Alabama lawmakers take action to shield federal COVID benefits from state income tax


The Alabama Senate passed a bill today to prevent Alabamians from paying state income tax on expanded federal tax benefits households received from the American Rescue Plan Act, a COVID-19 relief bill passed by Congress.

The bill, by Sen. Dan Roberts, R-Mountain Brooks, would mean Alabamians who got increases to child tax credits, earned income tax credits and personal tax credits dependents in 2021 will not pay more state income taxes because of it. .

Roberts said Alabama families received about $2 billion in benefits from the expanded tax credits, according to an estimate by the Joint Committee on Taxation. Without legislative action, Alabama taxpayers would owe about $87.7 million in taxes on that money, according to a press release from the Senate Republican caucus.

The Senate passed Roberts’ bill today by a vote of 31-0. Roberts said he was proud of the bipartisan effort to help Alabama families.

“It’s a big team win for the Alabama Senate to come together to push this through,” Roberts said.

His bill moved to the House, where Rep. Jim Carns, R-Vestavia Hills, sponsored the bill.

The American Rescue Plan Act was passed by Congress and the Biden administration in March 2021.

Roberts said the expanded tax credits were intended to help families cope with rising costs for childcare, groceries and other essentials caused by inflation and chain issues. supplies, as well as help with rent and mortgage payments. Taxpayers must have earned income from work to qualify for the earned income credit and the dependent care credit.

“These people were entitled to tax relief because they showed up for work during the pandemic, so it would be outrageous to punish them, especially when they did what was necessary during difficult times to support themselves and their lives. those of their families,” Roberts said in a press release. “This money belongs to the people, not the state government, and I am proud that we are one step closer to giving tax credits to these deserving people.”

Roberts said the legislation follows a commitment Governor Kay Ivey made in December 2020 that Alabama would not tax benefits people and businesses receive from the federal government to help deal with financial strain. caused by the pandemic.

Last year, Ivey signed into law a bill to exempt from state income tax the stimulus payments and benefits that households and businesses received from the CARES Act, which Congress and the Trump administration have approved in 2020.

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