HB107 Alabama 2020 Session

Summary

Primary Sponsor

Lynn Greer

Republican

Session

Regular Session 2020

Title

Deferred compensation plans, portion of income exempt from income tax, Sec. 40-18-19 am'd.

Summary

HB 107 would create a phased-in state income tax exemption for 90% of distributions from defined contribution deferred compensation plans for Alabama residents ages 65 and older, up to a cap that grows from $3,000 in 2021 to $30,000 in 2030.

What This Bill Does

The bill amends Section 40-18-19 to allow 90% of distributions from defined contribution deferred compensation plans to be exempt from state income tax for individuals 65 or older, up to a cap that starts at $3,000 in 2021 and increases by $3,000 each year until reaching $30,000 in 2030. The exemption cannot exceed 90% of the distributions. The Alabama Department of Revenue would create rules to implement and administer the exemption, and the act would take effect on the first day of the third month after passage and governor approval.

Who It Affects

• Individuals 65 years of age or older who receive distributions from defined contribution deferred compensation plans, who would be eligible for a growing exemption from Alabama income tax.
• The Alabama Department of Revenue and tax professionals who would implement and administer the new exemption.

Key Provisions

• Adds a new exemption: 90% of distributions from a defined contribution deferred compensation plan are exempt from state income tax for individuals 65 or older, up to a cap.
• Exemption cap starts at $3,000 in 2021 and increases by $3,000 each year, reaching $30,000 in 2030; exemption applies only to up to 90% of the distributions.
• Eligibility limited to taxpayers who are 65+, with no exemption exceeding 90% of the distributions.
• Department of Revenue may enact rules to implement and administer the exemption.
• Effective date: the act becomes law on the first day of the third month after passage and governor approval.

AI-generated summary using openai/gpt-5-nano on Feb 22, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Taxation