After a turbulent start to the week, lawmakers quickly regrouped and refocused their efforts. The General Fund and Education Trust Fund budgets received final passage. With just one week remaining in the 2026 Regular Session, the race to the finish line is on.

House Passes Overtime Tax Deduction Bill with Grocery Sales Tax Holiday Added
Sponsored by Rep. James Lomax, R-Huntsville, HB527 would allow taxpayers to deduct up to $1,000 in qualified overtime pay annually for tax years beginning January 1, 2026, through December 31, 2028. Lomax described the proposal as targeted relief for working families and noted that it mirrors existing federal deductions.

An amendment introduced by Rep. Mike Shaw, R-Vestavia Hills, adds a state grocery tax holiday, suspending the 2% state sales tax on groceries from May 1 through June 30. While the amendment expanded the bill’s scope, it also raised concerns among some lawmakers about fiscal impact, increasing the estimated cost from $37.4 million to $83.4 million annually.

Despite those concerns, the bill passed unanimously, 100-0, and now moves to the Senate for consideration.

Rep. Shaw also introduced this week HB647, which would gradually reduce the state sales and use tax on food by 0.5% annually beginning September 1, 2026, with full exemption set for September 1, 2029. With limited time remaining this session, it is not expected to reach the finish line.

Cash Rounding Bill Advances
Legislation to authorize the rounding of in-person cash transactions to the nearest five cents continues to advance, with the House-passed version, HB545 by Rep. Norman Crow, R-Tuscaloosa, receiving a favorable report from the Senate Banking and Insurance Committee this week.

HB545 would establish a uniform method for rounding final cash totals while leaving product pricing and sales tax calculations unchanged and would not apply to electronic payments. A companion bill, SB365 by Sen. Jay Hovey, R-Auburn, has also cleared committee, positioning both measures for consideration by the full Senate.

House Committee Advances Swipe Fee Tax Clarification Bill
Legislation to exclude credit and debit card transaction fees from the calculation of sales and use tax was considered by the House Ways and Means Education Committee this week. A public hearing was held, and SB221, sponsored by Sen. Arthur Orr, R-Decatur, ultimately received unanimous approval.

During the hearing, proponents emphasized the need for clarity in statute and consistency in tax treatment, noting that services and fees are not considered taxable under current law. The legislation was brought in response to an internal policy of the Alabama Department of Revenue, which was not promulgated by rule or established in state law. Advocates warned that this policy effectively usurps legislative authority and highlighted the importance of restoring statutory clarity.

Representatives from the League of Municipalities spoke in opposition, raising concerns that the measure could reduce local sales tax revenue. The bill is being carried in the House by Rep. Chad Robertson, R-Heflin.

Seafood Labeling Bill Stalls
Legislation to expand Alabama’s seafood country-of-origin labeling requirements for food service establishments advanced this week in the Senate Agriculture, Conservation and Forestry Committee, though concerns were raised about its path forward. Committee Chairman Sen. David Sessions, R-Grand Bay, carried HB444 and indicated that while he did not oppose giving the measure a favorable report, he would not advocate for its final passage, stating the bill may go too far. He encouraged restaurants to comply with existing laws and urged the Alabama Department of Public Health to increase enforcement.

Sponsored by Rep. Chip Brown, R-Mobile, HB444 would authorize the Commissioner of Agriculture and Industries to conduct random testing of seafood, while maintaining the State Health Officer’s authority to investigate verified complaints. The bill also updates menu and signage disclosure requirements and retains a graduated penalty structure that includes a five-point reduction in posted health scores for violations.

Alcohol Legislation Advances in Both Chambers
HB593, sponsored by Rep. Andy Whitt, R-Ardmore, was approved by the House on Tuesday and later received a favorable report from the Senate Tourism Committee on Thursday. The legislation would broaden the state’s current brewpub law by creating new license categories for small craft distilleries and wineries and allowing a single manufacturer license for combined operations within a contiguous area. Additional provisions would permit tours, tastings, and limited off-site sales at public events. The bill is being carried in the Senate by Sen. Donnie Chesteen, R-Geneva.

SB287 by Sen. Kirk Hatcher, D-Montgomery, received a favorable report from the House Economic Development and Tourism Committee. The bill clarifies that licensed importers may bring alcoholic beverages into Alabama from anywhere outside the state and aligns the importer license year to begin October 1. The measure also incorporates provisions related to consumable hemp products by allowing certain retailers to obtain a hemp product retailer license and permitting the sale of hemp-derived beverages in retail food stores.