HB40 Alabama 2015 2nd Special Session

Summary

Primary Sponsor

Jim Patterson

Republican

Session

Second Special Session 2015

Title

Taxation, income tax, sale or exchange of property, captial loss limitation same as allowed under federal tax law, Sec. 40-18-8 am'd.

Summary

HB40 would align Alabama's capital loss rules with federal tax limits, limiting deductions to the federal cap and allowing losses to be carried forward per federal rules.

What This Bill Does

It amends Alabama Code §40-18-8 to cap the annual deduction for capital losses at the federal limit (per 26 U.S.C. §1211) or the amount by which losses exceed gains, whichever is smaller. If losses exceed gains, only the federal limit can be deducted in a year, and any unused losses can be carried forward to future years under federal rules. The bill also ties other capital-transaction rules to federal treatment (www subsections b through r), ensuring Alabama follows federal guidelines in cases like exchanges, reorganizations, and other specified transfers. The overall effect is to make Alabama’s capital loss rules consistent with federal practice.

Who It Affects

• Individual Alabama taxpayers with capital gains and losses, who would be able to deduct only up to the federal limit in a given year.
• Business and corporate taxpayers in Alabama with capital gains and losses, who would be subject to the same federal-limited deduction and carryforward rules.
• Tax professionals and preparers in Alabama who calculate and report state capital gains/losses, who would apply the federal cap and carryforward rules on state returns.

Key Provisions

• Provision 1: Amend §40-18-8(a) to limit the deduction of capital losses to the lesser of the excess losses over gains or the federal limit (as per 26 U.S.C. §1211); unutilized net losses may be carried forward to future years.
• Provision 2: Maintain alignment with federal treatment for various capital-transaction scenarios (b–r), including like-kind exchanges, reorganizations, transfers, and other specified provisions, by referencing federal rules in Alabama law.
• Provision 3: Effective date is immediate upon passage and approval by the Governor (or otherwise becoming law).

AI-generated summary using openai/gpt-5-nano on Feb 24, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Taxation