Passed by Congress and signed into law by President Donald Trump on Dec. 2017, the TCJA enacted changes across the board to the federal tax system for both businesses and individuals, primarily for tax years beginning on or after Jan. 1, 2018.
According to ADOR’s 50-page guidance, “the overall impact of the federal changes as it relates to Alabama income taxes is unknown until all provisions are in effect.” In fact the guidance is preliminary and subject to revision as more information becomes available, including additional federal guidance and input from other tax administrative agencies and/or the private sector.
The guidance addresses whether, and how, the provisions of the TCJA are tied to Alabama’s taxing regime, as they relate to individuals (including sole proprietors), corporations, and financial institutions.
“Since the Alabama corporate income tax is tied to the definition of federal taxable income ‘as in effect from time to time’, much of the fiscal impact of the TCJA on our corporate income tax revenues is automatic,” Bruce Ely, a tax attorney and partner at Bradley Arant Boult Cummings LLP in Birmingham, Ala., told Bloomberg Tax. “In contrast, our individual income tax scheme selectively conforms to the IRC counterpart and is outdated in many respects, so benefits like the new Section 199A deduction for owners of pass-through entities apparently won’t carry over into Alabama law—at least not without curative legislation.”