HB467INTRODUCED
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HB467
CXD3HJQ-1
By Representatives Daniels, Stadthagen, Jackson, Lawrence,
Lands, Hall, Mooney, Travis, Yarbrough, McCampbell, Gray,
Chestnut, Clarke, Drummond, Forte, Warren, Rafferty, Ensler,
England, McClammy, Tillman, Givan, Hendrix, Boyd, Hassell,
Bracy, Hollis, Moore (M), Sellers, Datcher, Morris, Jones,
Lipscomb, Stringer
RFD: Ways and Means Education
First Read: 20-Mar-25
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10 CXD3HJQ-1 03/17/2025 RA F DJ 2024-3245
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First Read: 20-Mar-25
SYNOPSIS:
Under existing law, amounts paid as overtime
compensation in accordance with the U.S. Fair Labor
Standards Act are excluded from calculation of gross
income through June 30, 2025.
This bill would remove the sunset provision for
this exemption.
This bill would require the Department of
Revenue and the Alabama Commission on the Evaluation of
Services to conduct an economic impact study of this
exemption.
This bill would also make nonsubstantive,
technical revisions to update the existing code
language to current style.
A BILL
TO BE ENTITLED
AN ACT
Relating to income taxes; to amend Section 40-18-14,
Code of Alabama 1975, as last amended by Acts 2024-437 and
2024-447, 2024 Regular Session; to remove the sunset provision
for the existing exemption of overtime compensation from
income tax; to require the Department of Revenue and the
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income tax; to require the Department of Revenue and the
Alabama Commission on the Evaluation of Services to conduct an
economic impact study on the effects of the exemption; to
require public posting of the study; and to make
nonsubstantive, technical revisions to update the existing
code language to current style.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. Section 40-18-14, Code of Alabama 1975, as
last amended by Acts 2024-437, and 2024-447, 2024 Regular
Session, is 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
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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
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
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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;
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;
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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.(i) Amounts received by a full-time hourly waged
paid employee as compensation for work performed in excess of
40 hours in a week.
(ii) The exemption provided pursuant to this
subparagraph shall be available for tax years that begin after
December 31, 2023, and end on October 1, 2024.
2.(i) Amounts paid as overtime compensation in
accordance with the U.S. Fair Labor Standards Act.
(ii) The exemption provided pursuant to this
subparagraph shall be available beginning on October 1, 2024 ,
through June 30, 2025 .
3.2. Notwithstanding subparagraph 2.1., for employers
governed by the National Railway Labor Act, the exemption
provided in this paragraph applies to hourly component
overtime compensation as defined in applicable collective
bargaining agreements.
4.3. 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
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(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, through September 30, 2024, the total amount received by
full-time hourly wage-paid employees as compensation for work
performed in excess of 40 hours in a week. (i) Beginning on
October 1, 2024, and each year thereafter, the total amount
paid pursuant to this paragraph 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)(ii) Additional information as may be required by
the department.
5.4. The department shall report to the Legislative
Services Agency - Fiscal Division and the Department of
Finance the data collected and compiled pursuant to
subparagraph 4.3.and an estimate of the amount of income tax
revenue lost pursuant to this subparagraph, no later than 30
days after the due date of the data.
5. No later than January 1, 2026, the department, in
collaboration with the Alabama Commission on the Evaluation of
Services, shall conduct a study on the economic impact of this
exemption. The study shall include quantitative estimates of
the economic effects of the exemption. The term "economic
effects" shall be construed broadly and include, but is not
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effects" shall be construed broadly and include, but is not
limited to, the estimated effects of the exemption on consumer
spending trends. The department shall post a copy of the
economic impact study on the department's public website.
6. The provisions of Article 6, Chapter 29 of Title 40
shall apply to this paragraph.
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."
Section 2. This act shall become effective on June 1,
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Section 2. This act shall become effective on June 1,
2025.197