The House overwhelmingly voted to pass H.B. 170, which would exempt funds received from the Coronavirus Aid, Relief and Economic Security Act
, and H.B. 192, which would reinstate an expired tax credit for cash contributions to local economic development organizations. H.B. 170 passed by a vote 94 to one with nine abstaining, while H.B. 192 passed 94 to zero with 10 abstaining.The vote comes less than two days after Republican Gov. Kay Ivey called on the Legislature to prioritize COVID-19 tax relief and reviving credits, saying she hoped those measures would pass within the first few weeks of the legislative session.
Ivey issued an emergency proclamation in December to exclude federal benefits from state taxes, including economic impact payments, employer principal and interest payments on employee education loans and fund grants. Republican legislators, who control a supermajority in the state House of Representatives and Senate, had already put out proposals to make the relief permanent by the time Ivey delivered her State of the State Address.
H.B. 192, introduced Tuesday by Rep. Bill Poole, R-Tuscaloosa, would reinstate an expired tax credit for cash contributions to local economic development organizations and double the annual credit cap to $20 million, according to a fiscal note.
The bill would also create a new jobs credit against the utility taxes for underrepresented businesses and some medical companies, and modify the requirements and limits of other credits. Amendments to the bill define "underrepresented businesses" as those majority-owned by underrepresented people, which means women or African Americans, and impose a severability clause to allow the rest of the bill's provisions to survive if any component is declared unlawful.
H.B. 170, sponsored by Rep. Danny Garrett, R-Trussville, would provide 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 from bills Garrett proposed last year that would 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 taxes cap workaround.
Under the bill, pass-through entities could 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 would also exclude qualified consolidated groups from the business interest deduction limit under Section 163(j)
of the Internal Revenue Code and replace 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.
H.B. 170 and H.B. 192 will be sent to the Senate for consideration, where S.B. 98, which is identical to H.B. 170, was pending a final floor vote as of Thursday afternoon.
"There were a couple of modifications, but I'm very glad that it passed," Poole told Law360 about the passage of H.B. 192. "We think it's important that Alabama is an attractive place for private capital to invest."
Poole said he anticipates the Senate will quickly move on his bill and that he is not aware of any planned amendments to the measure.
Garrett said in an email that H.B. 170 is scheduled for a Senate committee hearing on Tuesday and that he expects a vote next week.
Kirsten Barnes, communications director for Senate Minority Leader Bobby Singleton, D-Greensboro, said in an email to Law360 that H.B. 170 and H.B. 192 will not receive a committee hearing vote until Wednesday and could pass the Senate as soon as Wednesday evening or Thursday.
"H.B. 170 is one of Gov. Ivey's priority bills and one that I believe will pass easily," Barnes said. "Like the previous bill, H.B. 192 is also a priority for Gov. Ivey."
Gina Maiola, press secretary for Ivey, told Law360 that "The governor supports this legislation and said during her state of the state address very clearly that when they reach her desk, she will sign without delay."
The offices of leadership for the majority in the House and Senate did not immediately respond to requests for comment.
The House minority leader could not immediately be reached for comment.
--Additional reporting by Paul Williams, Natalie Olivo, Maria Koklanaris and Daniel Tay. Editing by Vincent Sherry.
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