Alabama Gov. Kay Ivey (R) on Wednesday signed legislation to exempt more than 230,000 small businesses from owing the unpopular business privilege tax to state government.

House Bill 391 (HB391) is sponsored by State Rep. Steve Clouse (R–Ozark) and State Sen. Tom Butler (R–Madison).

The legislation will provide relief from the business privilege tax for Alabama small businesses – many of whom are struggling with rising labor and fuel costs. The exemption will provide relief to more than 230,000 small businesses across Alabama.

This tax cut is phased in over time. When fully implemented, the exemption is projected to save the state’s small businesses an estimated $23 million a year. Beginning in tax year 2023, this new law cuts the $100 minimum business privilege tax in half to $50 for small businesses, and it completely exempts small businesses from the minimum tax beginning in 2024.

Currently, the Alabama Business Privilege Tax levies a minimum of $100 annually on corporations, limited liability entities and other businesses in Alabama. The tax remains due every registered year until the entity is legally dissolved, regardless of whether or not such entity is actively doing business in Alabama or whether or not the business actually made any money. Ivey’s signature on House Bill 391 will deliver relief to Alabama’s many small businesses.

Critics however suggested that the legislature did not go far enough in providing tax relief. The 5% individual and corporate tax rate is higher than neighboring states and Alabama is one of only a handful of states that tax groceries. Also, the legislature raised fuel taxes by ten cents per gallon in 2019. Many of Ivey’s gubernatorial opponents are calling on Ivey to suspend or lower the tax on fuel, which is up almost 58.1% in the last year.

Ivey was elevated to governor in 2017 and then elected in her own right in 2018. She is seeking another term in office but faces a host of challengers in the Republican primary as well as a Democratic challenger in the Nov. 8 general election.

Lindy Blanchard, Lew Burdette, Kay Ivey, Stacy George, Tim James, Donald Trent Jones, Dean Odle, and Dean Young are all running in the May 24 Republican primary.

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