Alabama's House of Representatives passed a bill on Tuesday that would decouple the state tax rules regarding depreciation from the depreciation rules in the federal tax code. If enacted, this will prevent a revenue loss that will otherise occur because of the federal stimulus law enacted in February.

That stimulus bill included Congress's latest round of "accelerated depreciation" corporate tax cuts passed under the guise of helping the economy rebound. It allows companies to claim a "bonus" depreciation tax break that lets them deduct the cost of their investments much faster than would otherwise be allowed.

Since virtually every state's corporate tax laws are based on federal rules, this tax break will create an automatic tax loss for states unless (as Alabama is in the process of doing) they take steps to "decouple" from the federal tax break. The Alabama bill, HB 455, is estimated to save the state over $50 million in the current fiscal year. The Center on Budget and Policy Priorities reports that as many as 22 other states could take the same loophole-closing step to help shore up their corporate income tax base -- and their budgets.

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