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MADISON COUNTY, Ala. (WHNT) — The Alabama Senate voted to eliminate the state’s business privilege tax. The bill, sponsored by Senator Tom Butler (R-Madison), now moves to the House.

If approved by the House and signed by Governor Kay Ivey, the bill would do away with the minimum tax levied on some corporations, business trusts, and both limited liability and disregarded entities. Current law determines the rate based on a taxpayer’s taxable income apportioned and allocated to the state.

Alabama’s business privilege tax has been in place since 1972.

“It is just something that is a hindrance to growing businesses in the state. This does not affect municipal and county taxes but it does send a message that the state is ready to do business without charging them the minimum tax to do it,” said Butler.

He said seeing the brunt small businesses bore during the pandemic is what inspired this legislation.

“That will affect more than 230 thousand small businesses in the state of Alabama at a cost of about $23 million dollars in a tax reduction,” he explained.

It will help people like small business owner Frida Morel, who opened her women’s clothing boutique, Silhouette, in 2019.

“Actually five months before COVID happened and I survived that, thank goodness,” Morel told News 19.

Morel says any break business owners can get helps.

“Being in business almost three years, I think it’s very important, especially with rising inflation… everywhere we can save,” said Morel.

Senator Butler says they are able to do this because the state currently has a healthy budget.

“The budgets allow that right now, both the general fund budget and the trust fund budget. We are in very good shape,” said Butler.