Bill
HB 163
Alabama decouples from federal R&D tax rules to let businesses immediately deduct research costs at state level, reducing taxes but decreasing state revenue.
HB 163 decouples Alabama's state tax code from recent federal changes to Section 174 of the Internal Revenue Code, which altered how businesses depreciate research and development (R&D) expenses. Under the 2017 Tax Cuts and Jobs Act, companies must now capitalize and amortize R&D costs over five years rather than deducting them immediately. This bill allows Alabama to maintain its previous treatment of R&D expenses for state tax purposes, creating a difference between federal and state tax calculations.
This decoupling directly affects Alabama's business competitiveness and state tax revenue. Companies conducting R&D will face higher federal tax burdens, so allowing immediate deductions at the state level makes Alabama more attractive for research-intensive industries. However, decoupling also reduces state tax revenue by allowing businesses larger deductions, potentially affecting state budgets for education, infrastructure, and services unless offset by other revenue sources or economic growth.
Compiled from official sources — confirm details with the bill’s official record.
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