Alabama
Alabama: Legislative Updates
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Discussion
The Alabama legislature recently passed several laws impacting employers. Key aspects of the bills are summarized below.
New TRAIN Act. Effective October 1, 2026, HB 517 establishes Alabama’s Talent Readiness and Industry Needs (TRAIN) Act, which creates a state income tax credit for employers that enter into a memorandum of understanding with an eligible educational institution and assign qualified employees to teaching roles for a minimum of 300 hours, while continuing to pay the employees’ full salary and benefits during the assignment. The credit is based on the portion of salary paid during the teaching assignment, subject to a statewide annual cap of $10 million, an individual taxpayer cap of $250,000, and a limit that credits may not reduce an employer’s tax liability by more than 50% (with unused credits carrying forward for up to five years).
Overtime Tax Deduction. Under HB 527, and for tax years from January 1, 2026 to December 31, 2028, individuals may take a $1,000 state income tax deduction on qualified overtime compensation received during the taxable year. Qualified overtime compensation is defined consistent with federal law. Deductions may be claimed regardless of whether the taxpayer itemizes deductions.
Tax Credit for Employers that Offer Organ Donor Paid Leave. Effective for tax years beginning January 1, 2027 through December 31, 2031, Alabama’s HB 361 creates a state income tax credit for private employers that adopt a formal written policy providing at least 15 days of paid leave for employees who donate all or part of an organ. The credit equals 25% of the gross compensation paid to the employee during the leave period, up to $2,000 per tax year. Unused credits may be carried forward for up to three succeeding tax years if the credit exceeds the employer’s tax liability.
New Consumer Privacy Law. Effective May 1, 2027, HB 351 establishes the Alabama Personal Data Protection Act (APDPA), creating a comprehensive data privacy framework governing how covered businesses collect, process, and sell consumers’ personal data. The law grants consumers new rights, including the right to access, correct, delete, and opt out of the sale of their personal data, and imposes corresponding obligations on covered businesses. While the APDPA does not impose employment-specific obligations on employers and expressly excludes data processed in an employment or commercial context from its scope, businesses operating in Alabama that meet certain thresholds should be aware of its requirements. The law generally applies to businesses that operate in Alabama or target Alabama residents and either process the personal data of more than 25,000 consumers or derive more than 25% of gross revenue from the sale of personal data. Notably, businesses with fewer than 500 employees that do not sell personal data are exempt.
Action Items
- Consider implementing organ donor paid leave to take advantage of a tax credit.
- Review the TRAIN Act and organ donor leave tax credit opportunities with a tax advisor.
- Review compliance obligations under new consumer privacy law, if applicable.
Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2026 ManagEase