 1.

“No. 2, we are trying to make Alabama one of the best states in the nation to own and do business, so that we can hire more people…”

Roberts said the act will help Alabama-based businesses compete not just in the U.S., but around the world.

“We’re trying to help our businesses be as competitive as possible and give them every advantage we can to succeed,” he said.

The bill would change how business income is apportioned to Alabama, clarify the corporate deduction for business interest expense and decouple from two corporate provisions of the 2017 federal Tax Cuts and Jobs Act.

Roberts said the legislation decouples from the federal taxable income inclusions related to certain income from international subsidiaries and certain state economic development grants and incentives to ensure that corporations doing business in Alabama are not unexpectedly facing an unintended tax burden.

It also ensures that interest deductions for Alabama-based companies conform with intended deductions at the federal level.

One of the more significant provisions gets rid of Alabama’s “throwback” rule for corporate income apportionment, which says that if an

Alabama-based company has sales in another state but is not taxed by that other state, then those sales are “thrown back” and included in the income apportioned to Alabama.

Roberts said nearly half of states, including most states surrounding Alabama, have already axed their throwback rules.

“Our Alabama companies have been at a competitive disadvantage,” Roberts said. “This legislation allows Alabama companies to compete at the same level.”

The bill would also allow pass-through entities, of which the majority of Alabama businesses are, to elect to be taxed at the entity level for state purposes if that is optimal for them. Pass-through entities are not subject to corporate income tax and instead their profits flow through to owners or members and are taxed under individual income tax. 

In all, House Bill 170 would increase tax revenues to the state’s Education Trust Fund by about $12.95 million this fiscal year and about $12.75 million for each year after.

“The pickup is coming from out-of-state sellers who are not Alabama businesses,” Roberts said.

But it’s similar to what they’re currently paying in neighboring states, he said.

The bill got a favorable report Tuesday in the Senate education budget committee, as did House Bill 192 by Rep. Bill Poole, R-Tuscaloosa, reauthorizes and revamps the state’s economic development laws. The bill increases the annual caps on the Alabama Jobs Credit and its sister Investment Credit by $25 million in both 2021 and 2022, taking it from $300 million to $350 million. It also increases the cap on the Growing Alabama Credit from $10 million to $20 million. The bill also offers tax breaks to automakers who will ship vehicles out of the Port of Mobile, which is a big deal considering the Alabama Port Authority is building a $60 million automotive terminal that will allow for vehicles to roll on and off of ships. It also creates new incentives for women- and Black-owned businesses. Senate President Pro Tem Greg Reed, R-Jasper, is the Senate sponsor.

A third bill deemed priority by House and Senate leadership for the first two weeks of session, Senate Bill 30, was approved in the House Judiciary committee Wednesday. Sen. Arthur Orr’s bill would give limited protection against COVID-19-related lawsuits to companies and other entities. Two Democrats on the committee, Rep. Chris England, D-Tuscaloosa, and Rep. Merika Coleman, D-Birmingham, voted no.

The bill could get a final vote on the House floor Thursday.