Gov. Ivey signs order excluding CARES Act money from state taxes

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MONTGOMERY, Ala. – An emergency proclamation signed by Governor Kay Ivey keeps certain benefits received under the federal CARES Act from being taxed on the state level. That money was already excluded from taxation at the federal level, but Alabama tax law meant those funds could have been taxable.

The proclamation says that taxation would deny people who received the funds the “full value of the benefits…intended to help.”

“In coordination with the Alabama Legislature, we are pleased to address items that were delayed due to COVID-19,” Governor Ivey said in the news release. “This action is a short-term solution until these items can be considered by the full legislative body during the 2021 Regular Session. In the meantime, the people of Alabama need clear guidance prior to filing their 2020 taxes. Therefore, the state will not be collecting taxes from individuals or businesses who received benefits from the CARES Act because these benefits were designed to help our citizens survive the pandemic’s strain on the economy. It is both my intent, and the will of the Legislature, to ensure CARES Act payments extend their full value to the people who need it the most.”

This proclamation directs the revenue commissioner to alter the tax-return forms and instructions to ensure that Alabama citizens and business will not have to pay taxes to the state government on the financial benefits they received from Congress through the CARES Act such as tax credits, advance refunds, and loan forgiveness.

Alabamians and Alabama businesses have received more than $7.2 billion in such benefits, according to the governor’s office. Around 70,000 Alabama businesses received loans through the CARES Act’s Paycheck Protection Program (PPP) and 2.5 million Alabama citizens received CARES Act stimulus payments.

This proclamation also changes the previously established sunset dates for two tax-credit programs that assist Alabama’s economic-development efforts, the Alabama Jobs Act tax credits and the Growing Alabama tax credit. The Alabama Jobs Act credits are set to expire on December 31, 2020, while the Growing Alabama credit expired on September 30, 2020. Both tax-credit programs will now be extended until the Legislature has an opportunity to enact legislation addressing the programs.

“The Alabama Jobs Act and Growing Alabama tax credits are essential to the success of Alabama’s economy, and we’ve seen a great return on investment across our state,” Governor Ivey said. “The state is currently negotiating potential economic projects that hinge on the availability of these tax-credit programs, and without today’s extension, we risk losing nearly $3 billion in direct capital investment and over 7,000 new direct jobs.”

Twenty-first Supplemental Emergency Proclamation

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