HB98 Alabama 2010 Session

Summary

Primary Sponsor

Gregory Canfield

Republican

Session

Regular Session 2010

Title

Income tax, retirement income from defined contribution plans, exempt under up to certain amounts, Sec. 40-18-19 am'd.

Summary

HB98 would create a state income tax exemption for retirement income from defined contribution plans (IRC 414(i)) up to $10,000, phased in over four years starting in 2011 with income limits.

What This Bill Does

It adds a new exemption for payments to retirees or designated beneficiaries from defined contribution retirement plans, up to $10,000. The exemption is phased in over four adjustment years, beginning after the Department of Finance certifies sufficient growth in the Education Trust Fund, with 25% then 50%, 75%, and finally 100% of the exemption. Eligibility is limited by adjusted gross income (not available if AGI > $75,000 for single filers or > $150,000 for joint filers), and the exemption is prorated for nonresidents based on Alabama-source income. The act becomes effective for tax years beginning January 1, 2011.

Who It Affects

• Resident Alabama individual taxpayers who receive retirement payments from a defined contribution plan would be eligible for the exemption up to $10,000, phased in over four years and subject to AGI limits.
• Nonresident taxpayers with income sourced in Alabama would receive a proportionate share of the exemption based on how much of their income comes from Alabama sources.

Key Provisions

• Establishes a new exemption of up to $10,000 for retirement payments from defined contribution plans (IRC 414(i)) to the retiree or designated beneficiary, with the exemption phased in over four adjustment years (25%, 50%, 75%, 100%). The exemption is limited by AGI: not available if AGI > $75,000 for single filers or > $150,000 for joint filers.
• Phasing and implementation details: the phase-in starts in a tax year following certification by the Department of Finance that Education Trust Fund growth will meet at least 3% for the next year; full exemption requires four years of compliant growth, with the Department of Revenue implementing the changes once certified; the act becomes effective for tax years beginning January 1, 2011.

AI-generated summary using openai/gpt-5-nano on Feb 25, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Taxation