HB379INTRODUCED
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HB379
ARRHKQQ-1
By Representative Garrett
RFD: Ways and Means Education
First Read: 04-Mar-25
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5 ARRHKQQ-1 02/27/2025 KHF (F)KHF 2025-1060
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First Read: 04-Mar-25
SYNOPSIS:
Under existing law, nonresident remote workers
are required to remit income tax in the State of
Alabama.
This bill would provide that remote workers are
exempt from income tax in the State of Alabama in
certain circumstances.
A BILL
TO BE ENTITLED
AN ACT
Relating to income taxes; to amend Section 40-18-2,
Code of Alabama 1975, regarding persons subject to income tax,
to exclude certain nonresidents; to add Section 40-18-2.2 to
the Code of Alabama 1975; to exempt certain nonresident income
from income tax.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. Section 40-18-2, Code of Alabama 1975, is
amended as follows:
"§40-18-2
(a) In addition to all other taxes now imposed by law,
there is hereby levied and imposed a tax on the taxable
income, as defined in this chapter, which tax shall be
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income, as defined in this chapter, which tax shall be
assessed, collected, and paid annually at the rate specified
herein and for each taxable year as hereinafter provided.
Persons and subjects taxable under this chapter are:
(1) Every individual residing in the State of Alabama.
(2) Every corporation domiciled in the State of Alabama
or licensed or qualified to transact business in the State of
Alabama.
(3) Every corporation doing business in the State of
Alabama or deriving income from sources within the State of
Alabama, including income from property located in the State
of Alabama.
(4) Every nonresident estate or nonresident trust
receiving income from property owned or business transacted in
the State of Alabama.
(5) Every resident estate and resident trust.
(6) Every nonresident individual receiving income from
property owned or business transacted in the State of Alabama,
except as provided in Section 40-18-2.2 .
(b) Every natural person domiciled in the State of
Alabama, and every other natural person who maintains a
permanent place of abode within the state or spends in the
aggregate more than seven months of the income year within the
state, shall be presumed to be residing within the state for
the purposes of determining liability for income taxes under
this chapter."
Section 2. Section 40-18-2.2 is added to the Code of
Alabama 1975, as follows:
§40-18-2.2
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§40-18-2.2
(a) As used in this section, the following words have
the following meanings:
(1) "Professional athlete" means an athlete who
performs services in a professional athletic event for
compensation.
(2) "Professional entertainer" means a person who
performs services in the professional performing arts for
compensation on a per-event basis.
(3) "Public figure" means a person of prominence who
performs services at discrete events, such as speeches, public
appearances, or similar events, for compensation on a
per-event basis.
(b) Compensation subject to withholding pursuant to
Article 2, without regard to any withholding tax exception set
forth in this chapter, paid to a nonresident individual is
exempt from the tax levied under Article 2 if all of the
following conditions apply:
(1) The compensation is paid for employment duties
performed by the individual in this state on 24 or fewer days
in the calendar year.
(2) The individual performed employment duties in more
than one state during the calendar year.
(3) The compensation is not paid for employment duties
performed by the individual in the individual’s capacity as a
professional athlete, professional entertainer, or public
figure.
(4) The nonresident individual's state of residence:
a. Provides a substantially similar exclusion;
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a. Provides a substantially similar exclusion;
b. Does not impose an individual income tax; or
c. The individual's income is exempt from taxation by
this state under the United States Constitution or federal
statute.
(c) Except as otherwise provided in this chapter, an
employer is not required to withhold taxes from compensation
that is paid to an employee described in subsection (b). If,
during the calendar year, the number of days an employee
spends performing employment duties in this state exceeds the
24-day threshold described in subsection (b) of this section,
an employer shall withhold and remit tax to this state for
every day in that calendar year, including the first 24 days,
on which the employee performs employment duties in this
state.
(d) For purposes of determining compensation paid and
subject to withholding under this section:
(1) If an employer maintains a time and attendance
system that tracks where employees perform services on a daily
basis, then data from the time and attendance system shall be
used. For purposes of this section, time and attendance system
means a system:
a. In which the employee is required, on a
contemporaneous basis, to record the work location for every
day worked outside of the state where the employment duties
are primarily performed; and
b. That is designed to allow the employer to allocate
the employee’s wages for income tax purposes among all states
in which the employee performs services; and
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in which the employee performs services; and
(2) In all other cases, the employer shall obtain a
written statement from the employee of the number of days
reasonably expected to be spent performing services in this
state during the taxable year. Absent the employer's actual
knowledge of fraud or gross negligence by the employee in
making the determination or collusion between the employer and
the employee to evade tax, the certification so made by the
employee and maintained in the employer’s books and records
shall be prima facie evidence and constitute a rebuttable
presumption of the number of days spent performing services in
this state.
(e) For purposes of this section, an employee shall be
considered present and performing employment duties within
this state for a day if the employee performs more of the
employee’s employment duties in this state than in any other
state during that day. Any portion of the day during which the
employee is in transit shall not be considered in determining
the location of an employee’s performance of employment
duties.
(f) The Alabama Department of Revenue shall adopt rules
necessary for the administration of this section.
(g) The provisions of this section shall be effective
for tax years beginning on or after January 1, 2026.
Section 3. This act shall become effective on October
1, 2025.
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