House committee advances bill to restore immediate R&D expense deduction, makes change retroactive

Representative Virginia Faulkner told a House committee that members had amended HB 163 to make Alabama''s tax treatment of research and experimental expenditures retroactive and to restore the ability for companies to deduct those expenses in the year incurred rather than amortizing them over multiple years.

The amendment, Faulkner said, "making this retroactive to 01/01/2024 makes this for tax purposes important for us to get this bill moved and and on through." She told the committee she was "not aware of any opposition to the bill" and noted there is a fiscal note in the meeting packet that she said was "positive for the state of Alabama." The bill and the amendment state that, for Alabama tax purposes under Chapter 16 and Chapter 18 of Title 40, Code of Alabama 1975, research and experimental expenditures shall not follow the provisions of 26 U.S.C. (federal tax code) related to amortization.

Why it matters: Faulkner said the change responds to a federal tax change enacted in 2022 that requires amortization of certain research expenses; she said other states have "decoupled" from that federal change and that Alabama risks losing businesses to neighboring states unless it restores the prior treatment. The Department of Revenue drafted the amendment and, according to Faulkner, supports the language.

Committee action and procedure: The committee considered and adopted the amendment by voice vote. The committee then voted to give HB 163 a favorable report by voice vote. Individual roll-call tallies for the amendment and the final favorable report were not specified in the transcript; both actions were recorded as voice votes with the result announced from the chair.

Bill details from the committee record: The amendment text read in committee replaced specified lines in the bill to provide retroactive effect and included the phrase that the change would be "effective for tax years beginning on or after 01/01/2024." The bill seeks to allow Alabama taxpayers to deduct research and experimental expenditures in the year the expense is incurred, rather than amortizing those costs over five years, as the speaker described.

What the committee did not say or decide: The transcript does not record any formal opposition, an exact fiscal-impact dollar amount, or a final enactment date beyond the committee''s favorable report. The committee did not record named roll-call votes for the actions taken; the transcript records voice votes only.

The committee adjourned after giving HB 163 a favorable report.