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HB 163

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2025-2026 Regular Session Introduced by Kasey Carpenter and 5 co-sponsors

House Bill 163 allows Alabama taxpayers to immediately deduct research expenses, boosting innovation and potentially increasing education funding by $7.2 million.

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Bill Summary · HB 163

Summary of House Bill 163: Decoupling from the Tax Cuts and Jobs Act

Bill Overview

  • Bill Number: HB 163
  • Title: Decoupling the Tax Cuts and Jobs Act (TCJA) Amendment to Section 174 of the Internal Revenue Code
  • Status: Enacted
  • Introduced: February 4, 2025
  • Effective Date: Tax years beginning on or after January 1, 2024
  • Classification: Bill
  • Subject: Taxation & Revenue

Purpose and Intent

House Bill 163 aims to decouple Alabama's tax code from the federal Tax Cuts and Jobs Act (TCJA) amendment concerning the amortization of research and experimental expenditures. The bill allows taxpayers in Alabama to deduct these expenses in the year they are incurred rather than amortizing them over several years, as mandated by the TCJA.

Key Provisions

  • Decoupling from TCJA: The bill specifically decouples Alabama's tax treatment of research and experimental expenditures from the TCJA's amendments to 26 U.S.C. § 174.
  • Deduction Options: Taxpayers will have the option to:
    • Deduct research and experimental expenditures in the year they are incurred.
    • Treat these expenditures as deferred expenses, following the provisions of 26 U.S.C. § 174 as they existed prior to tax year 2022.
  • Implementation Rules: The Alabama Department of Revenue is authorized to adopt rules for the implementation and administration of this act.

Financial Impact

  • Estimated Revenue Increase: The bill is projected to increase income tax receipts to the Education Trust Fund by an estimated cumulative maximum of $7.2 million starting in fiscal year 2025. This is due to the allowance of immediate deductions for research and experimental expenses instead of amortization.
  • Timeline for Revenue Impact: The financial benefits are expected to accumulate from fiscal year 2025 through fiscal year 2031.

Affected Parties

  • Taxpayers: Businesses and individuals engaged in research and development activities in Alabama will benefit from the ability to deduct expenses immediately.
  • Education Trust Fund: The increased tax receipts will contribute to the funding of educational initiatives in Alabama.

Legislative Process

  • Committee Reviews: The bill underwent reviews by the Finance and Taxation Education and Financial Services committees.
  • Amendments: Several amendments were proposed and adopted during the legislative process, including provisions for retroactive effect.
  • Final Approval: The bill passed the House of Representatives with a vote of 99-0 and was subsequently enacted on May 14, 2025.

Conclusion

House Bill 163 represents a significant change in Alabama's tax policy regarding research and experimental expenditures, providing immediate tax relief to businesses engaged in innovation and potentially boosting the state's economy. By allowing for immediate deductions, the bill aims to foster a more favorable environment for research and development activities within the state.

Compiled from official sources — confirm details with the bill’s official record.

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