HB92 Alabama 2016 Session

Summary

Primary Sponsor

Lynn Greer

Republican

Session

Regular Session 2016

Title

Income tax, defined benefit plans, distributions, including retirement under Teachers and State Employees Retirement, exemption limited, contributions to defined benefit plans exempt from income under certain conditions, Secs. 16-25-23, 36-27-28, 36-27-170, 40-18-14, 40-18-19 am'd; Sec. 40-18-20 repealed

Summary

HB92 would require Alabama taxpayers to report and be taxed on distributions from defined benefit pension plans and would provide a $50,000 per-person exemption for pension and annuity income, beginning with the 2016 tax year.

What This Bill Does

It ends the current exemption from reporting defined benefit distributions and requires these benefits to be included in gross income on individual tax returns. It adds a $50,000 exemption for pension and annuity income per taxpayer (married couples can use this individually as well). It allows a 60-month period to recover any basis in reporting distributions from a defined benefit plan, with up to 20% of the basis recovered each year, and notes that participants in a Deferred Retirement Option Plan (DROP) do not qualify for this basis-recovery exemption. It repeals Section 40-18-20 and updates related provisions, with the changes taking effect for tax years beginning after December 31, 2015.

Who It Affects

• Alabama resident individual taxpayers who receive distributions from defined benefit pension plans would need to report those distributions and pay tax on them, though the first $50,000 of pension/annuity income per taxpayer would be exempt.
• Participants in Deferred Retirement Option Plans (DROP) or other defined benefit plan arrangements would not qualify for the basis-recovery exemption and would face the revised tax treatment.

Key Provisions

• Distributions from defined benefit plans must be included in gross income for the calendar year.
• Provides an exemption of the first $50,000 of pension and annuity income per individual taxpayer (with married couples each eligible to claim the deduction).
• Allows a 60-month period to recapture any basis in reporting distributions from a defined benefit plan, with a maximum of 20% recovered per year; DROP participants are not eligible for this exemption.
• Repeals Section 40-18-20 and adjusts related sections (16-25-23, 36-27-28, 36-27-170, 40-18-14, 40-18-19) to implement the changes.
• Effective for taxable years beginning after December 31, 2015.

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