Alabama Gov. Kay Ivey (R) has approved legislation to provide tax relief for small businesses.
H.B. 82, the Small Business Relief and Revitalization Act, was signed by Ivey February 28. It exempts up to $40,000 in tangible business personal property from the state ad valorem tax, beginning in October 2023. This relief will allow 75 percent of Alabama businesses to be effectively exempt from paying the state's portion of this tax, according to a release.
The bill also authorizes counties and municipalities to adopt the same exemption for local ad valorem taxes.
A February 15 fiscal note estimates that each year the exemption on the state's portion of the ad valorem tax will reduce the Public School Fund by $2.02 million, the general fund by $1.68 million, and the Veterans Assistance Fund by $670,000, beginning in fiscal 2024.
Under H.B. 82, forgiven loans for disadvantaged farmers and ranchers under section 1005 of the American Rescue Plan Act of 2021 (P.L. 117-2) are also exempt from state income tax and are excluded from calculations when determining a taxpayer's federal income tax deduction for state tax purposes.
The measure also extends the tax return due date for the state financial institution excise tax and state corporate income tax to one month after the due date of the corresponding federal return.
The legislation also increases from $2,500 to $5,000 the threshold by which businesses will be required to make estimated sales tax payments. According to the release, this will provide about 2,400 small businesses with relief.
According to the fiscal note, the reduction in estimated sales tax return filings as a result of the higher filing threshold will “temporarily reduce sales tax receipts held in escrow by an estimated $5.5 million in the month immediately preceding passage of this bill.” But the note said this “will be offset by the eventual collection of actual sales tax receipts.”
The Senate passed H.B. 82 on a 29–0 vote February 17 after the House approved it 99 to 0 on February 3.