HB268INTRODUCED
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HB268
96Z9PPM-1
By Representative Moore (P)
RFD: Ways and Means Education
First Read: 13-Feb-25
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5 96Z9PPM-1 02/12/2025 TEW (L)TEW 2024-2127
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First Read: 13-Feb-25
SYNOPSIS:
Under current law, lottery prize proceeds are
subject to state income tax. This bill would exempt
these proceeds from the state income tax.
A BILL
TO BE ENTITLED
AN ACT
Relating to income tax, to amend Section 40-18-19, Code
of Alabama 1975, to exempt lottery proceeds from state income
taxation.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. Section 40-18-19, Code of Alabama 1975, is
amended to read as follows:
"§40-18-19
(a) The following exemptions from income taxation shall
be allowed to every individual resident taxpayer:
(1) Retirement allowances, pensions and annuities, or
optional allowances, approved by the Board of Control of the
Teachers' Retirement System of Alabama, which exempt status is
set out in Section 16-25-23.
(2) Retirement allowances, pensions and annuities, or
optional allowances, approved by the Board of Control of the
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optional allowances, approved by the Board of Control of the
Employees' Retirement System of Alabama, which exempt status
is set out in Section 36-27-28.
(3) The first eight thousand dollars ($8,000) of any
retirement compensation, retirement allowances, pensions and
annuities, or optional allowances, received by any eligible
firefighter, as defined in Sections 36-32-1 and 36-32-2, or
his or her designated beneficiary, from any firefighting
agency established in the State of Alabama, but only if such
retirement compensation, retirement allowances, pensions and
annuities, or optional allowances as are awarded as a result
of fire protection services rendered. This subdivision shall
become effective for the taxable years beginning January 1,
1987, and thereafter following its passage and approval by the
Governor, or upon its otherwise becoming a law; provided, that
for the taxable years beginning on or after January 1, 1991,
all of the pension and retirement payments shall be exempt
from taxation.
(4) The first eight thousand dollars ($8,000) of any
retirement compensation, retirement allowances, pensions and
annuities, or optional allowances received by any eligible
peace officer, as defined in subdivision (11) of Section
36-21-60, or his or her designated beneficiary, from any
police retirement system established in the State of Alabama,
but only if the retirement compensation, retirement
allowances, pensions and annuities, or optional allowances are
awarded as a result of police services rendered. This
subdivision shall become effective for taxable years beginning
January 1, 1984, and thereafter; provided, that for the
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January 1, 1984, and thereafter; provided, that for the
taxable years beginning on or after January 1, 1991, all of
the pension and retirement payments shall be exempt from
taxation.
(5) Income received as annuities under the United
States Retirement System from the United States Government
Civil Service Retirement and Disability Fund, including income
received from the Tennessee Valley Authority's pension system,
income received as annuities under the United States Foreign
Service Retirement and Disability Fund, or income received
from any other United States government retirement and
disability fund.
(6) Beginning January 1, 1991, all payments made on or
after such date to a retiree or his designated beneficiary
under a "defined benefit plan ", as defined under 26 U.S.C. §
414(j), to the extent such payment would be taxable for
federal income tax purposes.
(7) Net income realized by individuals and partnerships
from time to time in the business of conducting a financial
business employing monied capital coming into competition with
the business of national banks, but only if such individuals
and partnerships are subject to an excise tax imposed by this
state on or with respect to such income.
(8) In the case of a single person or a married person
not living with husband or wife, a personal exemption of one
thousand five hundred dollars ($1,500) or, in the case of a
head of a family or a married person living with husband or
wife, a personal exemption of three thousand dollars ($3,000),
but a husband and wife living together shall receive only one
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but a husband and wife living together shall receive only one
personal exemption of three thousand dollars ($3,000) against
their aggregate income, and in case they make separate returns
each must claim a personal exemption of one thousand five
hundred dollars ($1,500).
(9) a. Three hundred dollars ($300) for each person,
other than husband or wife, dependent upon the taxpayer, and
over half of whose support, for the calendar year in which the
taxable year for the taxpayer begins, was received from the
taxpayer.
b. For tax years beginning after December 31, 2006, for
taxpayers with adjusted gross income equal to or less than
twenty thousand dollars ($20,000), one thousand dollars
($1,000) for each person other than husband or wife, dependent
upon the taxpayer, and over half of whose support, for the
calendar year in which the taxable year for the taxpayer
begins, was received from the taxpayer.
c. For tax years beginning after December 31, 2006, for
taxpayers with adjusted gross income in excess of twenty
thousand dollars ($20,000) and equal to or less than one
hundred thousand dollars ($100,000), five hundred dollars
($500) for each person other than husband and wife, dependent
upon the taxpayer, and over half of whose support, for the
calendar year in which the taxable year for the taxpayer
begins, was received from the taxpayer.
d. For tax years beginning after December 31, 2021, for
taxpayers with adjusted gross income equal to or less than
fifty thousand dollars ($50,000), one thousand dollars
($1,000) for each person other than husband or wife, dependent
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($1,000) for each person other than husband or wife, dependent
upon the taxpayer, and over half of whose support, for the
calendar year in which the taxable year for the taxpayer
begins, was received from the taxpayer.
e. For tax years beginning after December 31, 2021, for
taxpayers with adjusted gross income in excess of fifty
thousand dollars ($50,000) and equal to or less than one
hundred thousand dollars ($100,000), five hundred dollars
($500) for each person other than husband and wife, dependent
upon the taxpayer, and over half of whose support, for the
calendar year in which the taxable year for the taxpayer
begins, was received from the taxpayer.
For the purposes of this section, "dependent" shall
mean: A son or daughter of the taxpayer or a descendant of
either; a stepson or stepdaughter of the taxpayer; a brother,
sister, stepbrother, or stepsister of the taxpayer; the father
or mother of the taxpayer or an ancestor of either; a
stepfather or stepmother of the taxpayer; a son or daughter of
a brother or sister of the taxpayer; a brother or sister of
the father or mother of the taxpayer; a son-in-law,
daughter-in-law, father-in-law, mother-in-law, brother-in-law,
or sister-in-law of the taxpayer. As used in this paragraph
the terms "brother" and "sister" include a brother or sister
by the half blood. For the purpose of determining whether any
of the foregoing relationships exist, a legally adopted child
of a person shall be considered a child of such a person by
blood.
(10) Beginning January 1, 1998, all income, interest,
dividends, gains, or benefits of any kind received from
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dividends, gains, or benefits of any kind received from
savings accounts or prepaid tuition contracts administered
under Title 16, Chapter 33C, are exempt from all income
taxation by the state and by all of its political subdivisions
to the extent that the amounts remain on deposit in the PACT
Trust Fund or the ACES Trust Fund, or are used to pay the
designated beneficiary's qualified higher education expenses
as defined in 26 U.S.C. § 529, or are refunded under such
terms as would not carry a penalty under 26 U.S.C. § 529.
(11) Beginning January 1, 2016, all income, interest,
dividends, gains, or benefits of any kind received from ABLE
savings accounts administered under Title 16, Chapter 33C, are
exempt from all income taxation by the state and by all of its
political subdivisions to the extent that the amounts remain
on deposit in the ABLE Trust Fund, or are used to pay the
designated beneficiary's qualified disability expenses as
defined in 26 U.S.C. § 529A, or are refunded under such terms
as would not carry a penalty under 26 U.S.C. § 529A, or other
applicable federal law.
(12) Beginning January 1, 2018, amounts received by an
individual from sources within a foreign country or countries
which constitute a housing allowance, and earned income
attributable to services performed by such individual received
during the tax period are exempt from all income taxation by
the state and by all of its political subdivisions to the
extent such income is exempt from federal income tax pursuant
to 26 U.S.C. § 911.
(13) a. Beginning January 1, 2023, the first six
thousand dollars ($6,000) of taxable retirement income.
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thousand dollars ($6,000) of taxable retirement income.
b. This exemption may only be claimed by individual
taxpayers who are 65 years of age or older.
(14) All proceeds from a prize won in any state
lottery.
a. The exemption provided by this subdivision will be
void upon the ratification of a statewide constitutional
amendment authorizing games of chance.
b. The exemption provided by this subdivision shall be
effective beginning with the tax year that begins January 1,
2026.
(b) Of the following personal exemptions allowed
resident taxpayers, each nonresident individual taxpayer shall
be allowed that proportion thereof that the adjusted gross
income received by said nonresident individual taxpayer from
sources within the State of Alabama bears to his or her
adjusted gross income received from sources within and without
the State of Alabama: In the case of a single person or a
married person not living with husband or wife, a personal
exemption of one thousand five hundred dollars ($1,500) or, in
the case of a head of a family or a married person living with
husband or wife, a personal exemption of three thousand
dollars ($3,000), a husband and wife living together shall
receive but one personal exemption of three thousand dollars
($3,000) against their aggregate income; and, in case they
make separate returns, each must claim a personal exemption of
one thousand five hundred dollars ($1,500); and the amount in
subdivision (9) of subsection (a) for each person, other than
husband or wife, dependent upon and receiving his or her chief
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husband or wife, dependent upon and receiving his or her chief
support from the taxpayer.
(c) The Department of Revenue may enact rules as
necessary to implement and administer the provisions of this
act.
Section 2. This act shall become effective on October
1, 2025.
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