QUESTION: Are Revive Alabama grants subject to Alabama income tax?
ANSWER: The Revive Alabama small business grant payments are being awarded to reimburse a business for the costs of business interruption caused by required closures related to the COVID-19 public health emergency. For the purpose of calculating Alabama income tax, the grant funds awarded will be includible in gross income for all recipients. However, the businesses will be entitled to deductions for the ordinary and necessary business expenses paid, such as mortgage interest, rent, payroll, and utilities. Thus, there might be a zero net effect on taxable income for those businesses with sufficient offsetting deductible ordinary and necessary business expenses. The businesses without sufficient deductible ordinary and necessary business expenses, such as earnings from self-employment, will report the grants as gross income, which might result in net taxable income. The full set of FAQs can be accessed at https://revenue.alabama.gov/revive-alabama-faq/.