Gross Income Legislation, HB 384, passes Alabama Legislature

HB384 received its final reading March 22nd and awaits Governor Ivey’s signature for enactment.  The legislation was a collaborative effort of the Alabama Department of Revenue, the Alabama Society of CPAs and the Business Council of Alabama to fix a long time problem with the income tax credit for taxes paid on income from sources outside the state. 
Synopsis and Proposed Change:
  • The statute once enacted will provide certainty regarding how Alabama residents calculate their credit for taxes paid to other states.  
  • In keeping with sound tax policy and an existing Department of Revenue regulation, this bill would provide that the credit for taxes paid to another state shall not be used to offset that portion of a taxpayer’s income tax liability that is attributable to Alabama sources. In other words, the credit will only be used to offset a taxpayer’s income tax liability that is attributable to income from other jurisdictions.
  • This legislation is the result of litigation invalidating Department Rule 810-3-21-.03, which provided an additional limitation not authorized by the existing statute, Ala. Code § 40-18-21.  This legislation essentially codifies Department Rule 810-3-21-.03, which has been effect since 2013.
The Alabama Society of CPAs thanks Chris Grissom and the tax team at Bradley Arant for helping to craft the legislation effectively passed.