Taxation Measures other than True Tax Reform

LWVAL Action Priority Level III - Issues identified by LWVAL Advocacy Committee and/or State Board or Local Leagues. Monitoring occurs; action dependent on opportunity and available resources.

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LWVAL has taken a position on these bills:
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HB92 - Income tax, defined benefit plans, distributions, including retirement under Teachers and State Employees Retirement, exemption limited, contributions to defined benefit plans exempt from income under certain conditions, Secs. 16-25-23, 36-27-28, 36-27-170, 40-18-14, 40-18-19 am'd; Sec. 40-18-20 repealed

Sponsor(s): Representative Greer

Summary/Synopsis: Under current law for Alabama income tax purposes, all individuals are exempt from the reporting of distributions received from a defined benefit plan to the extent it is taxable for federal income tax purposes. Distributions received from a defined contribution plan are not exempt from reporting.

This bill would remove the exemption from the reporting and taxation of such distributions and require such benefits be reported on an individual’s income tax returns effective for the 2016 calendar tax year and provide an exemption of the first $50,000 of pension and annuity income.

A portion of such distributions may be exempt from taxation for the recapture of any basis, under certain circumstances.


League Action and Justification: Monitor to keep members and the public informed.

League has no position on retirement plan taxation policy but supports tax reform. This move is another patch to the system, not system reform. Many members and the public are retirees who will be impacted if this law passes and some made decisions on the basis of the fact that state and other pensions were exempt from taxation during retirement.

Bill Progress in Legislature:

02/02/2016: First read and referred to the House Committee on Boards, Agencies and Commissions (BA&C).


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