Monday, the Alabama Senate Finance and Taxation Education Committee gave a favorable report to a bill that would make stimulus checks under the federal CARES Act to individuals as well as Payroll Protection Program (PPP) forgiven loans exempt from the Alabama State income tax.
Senate Bill 250 is sponsored by Senator Dan Roberts (R-Mountain Brook).
On Tuesday, Roberts told the Alabama Political Reporter that the bill would make the taxation consistent with federal law.
Under the CARES Act, every taxpayer was sent a personal stimulus check to make up for some of their cost of having to shelter in place for months. The Small Business Administration’s Payroll Protection Program loans money to small businesses, an in some cases not so small businesses, adversely impacted by the forced economic shutdown to slow the spread of the coronavirus. If a business owner uses those PPP funds to pay his or her employees, rent, mortgage payments, utilities, and other overhead the loans will be forgiven.
Under Alabama law, the forgiveness of those PPP loans would create a state income tax liability. It is the same with the personal stimulus checks. A taxpayer with a $1,700 federal stimulus check would owe the Alabama Department of Revenue 5 percent of that check, $85. A business who borrowed $100,000 under the PPP program would have a $6,500 tax liability if that loan were forgiven at the state corporate tax rate of 6.5 percent.
SB250 would eliminate those CARES Act tax liabilities so the state was not profiting off of citizens’ federal coronavirus crisis relief payments.
SB250 was originally the Alabama Business Tax Competitiveness Act; but due to the coronavirus crisis, Roberts substituted that legislation for this in the Senate committee.
The Senate Finance and Taxation Education Committee voted to give SB250 a favorable report.
The bill can now be considered by the full Senate.
The bill, like other Senate legislation faces an uncertain future due to squabbling between the two Houses of the Alabama legislature.
On Monday, House members told the Alabama Political Reporter that this session would sine dies (a motion to conclude the legislative session and everybody go home til next year) on Friday. Just hours later a senior Senator told APR that the legislature would need to work through late Saturday and likely have to come back on Sunday or Monday to conclude. The two Houses were obviously working from a different playbook.
Those differences erupted on Tuesday. The House leadership was apparently under the impression that the only things the legislature was going to do in the remaining days of the session were the two budgets, members’ local bills, supplemental appropriations, and a school construction bond issue. The Senate meanwhile was advancing a much more comprehensive legislative package, including this bill.
Tuesday, Sen. Rodger Smitherman (D-Birmingham) became angry that House Republicans were not moving on a judge allocation he supports so announced that he was going to contest all House sponsored local bills, until the House does some work on Senate sponsored legislation.
Alabama Speaker of the House Mac McCutcheon (R-Monrovia) took a moment of personal privilege to reiterate that the House will only consider local bills and state budgets and that was the agreement that they made with the Senate leadership.
“We are only going to do what I agreed upon,” insisted McCutcheon. “We’re going to do our job, and we’re going to do our job based upon the commitments we made.”
McCutcheon made the argument that because the public is being barred from the building due to the coronavirus crisis that there are only a limited amount of issues that the legislature should address.
At the close of the working day in the Senate, Senate President Pro Tem. Del Marsh (R-Anniston) thanked the Senators for their hard work and for setting an example for members of the House.
(Original reporting by the Yellowhammer News contributed to this report.)