SB297INTRODUCED
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SB297
U2WFDGG-1
By Senator Melson
RFD: Finance and Taxation General Fund
First Read: 04-Apr-24
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5 U2WFDGG-1 11/15/2023 TRP (L)ma 2023-3479
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First Read: 04-Apr-24
SYNOPSIS:
This bill would exclude from gross income of
individuals the net capital gain derived from the
exchange of precious metal bullion.
This bill would also include as a deduction for
individuals from gross income the net capital loss
derived from the exchange of precious metal bullion.
A BILL
TO BE ENTITLED
AN ACT
Relating to state income tax as for individuals; to
amend Section 40-18-14, as last amended by Act 2023-421, 2023
Regular Session, and Section 40-18-15, Code of Alabama 1975;
to exclude net capital gains and losses derived from the
exchange of precious metal bullion from state income taxes.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. This act shall be known and may be cited as
the Sound Money Tax Neutrality Act.
Section 2. Section 40-18-14, as last amended by Act
2023-421, 2023 Regular Session, and Section 40-18-15, Code of
Alabama 1975, are amended to read as follows:
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Alabama 1975, are amended to read as follows:
"§40-18-14
(a) The term "gross income" as used herein:
(1) Includes gains, profits and income derived from
salaries, wages, or compensation for personal services of
whatever kind, or in whatever form paid, including the
salaries, income, fees, and other compensation of state,
county, and municipal officers and employees, or from
professions, vocations, trades, business, commerce or sales,
or dealings in property whether real or personal, growing out
of ownership or use of or interest in such property; also from
interest, royalties, rents, dividends, securities, or
transactions of any business carried on for gain or profit and
the income derived from any source whatever, including any
income not exempted under this chapter and against which
income there is no provision for a tax. The term "gross
income" as used herein also includes alimony and separate
maintenance payments to the extent they are includable in
gross income for federal income tax purposes under 26 U.S.C. §
71, relating to alimony and separate maintenance payments. The
term "gross income" as used herein also includes any amount
included in gross income under 26 U.S.C. § 83 at the time it
is so included under 26 U.S.C. § 83.
(2) For purposes of this chapter, the reductions in tax
attributes required by 26 U.S.C. § 108 shall be applied only
to the net operating losses determined under this chapter and
the basis of depreciable property. The basis reductions of
depreciable property shall not exceed the basis reductions for
federal income tax purposes. All other tax attribute
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federal income tax purposes. All other tax attribute
reductions required by 26 U.S.C. § 108 shall not be
recognized.
(3) Gross income does not include the following items
which shall be exempt from income tax under this chapter:
a. Amounts received under life insurance policies and
contracts paid by reason of the death of the insured in
accordance with 26 U.S.C. § 101;
b. Amounts received, other than amounts paid by reason
of the death of the insured, under life insurance, endowment
or annuity contracts, determined in accordance with 26 U.S.C.
§ 72;
c. The value of property acquired by gift, bequest,
devise, or descent, but the income from such property shall be
included in the gross income, in accordance with 26 U.S.C. §
102;
d. Interest upon obligations of the United States or
its possessions; or securities issued under provisions of the
Federal Farm Loan Act of July 18, 1916;
e. Any amounts received by an individual which are
excludable from gross income under 26 U.S.C. § 104, relating
to compensation for injuries or sickness, or 26 U.S.C. § 105,
relating to amounts received under accident or health plans;
f. Interest on obligations of the State of Alabama and
any county, municipality, or other political subdivision
thereof;
g. The rental value of a parsonage provided to a
minister of the gospel to the extent excludable under 26
U.S.C. § 107;
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U.S.C. § 107;
h. Income from discharge of indebtedness to the extent
allowed by 26 U.S.C. § 108;
i. For each individual resident taxpayer, or each
husband and wife filing a joint income tax return, as the case
may be, any gain realized from the sale of a personal
residence of the taxpayer shall be excluded to the extent
excludable for federal income tax purposes under 26 U.S.C. §
121;
j. Contributions made by an employer on behalf of an
employee to a trust which is part of a qualified cash or
deferred arrangement, as defined in 26 U.S.C. § 401(k)(2) or 5
U.S.C. § 8437, under which the employee has an election
whether the contribution will be made to the trust or received
by the employee in cash and contributions made by an employer
for an employee for an annuity contract, which contributions
would be excludable from the gross income, for federal income
tax purposes, of the employee in accordance with the
provisions of 26 U.S.C. § 403(b). The limitations imposed by
26 U.S.C. § 402(g) shall apply for purposes of this paragraph;
k. Amounts that an employee is allowed to exclude from
gross income for federal income tax purposes pursuant to 26
U.S.C. § 125, relating to cafeteria plans, and 26 U.S.C. §
132,relating to certain fringe benefits; and
l. Amounts paid or incurred by an employer on behalf of
an employee if the amounts may be excluded from gross income
for federal income tax purposes by an employee pursuant to 26
U.S.C. § 129, relating to dependent care expenses.
m.1. Amounts received by a full-time hourly waged paid
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m.1. Amounts received by a full-time hourly waged paid
employee as compensation for work performed in excess of 40
hours in a week.
2. The exemption provided pursuant to this paragraph
shall be available for tax years that begin after December 31,
2023, and end prior to June 30, 2025.
3. Each employer shall submit to the Department of
Revenue, on forms prescribed by the department, all of the
following:
(i) For the tax year beginning January 1, 2023, the
total amount received by full-time hourly wage-paid employees
as compensation for work performed in excess of 40 hours in a
week and the total number of employees for which it was paid.
The data shall be due no later than January 31, 2024.
(ii) For the tax year beginning on or after January 1,
2024, and each tax year thereafter, the total amount received
by full-time hourly wage-paid employees as compensation for
work performed in excess of 40 hours in a week and the total
number of employees for which it was paid. The data shall be
provided monthly or quarterly and shall be due no later than
the due date for the corresponding monthly or quarterly
withholding tax returns.
(iii) Additional information as may be required by the
department.
4. The department shall report to the Legislative
Services Agency - Fiscal Division and the Department of
Finance the data collected and compiled pursuant to
subparagraph 3. no later than 30 days after the due date of
such data.
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such data.
n. Any net capital gain derived from the exchange of
precious metal bullion. For purposes of this paragraph,
precious metal bullion means coins, bars or rounds containing
primarily refined gold, silver, platinum, or palladium that is
marked and valued primarily by its weight, purity, and
content.
(4) The term "gross income," in the case of a resident
individual, includes income from sources within and outside
Alabama, including without limitation, the resident's
proportionate share of any income arising from a Subchapter K
entity, Alabama S corporation, or estate or trust, regardless
of the geographic source of the income. The term gross income,
in the case of a nonresident individual, includes only income
from property owned or business transacted in Alabama. For
purposes of this article, proportionate share shall be defined
by reference to (i) the status of the individual owner as a
partner or member of a Subchapter K entity, shareholder of an
Alabama S corporation, or beneficiary of an estate or trust,
and (ii) the allocable interest in that entity owned by the
individual.
(b) The Department of Revenue may adopt rules to
provide for the administration of this section.
"§40-18-15
(a) No deduction shall be allowed for any losses,
expenses, or interest deferred or disallowed pursuant to 26
U.S.C. § 267 or for any cost required to be capitalized in
accordance with 26 U.S.C. § 263A; otherwise, there shall be
allowed as deductions:
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allowed as deductions:
(1) All ordinary and necessary expenses paid or
incurred during the taxable year in carrying on any trade or
business, as determined in accordance with 26 U.S.C. § 162.
(2) Interest paid or accrued within the taxable year on
indebtedness, limited to the amount allowable as an interest
deduction for federal income tax purposes in the corresponding
tax year or period pursuant to the provisions of 26 U.S.C. §§
163, 264, and 265.
(3) The following taxes paid or accrued within the
taxable year:
a. Income taxes, Federal Insurance Contribution Act
taxes, taxes on self-employment income and estate and gift
taxes imposed by authority of the United States or any
possession of the United States.
b. State and local, and foreign, occupational license
taxes, and contributions to state unemployment funds.
c. State and local, and foreign, real property taxes.
d. State and local personal property taxes.
e. The generation-skipping transfer (GST) tax imposed
on income distributions by 26 U.S.C. § 2601.
f. The taxes described in paragraphs c., d., and e.
shall be deductible only to the extent that the taxes are
deductible for federal income tax purposes under 26 U.S.C. §
164 (relating to taxes).
g. In addition, there shall be allowed as a deduction,
state and local, and foreign taxes, except income taxes, and
taxes imposed by authority of the United States or any
possession of the United States, which are paid or accrued
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possession of the United States, which are paid or accrued
within the taxable year in carrying on a trade or business or
an activity described in 26 U.S.C. § 212 (relating to expenses
for the production of income).
h. Notwithstanding paragraph g., any tax described in
any paragraph preceding paragraph g. that is paid or accrued
in connection with an acquisition or disposition of property
shall be treated as part of the cost of the acquired property
or, in the case of a disposition, as a reduction in the amount
realized on the disposition of that property.
(4) Losses sustained during the taxable year and not
compensated for by insurance or otherwise if incurred in a
trade or business, in accordance with 26 U.S.C. § 165(c)(1).
(5) Losses sustained during the taxable year and not
compensated for by insurance or otherwise, if incurred in any
transaction entered into for profit, though not connected with
the trade or business in accordance with 26 U.S.C. §
165(c)(2); but, in the case of a taxpayer other than a
resident of the state, only as to those transactions within
the state.
(6) Casualty and theft losses sustained during the
taxable year of property not connected with the conduct of a
trade or business or a transaction entered into for profit as
determined in accordance with subsections (c)(3) and (h) of 26
U.S.C. § 165. In the case of a nonresident, the deduction
shall be allowed only for the losses arising from property
located within the State of Alabama and the limitations in 26
U.S.C. § 165 shall be applied with regard only to the
taxpayer's Alabama adjusted gross income. No loss shall be
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taxpayer's Alabama adjusted gross income. No loss shall be
allowed if at the time of filing the return, the loss has been
claimed on a federal estate tax return.
(7) Losses from debts ascertained to be worthless and
charged off during the taxable year of ascertainment, if
sustained in the conduct of the regular trade or business of
the taxpayer.
(8) A reasonable allowance for the exhaustion, wear and
tear of property from which any income is derived, including a
reasonable allowance for obsolescence, in accordance with 26
U.S.C. §§ 167 and 168, and an allowance for the amortization
of intangibles determined in accordance with 26 U.S.C. § 197.
(9) In the case of mines, oil, and gas wells, other
natural deposits and timber, a reasonable allowance for
depletion and for depreciation of improvements, according to
the peculiar condition in each case based upon the cost,
including the cost of development not otherwise deducted, such
reasonable allowance in all cases to be made under rules and
regulations to be prescribed by the Department of Revenue;
and, in the case of leasehold interests, the deduction allowed
by this section shall be equitably apportioned between the
lessor and the lessee.
(10) Charitable contributions to the extent allowed for
federal income tax purposes under 26 U.S.C. § 170 (relating to
charitable contributions and gifts).
(11) The deduction allowed to the individual for
federal income tax purposes by 26 U.S.C. § 219 (relating to
retirement savings).
(12) The deduction allowed for federal income tax
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(12) The deduction allowed for federal income tax
purposes by 26 U.S.C. § 404 (relating to qualified pension,
profit sharing, stock bonus, and annuity plans).
(13) For each individual income taxpayer, medical and
dental expenses, including amounts paid for medicine and drugs
and amounts paid for accident and health insurance, as
determined in accordance with 26 U.S.C. § 213; provided,
however, that the limitation of the deduction to the excess of
those expenses over 7.5 percent of adjusted gross income as
provided in 26 U.S.C. § 213 shall instead be limited to the
excess of those expenses over 4.0 percent of adjusted gross
income.
(14) For each individual income taxpayer, the deduction
determined in accordance with 26 U.S.C. § 212 for all the
ordinary and necessary expenses paid or incurred during the
taxable year for the production or collection of income, or
for the management, conservation, or maintenance of property
held for the production of income, or in connection with the
determination, collection, or refund of any tax.
(15) Any expense not exceeding ($1,000) actually
incurred during the taxable year in constructing on his or her
property a family radioactive fallout shelter, as approved and
certified by the State Department of Emergency Management, and
any amount not exceeding ($1,000) which he or she contributed
during the taxable year toward the construction of a community
radioactive fallout shelter.
(16) A deduction from the taxpayer's adjusted gross
income for state income tax purposes of the total cost of
installation for conversion from gas or electricity to wood as
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installation for conversion from gas or electricity to wood as
the primary energy source for heating their individual
domestic homes for the taxable year during which a conversion
was completed.
(17) Alimony and separate maintenance payments, the
amount deductible to be the same as the amount deductible for
federal income tax purposes under 26 U.S.C. § 215 (relating to
alimony payments).
(18) Moving expenses paid or incurred during the
taxable year as allowed under 26 U.S.C. § 217 (relating to
moving expenses). However, in applying 26 U.S.C. § 217, the
term "new principal place of work" means only places of work
located within the State of Alabama.
(19) Any expense not exceeding $35,000 actually
incurred during the taxable year in removing from his or her
property any architectural or transportation barriers to
handicapped persons with nonambulatory and semiambulatory
disabilities; provided, however, that any improvements
resulting from that expense shall not be eligible to be
capitalized for depreciation.
(20) Notwithstanding subdivision (1), the deduction for
expenses of travel, entertainment, and meals shall be
determined in accordance with 26 U.S.C. § 274.
(21) The deduction allowed by 26 U.S.C. § 179 (relating
to expensing certain depreciable property), provided that no
deduction shall be allowed under subdivision (8) for any
amount allowed as a deduction under this subdivision.
(22) The deduction allowed by 26 U.S.C. § 195 (relating
to amortization of start-up expenditures), but in the case of
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to amortization of start-up expenditures), but in the case of
a nonresident, only if the principal place of business of the
business investigated, created, or acquired is located in the
State of Alabama.
(23) The deduction allowed by subdivision (1), to the
extent that it consists of unreimbursed employee business
expenses, and the deduction allowed by subdivision (14) shall
be allowed only to the extent that the aggregate of the
deductions exceeds 2 percent of adjusted gross income.
(24) The reasonable medical and legal expenses paid or
incurred by the taxpayer in connection with the adoption of a
minor. For purposes of this subdivision, medical expenses
shall include any medical and hospital expenses of the adoptee
and the adoptee's biological mother which are incident to the
adoptee's birth and subsequent medical care and which, in the
case of the adoptee, are paid or incurred before the petition
is granted.
(25) The amount of any aid or assistance, whether in
the form of property, services, or monies, provided to the
State Industrial Development Authority pursuant to Section
41-10-44.8(d) in order to induce an approved company to
undertake a major project within the state.
(26) The amount of premiums paid pursuant to a
qualifying insurance contract for qualified long-term care
coverage.
(27) The amount deductible by the taxpayer in
accordance with 26 U.S.C. § 162(h).
(28) The amount, up to five thousand dollars ($5,000)
per annum, contributed subsequent to December 31, 2007, to the
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per annum, contributed subsequent to December 31, 2007, to the
Alabama Prepaid Affordable College Tuition Program or the
Alabama College Education Savings Program as defined in
Chapter 33C of Title 16. If the taxpayer makes a nonqualified
withdrawal as defined by Section 529 of the Internal Revenue
Code (26 U.S.C. 529), the amount of the nonqualified
withdrawal, plus 10 percent of the amount withdrawn, shall be
added back to the income of the contributing taxpayer in the
year the nonqualified withdrawal was distributed.
(29) Any net capital loss derived from the exchange of
precious metal bullion. For purposes of this subdivision,
precious metal bullion means coins, bars, or rounds containing
primarily refined gold, silver, platinum, and palladium that
is marked and valued primarily by its weight, purity, and
content.
(b)(1) In lieu of the deductions allowable to
individual taxpayers, as provided in subdivision (1) of
subsection (a) to the extent of unreimbursed employee business
expenses, and as provided in subdivisions (2), (3), (5), (6),
(10), (13), (14), (15), (16), (19), (22), and (26) of
subsection (a), the taxpayer may elect to take the optional
standard deduction of 20 percent of the adjusted gross income
or $2,000, whichever is the lesser. Taxpayers filing jointly
as defined in Section 40-18-27 may elect to take the optional
standard deduction of 20 percent of the adjusted gross income
or $4,000, whichever is the lesser.
(2) For tax years beginning after December 31, 2006,
the optional standard deduction shall be determined as
follows:
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follows:
a. The standard deduction for married taxpayers filing
jointly with adjusted gross income of $20,000 or less shall be
$7,500. For married taxpayers filing jointly with adjusted
gross income of greater than $20,000, the standard deduction
shall be reduced by $175 for each $500 of adjusted gross
income in excess of $20,000. Notwithstanding the preceding
sentence, the standard deduction shall not be less than $4,000
for married taxpayers filing jointly.
b. The standard deduction for married taxpayers filing
separate returns with adjusted gross income of $10,000 or less
shall be $3,750. For married taxpayers filing separate returns
with adjusted gross income of greater than $10,000, the
standard deduction shall be reduced by $88 for each $250 of
adjusted gross income in excess of $10,000. Notwithstanding
the preceding sentence, the standard deduction shall not be
less than $2,000 for married taxpayers filing separate
returns.
c. The standard deduction for head of family taxpayers
with adjusted gross income of $20,000 or less shall be $4,700.
For head of family taxpayers with adjusted gross income of
greater than $20,000, the standard deduction shall be reduced
by $135 for each $500 of adjusted gross income in excess of
$20,000. Notwithstanding the preceding sentence, the standard
deduction shall not be less than $2,000 for head of family
taxpayers.
d. The standard deduction for single taxpayers with
adjusted gross income of $20,000 or less shall be $2,500. For
single taxpayers with adjusted gross income of greater than
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single taxpayers with adjusted gross income of greater than
$20,000, the standard deduction shall be reduced by $25 for
each $500 of adjusted gross income in excess of $20,000.
Notwithstanding the preceding sentence, the standard deduction
shall not be less than $2,000 for single taxpayers.
(3) For tax years beginning after December 31, 2018,
the optional standard deduction shall be determined as
follows:
a. The standard deduction for married taxpayers filing
jointly with adjusted gross income of less than $23,000 shall
be $7,500. For married taxpayers filing jointly, the standard
deduction shall be reduced further by $175 for each $500 of
adjusted gross income in excess of $23,000. Notwithstanding
the preceding sentence, the standard deduction shall not be
less than $4,000 for married taxpayers filing jointly.
b. The standard deduction for married taxpayers filing
separate returns with adjusted gross income of less than
$10,500 shall be $3,750. For married taxpayers filing separate
returns, the standard deduction shall be reduced further by
$88 for each $250 of adjusted gross income in excess of
$10,500. Notwithstanding the preceding sentence, the standard
deduction shall not be less than $2,000 for married taxpayers
filing separate returns.
c. The standard deduction for head of family taxpayers
with adjusted gross income of less than $23,000 shall be
$4,700. For head of family taxpayers, the standard deduction
shall be reduced further by $135 for each $500 of adjusted
gross income in excess of $23,000. Notwithstanding the
preceding sentence, the standard deduction shall not be less
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preceding sentence, the standard deduction shall not be less
than $2,000 for head of family taxpayers.
d. The standard deduction for single taxpayers with
adjusted gross income of less than $23,000 shall be $2,500.
For single taxpayers, the standard deduction shall be reduced
further by $25 for each $500 of adjusted gross income in
excess of $23,000. Notwithstanding the preceding sentence, the
standard deduction shall not be less than $2,000 for single
taxpayers.
(4) For tax years beginning after December 31, 2021,
the optional standard deduction shall be determined as
follows:
a. The standard deduction for married taxpayers filing
jointly with adjusted gross income of less than twenty-five
thousand five hundred dollars ($25,500) shall be eight
thousand five hundred dollars ($8,500). For married taxpayers
filing jointly, the standard deduction shall be reduced
further by one hundred seventy-five dollars ($175) for each
five hundred dollars ($500) of adjusted gross income in excess
of twenty-five thousand five hundred dollars ($25,500).
Notwithstanding the preceding sentence, the standard deduction
shall not be less than five thousand dollars ($5,000) for
married taxpayers filing jointly.
b. The standard deduction for married taxpayers filing
separate returns with adjusted gross income of less than
twelve thousand seven hundred fifty dollars ($12,750) shall be
four thousand two hundred fifty dollars ($4,250). For married
taxpayers filing separate returns, the standard deduction
shall be reduced further by eighty-eight dollars ($88) for
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shall be reduced further by eighty-eight dollars ($88) for
each two hundred fifty dollars ($250) of adjusted gross income
in excess of twelve thousand seven hundred fifty dollars
($12,750). Notwithstanding the preceding sentence, the
standard deduction shall not be less than two thousand five
hundred dollars ($2,500) for married taxpayers filing separate
returns.
c. The standard deduction for head of family taxpayers
with adjusted gross income of less than twenty-five thousand
five hundred dollars ($25,500) shall be five thousand two
hundred dollars ($5,200). For head of family taxpayers, the
standard deduction shall be reduced further by one hundred
thirty-five dollars ($135) for each five hundred dollars
($500) of adjusted gross income in excess of twenty-five
thousand five hundred dollars ($25,500). Notwithstanding the
preceding sentence, the standard deduction shall not be less
than two thousand five hundred dollars ($2,500) for head of
family taxpayers.
d. The standard deduction for single taxpayers with
adjusted gross income of less than twenty-five thousand five
hundred dollars ($25,500) shall be three thousand dollars
($3,000). For single taxpayers, the standard deduction shall
be reduced further by twenty-five dollars ($25) for each five
hundred dollars ($500) of adjusted gross income in excess of
twenty-five thousand five hundred dollars ($25,500).
Notwithstanding the preceding sentence, the standard deduction
shall not be less than two thousand five hundred dollars
($2,500) for single taxpayers.
(c) A deduction is allowable for the amount of federal
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(c) A deduction is allowable for the amount of federal
income tax paid or accrued within the taxable year. In the
case of a nonresident taxpayer, the amount of federal income
tax deductible to Alabama shall be determined by the ratio
that the amount of adjusted gross income received from sources
within the State of Alabama bears to the amount of adjusted
gross income received from sources within and outside the
State of Alabama.
(d) If separate returns are filed by husband and wife
and one spouse elects to claim the optional standard
deduction, the other spouse must also claim the optional
standard deduction, unless, for the tax returns filed for the
2014 and subsequent tax years, the spouses have lived apart
for the entire year. In this case, each spouse may claim
either the optional standard deduction or itemized deductions.
Neither spouse may claim a deduction for expenses paid by the
other spouse.
(e) In the case of a nonresident individual:
(1) The deductions allowed in subdivisions (1), (2),
(3), (4), (5), (7), (8), (9), (11), (12), (19), (21), (23),
and (25) of subsection (a) shall be allowed only to the extent
that they are paid or incurred in carrying on a trade or
business within the State of Alabama and the deduction allowed
by Section 40-18-15.2 shall be allowed only to the extent it
arose from a trade or business carried on in Alabama.
(2) The deductions allowed by subdivisions (2), (3),
(5), (8), (9), (14), and (19) of subsection (a) shall be
allowed only to the extent arising from property located in
Alabama or transactions producing income that is subject to
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Alabama or transactions producing income that is subject to
tax in the State of Alabama.
(3) The amount of the deductions allowed by
subdivisions (2), (3), (6), (10), (13), (15), (16), (17),
(19), (24), and (26) of subsection (a) (and not allowed by
subdivisions (1) or (2) of this subsection), or by subsection
(b) if the taxpayer elects the standard deduction, shall be
limited to the amount determined by multiplying the total of
such deductions by a fraction, the numerator of which is the
taxpayer's adjusted gross income determined using the rules
provided in subdivisions (1) and (2) of this subsection and
the denominator of which is the taxpayer's adjusted gross
income determined under Section 40-18-14.2. The deduction
allowed in subdivision (17) of subsection (a) shall not be
subtracted in calculating either the numerator or denominator
in the previous sentence.
(f) Nothing in this section shall allow any item to be
deducted more than once."
Section 3. This act shall become effective on January
1, 2025.
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