Alabama 2025 Regular Session

Alabama House Bill HB268 Compare Versions

Only one version of the bill is available at this time.

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1	1	HB268INTRODUCED
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3	3	HB268
4	4	96Z9PPM-1
5	5	By Representative Moore (P)
6	6	RFD: Ways and Means Education
7	7	First Read: 13-Feb-25
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12	12	5 96Z9PPM-1 02/12/2025 TEW (L)TEW 2024-2127
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14	14	First Read: 13-Feb-25
15	15	SYNOPSIS:
16	16	Under current law, lottery prize proceeds are
17	17	subject to state income tax. This bill would exempt
18	18	these proceeds from the state income tax.
19	19	A BILL
20	20	TO BE ENTITLED
21	21	AN ACT
22	22	Relating to income tax, to amend Section 40-18-19, Code
23	23	of Alabama 1975, to exempt lottery proceeds from state income
24	24	taxation.
25	25	BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
26	26	Section 1. Section 40-18-19, Code of Alabama 1975, is
27	27	amended to read as follows:
28	28	"§40-18-19
29	29	(a) The following exemptions from income taxation shall
30	30	be allowed to every individual resident taxpayer:
31	31	(1) Retirement allowances, pensions and annuities, or
32	32	optional allowances, approved by the Board of Control of the
33	33	Teachers' Retirement System of Alabama, which exempt status is
34	34	set out in Section 16-25-23.
35	35	(2) Retirement allowances, pensions and annuities, or
36	36	optional allowances, approved by the Board of Control of the
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66	66	optional allowances, approved by the Board of Control of the
67	67	Employees' Retirement System of Alabama, which exempt status
68	68	is set out in Section 36-27-28.
69	69	(3) The first eight thousand dollars ($8,000) of any
70	70	retirement compensation, retirement allowances, pensions and
71	71	annuities, or optional allowances, received by any eligible
72	72	firefighter, as defined in Sections 36-32-1 and 36-32-2, or
73	73	his or her designated beneficiary, from any firefighting
74	74	agency established in the State of Alabama, but only if such
75	75	retirement compensation, retirement allowances, pensions and
76	76	annuities, or optional allowances as are awarded as a result
77	77	of fire protection services rendered. This subdivision shall
78	78	become effective for the taxable years beginning January 1,
79	79	1987, and thereafter following its passage and approval by the
80	80	Governor, or upon its otherwise becoming a law; provided, that
81	81	for the taxable years beginning on or after January 1, 1991,
82	82	all of the pension and retirement payments shall be exempt
83	83	from taxation.
84	84	(4) The first eight thousand dollars ($8,000) of any
85	85	retirement compensation, retirement allowances, pensions and
86	86	annuities, or optional allowances received by any eligible
87	87	peace officer, as defined in subdivision (11) of Section
88	88	36-21-60, or his or her designated beneficiary, from any
89	89	police retirement system established in the State of Alabama,
90	90	but only if the retirement compensation, retirement
91	91	allowances, pensions and annuities, or optional allowances are
92	92	awarded as a result of police services rendered. This
93	93	subdivision shall become effective for taxable years beginning
94	94	January 1, 1984, and thereafter; provided, that for the
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124	124	January 1, 1984, and thereafter; provided, that for the
125	125	taxable years beginning on or after January 1, 1991, all of
126	126	the pension and retirement payments shall be exempt from
127	127	taxation.
128	128	(5) Income received as annuities under the United
129	129	States Retirement System from the United States Government
130	130	Civil Service Retirement and Disability Fund, including income
131	131	received from the Tennessee Valley Authority's pension system,
132	132	income received as annuities under the United States Foreign
133	133	Service Retirement and Disability Fund, or income received
134	134	from any other United States government retirement and
135	135	disability fund.
136	136	(6) Beginning January 1, 1991, all payments made on or
137	137	after such date to a retiree or his designated beneficiary
138	138	under a "defined benefit plan ", as defined under 26 U.S.C. §
139	139	414(j), to the extent such payment would be taxable for
140	140	federal income tax purposes.
141	141	(7) Net income realized by individuals and partnerships
142	142	from time to time in the business of conducting a financial
143	143	business employing monied capital coming into competition with
144	144	the business of national banks, but only if such individuals
145	145	and partnerships are subject to an excise tax imposed by this
146	146	state on or with respect to such income.
147	147	(8) In the case of a single person or a married person
148	148	not living with husband or wife, a personal exemption of one
149	149	thousand five hundred dollars ($1,500) or, in the case of a
150	150	head of a family or a married person living with husband or
151	151	wife, a personal exemption of three thousand dollars ($3,000),
152	152	but a husband and wife living together shall receive only one
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182	182	but a husband and wife living together shall receive only one
183	183	personal exemption of three thousand dollars ($3,000) against
184	184	their aggregate income, and in case they make separate returns
185	185	each must claim a personal exemption of one thousand five
186	186	hundred dollars ($1,500).
187	187	(9) a. Three hundred dollars ($300) for each person,
188	188	other than husband or wife, dependent upon the taxpayer, and
189	189	over half of whose support, for the calendar year in which the
190	190	taxable year for the taxpayer begins, was received from the
191	191	taxpayer.
192	192	b. For tax years beginning after December 31, 2006, for
193	193	taxpayers with adjusted gross income equal to or less than
194	194	twenty thousand dollars ($20,000), one thousand dollars
195	195	($1,000) for each person other than husband or wife, dependent
196	196	upon the taxpayer, and over half of whose support, for the
197	197	calendar year in which the taxable year for the taxpayer
198	198	begins, was received from the taxpayer.
199	199	c. For tax years beginning after December 31, 2006, for
200	200	taxpayers with adjusted gross income in excess of twenty
201	201	thousand dollars ($20,000) and equal to or less than one
202	202	hundred thousand dollars ($100,000), five hundred dollars
203	203	($500) for each person other than husband and wife, dependent
204	204	upon the taxpayer, and over half of whose support, for the
205	205	calendar year in which the taxable year for the taxpayer
206	206	begins, was received from the taxpayer.
207	207	d. For tax years beginning after December 31, 2021, for
208	208	taxpayers with adjusted gross income equal to or less than
209	209	fifty thousand dollars ($50,000), one thousand dollars
210	210	($1,000) for each person other than husband or wife, dependent
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240	240	($1,000) for each person other than husband or wife, dependent
241	241	upon the taxpayer, and over half of whose support, for the
242	242	calendar year in which the taxable year for the taxpayer
243	243	begins, was received from the taxpayer.
244	244	e. For tax years beginning after December 31, 2021, for
245	245	taxpayers with adjusted gross income in excess of fifty
246	246	thousand dollars ($50,000) and equal to or less than one
247	247	hundred thousand dollars ($100,000), five hundred dollars
248	248	($500) for each person other than husband and wife, dependent
249	249	upon the taxpayer, and over half of whose support, for the
250	250	calendar year in which the taxable year for the taxpayer
251	251	begins, was received from the taxpayer.
252	252	For the purposes of this section, "dependent" shall
253	253	mean: A son or daughter of the taxpayer or a descendant of
254	254	either; a stepson or stepdaughter of the taxpayer; a brother,
255	255	sister, stepbrother, or stepsister of the taxpayer; the father
256	256	or mother of the taxpayer or an ancestor of either; a
257	257	stepfather or stepmother of the taxpayer; a son or daughter of
258	258	a brother or sister of the taxpayer; a brother or sister of
259	259	the father or mother of the taxpayer; a son-in-law,
260	260	daughter-in-law, father-in-law, mother-in-law, brother-in-law,
261	261	or sister-in-law of the taxpayer. As used in this paragraph
262	262	the terms "brother" and "sister" include a brother or sister
263	263	by the half blood. For the purpose of determining whether any
264	264	of the foregoing relationships exist, a legally adopted child
265	265	of a person shall be considered a child of such a person by
266	266	blood.
267	267	(10) Beginning January 1, 1998, all income, interest,
268	268	dividends, gains, or benefits of any kind received from
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298	298	dividends, gains, or benefits of any kind received from
299	299	savings accounts or prepaid tuition contracts administered
300	300	under Title 16, Chapter 33C, are exempt from all income
301	301	taxation by the state and by all of its political subdivisions
302	302	to the extent that the amounts remain on deposit in the PACT
303	303	Trust Fund or the ACES Trust Fund, or are used to pay the
304	304	designated beneficiary's qualified higher education expenses
305	305	as defined in 26 U.S.C. § 529, or are refunded under such
306	306	terms as would not carry a penalty under 26 U.S.C. § 529.
307	307	(11) Beginning January 1, 2016, all income, interest,
308	308	dividends, gains, or benefits of any kind received from ABLE
309	309	savings accounts administered under Title 16, Chapter 33C, are
310	310	exempt from all income taxation by the state and by all of its
311	311	political subdivisions to the extent that the amounts remain
312	312	on deposit in the ABLE Trust Fund, or are used to pay the
313	313	designated beneficiary's qualified disability expenses as
314	314	defined in 26 U.S.C. § 529A, or are refunded under such terms
315	315	as would not carry a penalty under 26 U.S.C. § 529A, or other
316	316	applicable federal law.
317	317	(12) Beginning January 1, 2018, amounts received by an
318	318	individual from sources within a foreign country or countries
319	319	which constitute a housing allowance, and earned income
320	320	attributable to services performed by such individual received
321	321	during the tax period are exempt from all income taxation by
322	322	the state and by all of its political subdivisions to the
323	323	extent such income is exempt from federal income tax pursuant
324	324	to 26 U.S.C. § 911.
325	325	(13) a. Beginning January 1, 2023, the first six
326	326	thousand dollars ($6,000) of taxable retirement income.
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356	356	thousand dollars ($6,000) of taxable retirement income.
357	357	b. This exemption may only be claimed by individual
358	358	taxpayers who are 65 years of age or older.
359	359	(14) All proceeds from a prize won in any state
360	360	lottery.
361	361	a. The exemption provided by this subdivision will be
362	362	void upon the ratification of a statewide constitutional
363	363	amendment authorizing games of chance.
364	364	b. The exemption provided by this subdivision shall be
365	365	effective beginning with the tax year that begins January 1,
366	366	2026.
367	367	(b) Of the following personal exemptions allowed
368	368	resident taxpayers, each nonresident individual taxpayer shall
369	369	be allowed that proportion thereof that the adjusted gross
370	370	income received by said nonresident individual taxpayer from
371	371	sources within the State of Alabama bears to his or her
372	372	adjusted gross income received from sources within and without
373	373	the State of Alabama: In the case of a single person or a
374	374	married person not living with husband or wife, a personal
375	375	exemption of one thousand five hundred dollars ($1,500) or, in
376	376	the case of a head of a family or a married person living with
377	377	husband or wife, a personal exemption of three thousand
378	378	dollars ($3,000), a husband and wife living together shall
379	379	receive but one personal exemption of three thousand dollars
380	380	($3,000) against their aggregate income; and, in case they
381	381	make separate returns, each must claim a personal exemption of
382	382	one thousand five hundred dollars ($1,500); and the amount in
383	383	subdivision (9) of subsection (a) for each person, other than
384	384	husband or wife, dependent upon and receiving his or her chief
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414	414	husband or wife, dependent upon and receiving his or her chief
415	415	support from the taxpayer.
416	416	(c) The Department of Revenue may enact rules as
417	417	necessary to implement and administer the provisions of this
418	418	act.
419	419	Section 2. This act shall become effective on October
420	420	1, 2025.
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