Relating to gross income; to amend Section 40-18-14, Code of Alabama 1975; to exclude difficulty of care payments from gross income.
Summary
HB217 amends Alabama’s income tax definition of “gross income” in Section 40-18-14 to add a new exclusion for payments made to individual care providers under certain Medicaid Home and Community-Based Services waiver programs. The bill is aimed at excluding “difficulty of care” payments from state taxable income, aligning Alabama law more closely with the federal treatment of those payments under 26 U.S.C. § 131.
The bill also preserves the state’s existing structure of gross-income exclusions and makes the new exclusion effective for tax years beginning on or after January 1, 2026, with the act itself becoming effective October 1, 2025. In practical terms, individual care providers who receive qualifying Medicaid waiver payments would no longer include those amounts in Alabama gross income for state income tax purposes, reducing their state tax liability and simplifying tax reporting for those payments.
Impact
HB217 would amend Section 40-18-14 of the Code of Alabama 1975, which governs the state definition of gross income for income tax purposes. The main legal effect is to exempt qualifying Medicaid Home and Community-Based Services waiver payments to individual care providers from Alabama taxable income, thereby narrowing the income base subject to state tax. The bill would affect individual care providers receiving difficulty-of-care payments and would require the Department of Revenue to administer the change under existing rulemaking authority.
Sentiment
The available context shows no recorded committee debate or votes, so there is no direct evidence of opposition or support from transcripts. Based on the bill’s narrow tax-relief purpose and its alignment with federal treatment of difficulty-of-care payments, the measure appears to be a technical and targeted tax conformity bill rather than a broadly controversial proposal. Its pending status in the House Ways and Means Education Committee suggests it was still under consideration at the time of the provided record.
Contention
No specific points of contention are documented in the provided materials. Potential issues, if raised, would likely center on the revenue impact of excluding these payments from taxable income and whether the exemption should be limited to certain Medicaid waiver programs and individual care providers. Because there are no transcripts or votes, it is not possible to identify named legislators or stakeholder groups taking opposing positions from the record provided.