HB170 Alabama 2021 Session

Summary

Primary Sponsor

Danny GarrettRepresentative

Republican

Co-Sponsor

Andy Whitt

Session

Regular Session 2021

Title

Taxation, certain tax credits, advance refunds, and other economic relief payments under the CARES Act excluded from income taxation, Alabama Taxpayer Stimulus Freedom Act of 2021, Sec. 40-27-1 am'd.

Summary

HB170 shields many federal COVID-19 relief payments from Alabama taxes, overhauls corporate taxation through a multistate framework, and adds new rules for pass-through entities and debt forgiveness related to CARES Act programs.

What This Bill Does

It excludes a wide range of federal COVID-19 relief payments and credits from Alabama individual income tax (for the 2021 tax year and related provisions), and extends similar relief from federal income tax deductions for Alabama taxpayers. It decouples Alabama from certain federal tax rules (including GILTI under 951A and 118(b)(2)) and adjusts related deductions, including business interest. It adopts the Multistate Tax Compact to coordinate how multistate businesses apportion income for Alabama and sets up uniform regulations, audits, and arbitration. It creates an Electing Pass-Through Entity option to tax such entities at the entity level and includes additional rules to handle 951A/118(b)(2) adjustments and related tax calculations.

Who It Affects

• Individual Alabama taxpayers who would receive federal COVID-19 relief credits, refunds, or disaster relief payments (these would be excluded from Alabama taxable income).
• Multistate corporations and other businesses operating in Alabama (they will follow the Multistate Tax Compact rules for apportioning income and may face entity-level taxation options for certain pass-through entities).
• Electing Pass-Through Entities (such as certain S corporations and Subchapter K entities) and their owners (these entities may elect to be taxed at the entity level rather than at owners’ level).
• Banks, lenders, and borrowers involved in CARES Act-related loan forgiveness and EIDL programs (cancellation of indebtedness income and related subsidies receive specific tax treatment).
• Taxpayers who receive CARES Act-related subsidies, EIDL grants, Shuttered Venue Grants, and other COVID relief funds (these payments are exempt from Alabama taxes and related deductions).
• Tax administrators and taxpayers generally (new uniform regulations, forms, audits, and arbitration procedures under the Multistate Tax Compact).

Key Provisions

• Exclusion from Alabama individual income tax of federal COVID-19 relief credits, advance refunds, disaster relief payments, SBA subsidy payments, Emergency EIDL grants, Targeted EIDL advances, student loans, or loan forgiveness related to the CARES Act and related acts for the 2021 tax year.
• Exemption from Alabama gross income and related federal deduction interactions for amounts received as Qualifed Emergency Federal Aid Grants, disaster relief payments, and similar COVID relief funds; and special treatment for education loan interest payments tied to federal exclusions.
• Exemption from Alabama financial institution excise tax and income taxes for cancellation of indebtedness income from forgiven CARES Act loans, with limitations on deductibility of related expenses and alignment with federal RELIEF Act rules.
• Exemption and deductibility rules for subsidy payments and Emergency EIDL Grants, including treatment identical to federal tax treatment for purposes of Alabama taxes; and guidance on deduction of expenses paid with exempt funds.
• Adoption of the Multistate Tax Compact by amending 40-27-1, creating uniform definitions (income tax, sales, use tax, etc.), and establishing a framework for moving toward a standardized apportionment method among party states and subdivisions.
• Implementation of the Compact’s apportionment framework, including optional elections for different methods, a two-step process for allocation and apportionment, and mechanisms for audits, arbitration, and compliance with uniform regulations and forms.
• Contributions, deductions, and adjustments related to 951A (Global Intangible Low-Taxed Income) and 118(b)(2) decoupling with new sections added (40-18-35.2 and 40-18-35.3) to govern how these federal provisions affect Alabama taxable income and related deductions, including required forms and carryforwards.
• Rules for business interest deduction changes, including separate-entity calculations for certain entities and allocation of carryforwards and deductions among members or affiliates as applicable.
• Electing Pass-Through Entity provisions (Section 10): allows eligible S corporations and Subchapter K entities to elect to pay Alabama income tax at the entity level, with specific election and revocation rules, and with taxes calculated at the highest marginal rate and apportioned under Alabama life, while protecting owners from double taxation.
• Schedule of effective dates: various sections take effect at different times, with retroactive provisions for some sections (including earlier CARES Act-related provisions) and others effective for tax years beginning in 2021 or later.

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