State & Local Tax Impacts of COVID-19 for Alabama – 2021

Thoughtware Alert Published: May 03, 2021 | Updated: Jun 08, 2021
SALT GOV COVID TW - 1

Information current as of April 30, 2021.

COVID-19 has changed life across the globe. Many taxing jurisdictions are taking mitigating actions to create social distance and aid taxpayers. The following is a running list of actions by jurisdiction, which generally result in additional time to file and/or pay. Further, many jurisdictions have closed their offices to in-person use by taxpayers and suspended their audit and administrative functions. This alert doesn’t cover similar waivers from local-level taxing authorities. These developments continue to quickly evolve; check with your BKD Trusted Advisor or visit our COVID-19 Resource Center for current information as needed.

Information Specific to Alabama

  • Alabama is extending the deadline for motor vehicle registrations and property tax payments on motor vehicles due to COVID-19. The measures include extending 1) the deadline for vehicle registrations to the last business day of the subsequent month the registration was otherwise due for registrants where the county license plate issuing office was closed during the month the registration was originally due; 2) the 20-day registration requirement where the county licensing office was closed and the registrant didn’t have access to it; 3) vehicle registrations and renewals under the International Registration Plan where the office was closed during the month the registration was originally due; and 4) penalty charges associated with registrations, renewals, and tax payments. The extension of time provided in the Commissioner’s order is valid from January 1 and will expire on June 30. 
    • Order of the Commissioner of Revenue; January 5, 2021.
  • Alabama updated its guidance regarding the tax relief measures contained in Alabama Gov. Kay Ivey’s 21st Supplemental Emergency Proclamation to provide that expenses paid with Paycheck Protection Program (PPP) loan amounts that have been forgiven are deductible in calculating federal taxable income. Because the calculation of Alabama corporate income tax and financial institution excise tax begins with a taxpayer’s federal taxable income, the allowance of these deductions at the federal level will flow through to the taxpayer’s calculation of Alabama taxable income, without the need for any adjustment on the taxpayer’s Alabama return. 
    • Alabama Department of Revenue (DOR), Guidance Related to Gov. Kay Ivey’s 21st Supplemental Emergency Proclamation; January 6, 2021.
  • Alabama legislation syncs the state to most tax features of last year’s federal pandemic relief laws and offers businesses additional tax benefits to spur the economy. The legislation conforms Alabama to the CARES Act, as well as the December relief law. Those measures were notable in clarifying that forgiven PPP loans won’t be treated as taxable income and loan recipients can deduct expenses paid with forgiven loans. It also retroactively carves Alabama out of the federal tax on income from intangible assets held overseas. In addition, the law establishes a pass-through entity tax workaround to the $10,000 limit on the deduction for state and local taxes. Last, businesses and healthcare providers are shielded from litigation that could hold them responsible for exposing employees and customers to COVID-19.
    • Alabama H.B. 170/S.B. 30/S.B. 98, passed; effective February 12, 2021.
  • Alabama issued guidance on individual income tax filing deadlines. Taxpayers won’t need to request an extension to file individual income tax returns without a late-filing penalty through the extended federal due date, and the state will automatically waive, without request, late-payment penalties for payments remitted by May 17. However, the DOR isn’t authorized to waive interest, and any interest accruing from April 15 through the actual payment date will be due.
    • Alabama DOR, Guidance on Income Tax Filing Deadlines, March 18, 2021.
  • Alabama legislation extended the deadline for 2020 individual income tax payments to May 17, 2021, to coincide with the federal deadline. The legislative change eliminates the accrual of interest for 2020 individual income tax payments made by May 17, 2021. The legislation also revises the payment date for financial institutions’ excise taxes to correspond with the revised due date for federal payments. It also authorizes the DOR to adjust the filing and payment deadlines for taxpayers residing in areas declared a state of emergency or disaster. 
    • Alabama S.B. 352, effective April 15, 2021.
  • Alabama COVID-19 relief legislation provides that the one-year period in which to satisfy the initial employment and wage requirements for an approved project entity under the Capital Credit Program will be extended to a period not to exceed two years for any otherwise qualifying project placed into service in calendar years 2019, 2020, or 2021 that have been directly affected by the COVID-19 pandemic. For this purpose, an “approved project entity” is an entity that has filed a notice of intent with the DOR on or before January 1, 2016, and has subsequently filed or will file a report of investment in project with the DOR to claim a capital credit under the Capital Credit Program. A “qualifying project” is a project that has been placed into service in calendar years 2019, 2020, and 2021. The legislation provides that an approved project entity’s qualifying project failure to meet the annual employment and wage requirements for tax years beginning after December 31, 2019, but before January 1, 2022, will not be considered in determining disqualification from the Capital Credit Program, provided that the COVID-19 pandemic is the primary cause. The legislation further provides that an approved project entity will not be subject to certain forfeiture penalties imposed on qualifying projects that fail to maintain employment and wage requirements for any tax year ending before January 1, 2022.
    • Alabama S.B. 274 (Act 240), effective April 20, 2021.

For more information, reach out to your BKD Trusted Advisor or use the Contact Us form below.

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