Legislation being fast-tracked in the Alabama Legislature would tie Alabama’s income and excise tax filing and payment deadlines to the federal timetable in an effort to avoid interest accruing on 2020 Alabama income taxes paid between April 15 and May 17, 2021.
SB352 by Sen. Arthur Orr, R-Decatur, received approval this week from the Alabama Senate and the House State Government Committee. It could receive final OK as early as next week. It is on the House’s special order calendar for Tuesday.
The Alabama Revenue Department doesn’t have the authority to waive interest for state income taxes originally due April 15. Even though the state and federal government have moved the income tax filing deadline to May 17, ADOR and state officials encourage taxpayers to file their state taxes on or before April 15 to avoid the accrual of interest. Read state guidance.
Orr’s bill revises the payment date for income taxes as well as financial institutions excise taxes to coincide with the revised due dates for the corresponding federal payments. The bill also would authorize the Department of Revenue to delay the due date for filing and payment of any tax administered by the department for taxpayers living in areas under a declared state of emergency or disaster. The department would write rules to govern the changes.
Last week, the IRS extended additional tax deadlines. Earlier in the 2021 regular session, the Alabama Legislature passed a law eliminating state income taxes on federal relief benefits.
On April 1, Sen. Dan Roberts, R-Birmingham, introduced SB379, which would alter due dates, deductibility, certain tax credits and exempt certain benefits from the Alabama income tax related to the American Rescue Plan, which became federal law March 11. The bill addresses grants from the Restaurant Revitalization Fund, child and dependent care tax credits, the earned income tax deduction, the federal income tax deduction, financial institution excise taxes and corporate income taxes. Some provisions apply to the 2020 tax year and others to the 2021 tax year. The bill has been assigned to the Senate Finance and Taxation Education Committee.
DETERMINING WHO IS AN EMPLOYEE FOR TAX PURPOSES
On April 6, the Alabama Senate unanimously approved HB408 by Rep. Wes Kitchens, R-Arab, which gives “clear and consistent guidance” on how to determine whether a worker is an employee for purposes of benefits and tax liabilities. The bill, which the House approved March 11, awaits the governor’s signature to become law.
It requires employers and state agencies to follow a specific IRS rule and the safe harbor provision of the Revenue Act of 1987 in making the determination. The federal guidelines do not apply to workers’ compensation laws.
Kitchens said state businesses are being flagged for federal tax audits because they weren’t sure whether to use U.S. Labor Department or IRS guidance. “We are hitching our wagon to the IRS,” Sen. Clay Scofield, R-Guntersville, said.
Other tax-related bills introduced or being considered in the 2021 regular session include:
- HB588 by Rep. Danny Garrett, R-Trussville, would provide an income tax credit beginning with the 2021 tax year to the owner, member, partner or shareholder in an amount equal to its pro rata or distributive share of the Alabama income tax paid by the electing pass-through entity with respect to the corresponding tax year. The House Ways and Means Education Committee approved the bill Wednesday, April 7; it is on the House’s April 13 special order calendar.
- SB316, introduced March 9 by Sen. Garlan Gudger, R-Cullman, which excludes the amount of any state/local tax or fee on an electronic payment transaction from the amount on which an interchange fee is based. It requires a credit or debit card processor to either deduct or rebate the amount of state and local taxes and fees from the calculation of the credit card swipe fee charged to the retailer or other business. If a merchant or seller is unable to capture and transmit tax or fee amounts at the time of sale, the payment card network would then be required to accept proof of tax or fee amounts collected on sales and to promptly credit the merchant’s or seller’s settlement account. The bill has been assigned to the Senate Fiscal Responsibility and Economic Development Committee.
- HB442 by Rep. Mary Moore, D-Birmingham, which would phase out the 4% state sales and use taxes on food by reducing the state tax by one percentage point over a four-part reduction schedule beginning Oct. 1. Food would be fully exempt from Alabama sales and use taxes by Oct. 1 2025, under this plan. The bill has been assigned to the House Ways and Means Education Committee.
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