Base Alabama's miscellaneous itemized deduction on the expenses and Alabama's 2% floor, not the suspended federal deduction

[MaxGhenis]

WIP (draft). Pending: targeted YAML runs (queued under the hub heavy lock), main-vs-branch households, the microsimulation (held by Fleet ops), an independent review and the Axiom parity item.

What changes

al_misc_deduction started from the federal misc_deduction, then subtracted 2% of Alabama AGI. The federal deduction is zero from 2018, because 26 U.S.C. 67(g) suspends it and P.L. 119-21 makes the suspension permanent. Before 2018 it is already net of the federal 2% floor. So main gave Alabama filers nothing from 2018 and applied two floors before. Alabama never adopted the suspension. The branch starts from the expenses themselves (total_misc_deductions: unreimbursed employee business expenses and tax preparation fees) and applies Alabama's own floor once.

Law

• Ala. Code 40-18-15(a)(23): "The deduction allowed by subdivision (1), to the extent that it consists of unreimbursed employee business expenses, and the deduction allowed by subdivision (14) shall be allowed only to the extent that the aggregate of the deductions exceeds 2 percent of adjusted gross income." (a)(14) is the section 212 deduction for "ordinary and necessary expenses paid or incurred … for the production or collection of income … or in connection with the determination, collection, or refund of any tax." https://alison.legislature.state.al.us/code-of-alabama?section=40-18-15
• 2024 Form 40 instructions, Schedule A lines 20–24 (PDF p.20): "Most miscellaneous deductions cannot be deducted in full. You must subtract 2% of your Alabama adjusted gross income from the total. You figure the 2% limit on line 23." https://www.revenue.alabama.gov/wp-content/uploads/2025/01/24f40bk.pdf#page=20
• Alabama Department of Revenue, OBBBA executive summary (PDF p.8): for section 67(g), "Tied to Federal: No". https://www.revenue.alabama.gov/wp-content/uploads/2025/11/OBBBA-Executive-Summary_FinalwAppendixA_10.31.25.pdf#page=8

Test edits

The two existing cases entered misc_deduction but treated it as the gross expenses (2021, when the federal deduction is zero). They now enter total_misc_deductions, with expected values unchanged.

Coordination

#9977 (draft) adds investment expenses to total_misc_deductions. Those are section 212 expenses, which Alabama's (a)(14) and (a)(23) cover, so they would flow here as intended.

Invariants

al_misc_deduction = max(0, expenses − 2% × Alabama AGI). It is between 0 and the expenses, nondecreasing in the expenses, nonincreasing in Alabama AGI, and independent of the federal 2% floor and the federal suspension.

Microsimulation

(pending; Fleet ops hold)

axiom: (pending)

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