HB418 Alabama 2022 Session

Summary

Primary Sponsor

Kyle South

Republican

Session

Regular Session 2022

Title

Relating to corporate income tax deductions, providing business interest expense deduction limitations, to provide a deduction equal to the business interest expense disallowed on the federal income tax return as a result of 26 U.S.C. Section 163 (j), Sec. 40-18-39.1 repealed.

Summary

HB418 would repeal Alabama's previous limit on business interest deductions and allow a state deduction equal to the federal amount disallowed under 26 U.S.C. § 163(j), starting with 2022 tax years.

What This Bill Does

The bill repeals Section 40-18-39.1 and creates a new deduction for Alabama taxable income equal to the amount of business interest disallowed by 163(j) on the taxpayer's federal return. It applies to Alabama C corporations, Subchapter K entities, disregarded entities, and Alabama S corporations. Prior year carryforwards of disallowed interest under 163(j) can still be used; the bill does not restrict those carryforwards.

Who It Affects

• Alabama C corporations: would be allowed a state deduction equal to the federal 163(j) disallowed interest in their Alabama taxable income.
• Subchapter K entities and disregarded entities: would receive the same deduction for the disallowed federal interest.
• Alabama S corporations: would also receive the deduction equal to the federal disallowed interest.

Key Provisions

• Repeals Section 40-18-39.1, Code of Alabama 1975.
• Provides a deduction equal to the business interest expense disallowed under 26 U.S.C. § 163(j) for the same taxable year when computing Alabama income taxes for eligible entities.
• Preserves carryforwards of previously disallowed 163(j) interest to be used in future years.
• Effective for taxable years beginning on or after January 1, 2022.

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

Subjects

Income Tax