Income tax; certain compensation of civilian employees of Armed Forces, exempt

HB 219 would expand Alabama's existing tax exemption for military personnel to include civilian employees of the U.S. Department of Defense and Armed Forces. It exempts their compensation from state income tax when earned while in a combat zone, deployed outside the U.S., or activated by Alabama’s governor or the president for emergency response. This change directly affects civilian defense workers meeting these deployment conditions, extending an existing exemption currently limited to active-duty military. The bill modifies Alabama Code §40-18-3 and applies to tax years beginning January 1, 2026. It is currently pending in the House Ways and Means Education Committee.