As a follow up to the Consolidated Appropriations Act of 2021, The Alabama Society of CPAs has Inquired of the Alabama Department of Revenue how it will interpret the following:
- Alabama’s conformity or lack of conformity with the new disaster relief provisions included in the Consolidated Appropriations Act of 2021, including the ability to withdraw funds from retirement accounts
- Potential impact for Alabama victims of Hurricanes Sally and Zeta (2020)
Alabama Department of Revenue Response: Relating to the new disaster relief provisions included as Sections 301-302 of the Taxpayer Certainty Disaster Tax Relief Act, in the Consolidated Appropriations Act of 2021, Alabama is tied to these provisions for income tax purposes.
Per 40-18-14.1, “All deferred compensation plans for public or private employees authorized in this state shall receive the same tax deferred treatment for state income tax purposes which the plan receives from the IRS for federal income tax purposes in a tax year”.
Therefore, Alabama will follow the federal relief by allowing taxable amounts of early withdrawals to be taxed ratably over a 3-year period and withdrawals to be recontributed over 3 years without being subject to Alabama income tax.