The Alabama Senate on Thursday passed legislation that would cut taxes on over 200,000 businesses. The bill would exempt most Alabama businesses from paying the business privilege tax.

Senate Bill 290 (SB290) is sponsored by State Sen. Tom Butler (R-Madison).

“Small businesses are the backbone of Alabama’s economy and pillars in our communities, and the last two years have been the most difficult in decades for these entities,” Butler released in a statement. “While our state budgets are robust, there is a real opportunity to provide substantial support by eliminating the business privilege tax, which will result in an annual $23 million tax cut for our small businesses.

“I am pleased that my colleagues in the Senate recognized the need to move this important piece of legislation forward, and I am eager to see this bill on Governor Kay Ivey’s desk so that we can provide relief for Alabama taxpayers and small businesses."

State Sen. Greg Reed (R-Jasper) is the Senate President Pro Tem.

“Alabama’s economy is strong, and our receipts have increased in both the General Fund and Education budgets, presenting an opportunity to provide a tax break for taxpayers and small businesses,” Reed said. “This bill has a pretty good price tag to it as far as loss of revenue to the state’s budgets, so we have worked closely with the budget chairmen to develop this policy and consider ways to fill the gap. The Senate has prioritized support for Alabama’s businesses, specifically small businesses, and I am proud of the effort that occurred within this legislative body to deliver much-needed relief for Alabamians.”

According to the synopsis. “Under existing law, the minimum business privilege tax due for certain corporations, business trusts, limited liability entities, and disregarded entities is not less than $100. This bill reduces the minimum business privilege tax of $100 to $50 for the taxable year beginning after December 31, 2022. This bill also provides for a full exemption from the minimum business privilege tax due for taxable years beginning after December 31, 2023.”

Sen. Arthur Orr (R-Decatur) who chairs the Senate Finance and Taxation Education Committee prepared the fiscal note on this bill. According to Orr, “Senate Bill 290 as introduced would 1) reduce the minimum Business Privilege Tax (BPT) due for tax year 2023 from $100 to $50, and 2) eliminate the minimum BPT due beginning with tax year 2024 and thereafter. These provisions would reduce receipts to the State General Fund by an estimated $11.5 million in Fiscal Year 2023 and $23 million in Fiscal Year 2024 and each fiscal year thereafter.”

There was vigorous debate on this in committee.

Sen. Jim McClendon (R-Springville) said that previous legislators passed the business privilege tax in order to add some revenue to the State General Fund (SGF), but that now the SGF has revenue from half of the internet taxes thus is much better funded now than it was then.

Butler said that the state has record funds in both the general fund and in the education fund and should remove this tax on business owners.

Sen. Rodger Smitherman (R-Birmingham) said that the state has had both good times and bad times and that he was not sure that the state should be giving up this revenue source.

Orr said that due to the Russian invasion of Ukraine, some economists are already using the R-word (recession).

The committee gave the bill a favorable report on Wednesday and the Senate passed it on Thursday on a vote of 29-0.

SB290 now goes to the House for their consideration. It has been assigned to the House Ways and Means General Fund Committee.

Tuesday will be day 22 of the Alabama Regular Legislative Session. The legislature is limited by the 1901 Constitution to no more than thirty legislative days in a regular session.

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