SALT Alert: Alabama Edition

As part of the annual meeting of the Alabama State Bar Tax Section held in Montgomery on August 16, representatives from the Alabama Department of Revenue (ALDOR) provided a helpful update on some key legislative and administrative developments. Here’s a summary of a few notable developments:

• FAQs Issued for “Overtime” Exemption – Act 2023-421 (H.B. 217) excludes any amounts received by a full-time, hourly wage resident employee as compensation for work performed in excess of 40 hours in a week from Alabama gross income, effective for the first tax year beginning on or after January 1, 2024. The ALDOR recently published useful guidance and a set of FAQs regarding this new exemption and its reporting requirements (which apply to all employers that are required to withhold Alabama income taxes) and are available here. Taxpayers and their advisors are encouraged to provide feedback to the FAQs to assist the ALDOR with the rules that will be issued to implement this new exemption.

• Innovating Alabama Tax Credit – Act 2023-33 (H.B. 247) provides a tax credit for cash contributions to approved state or local economic development organizations. The ALDOR confirmed that reservations will be accepted through an online portal via a dedicated email process until the procedure can be automated through the My Alabama Taxes website later this fall. Instructions for donors who would like to reserve a credit and other guidance regarding the credit is available here.

• Additional $5 Million Historic Tax Credit Allocation to Apply on an Annual Basis – Act 2023-522 (H.B. 253) includes several technical corrections to the Alabama Historic Rehabilitation Tax Credit and one important enhancement – providing an additional $5 million of credit allocation for tax years 2024 through 2027 to reduce the backlog of qualified applicants. The ALDOR confirmed that this additional allocation will apply on an annual basis, thereby increasing the maximum allocation per year to $25 million, provided there are sufficient applications for these credits.

Annual Alabama Sales/Use Tax Webinar Set for September 22

Bradley partners Will Thistle and Bruce Ely will be presenting their annual webinar, “Sales and Use Tax for Alabama CPAs,” on behalf of the Alabama Society of CPAs on Friday morning, September 22. The webinar will cover recent sales/use/rental/business license tax developments (legislative, judicial and administrative), as well as a wide variety of hot topics, including:

• The taxation of computer software and SaaS
• What makes a business a “contractor” and how those businesses should be reporting their purchases and sales
• Recent developments involving so-called “economic nexus” following the landmark U.S. Supreme Court ruling in Wayfair and its impact on both state and local taxing authorities
• What qualifies for the reduced “machine rate” and some recent surprises
• When and where state and local rental/leasing tax may be due
• Handling audits by local taxing authorities or their contract auditors