SB375 Alabama 2018 Session

Summary

Primary Sponsor

Bill Hightower

Republican

Session

Regular Session 2018

Title

Taxation, individual and corporate tax structure revised, specific tax rate, reduction of rate under certain conditions, const. amend.

Summary

SB 375 would replace Alabama's current income tax with a single 4.20% flat tax on individuals, under the Individual Flat Tax Act of 2018.

What This Bill Does

It repeals existing constitutional income tax amendments and establishes a new flat tax structure. It imposes a 4.20% tax on residents and on nonresidents who earn Alabama-sourced income, calculated on net income. It defines income using federal adjusted gross income and allows limited deductions and credits, including retirement income exemptions, mortgage interest, charitable contributions, and a first portion of income; it also permits excluding income taxed by other jurisdictions. The Legislature would pass general laws to implement the amendment.

Who It Affects

• Alabama residents: would be taxed at a 4.20% flat rate on their Alabama-sourced net income.
• Nonresidents earning income in Alabama: would be taxed at a 4.20% flat rate on their Alabama-sourced net income.
• Taxpayers with retirement income: could exclude defined benefit retirement income up to $70,000 (individual) or $140,000 (joint) from taxation.
• Homeowners and charitable donors: could claim a mortgage interest deduction and a charitable contributions deduction, plus a deduction for the first $9,000 of income ($18,000 for joint).

Key Provisions

• Repeal of Amendment 25 (Section 211.01) and Amendment 225 (Section 211.04) effective January 1, 2019.
• Imposition of a single 4.20% tax on resident individuals and nonresident individuals with Alabama-sourced net income.
• Adjusted gross income is defined as the individual's AGI under the federal Internal Revenue Code, as amended.
• Allowance to exclude from AGI any income taxed by another jurisdiction.
• Deductions and exemptions are limited to: defined-benefit retirement income up to $70,000 ($140,000 for joint returns); mortgage interest deduction; charitable contributions deduction; and the first $9,000 of income ($18,000 for joint).
• The Legislature would enact general laws to implement the amendment.

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

Subjects

Constitutional Amendments