After two weeks off for spring break, the Alabama Legislature this week reached the midpoint of the 2017 legislative session with the Business Council of Alabama continuing its involvement in the business community’s legislative agenda including encouraging the successful defeat of the Mandatory Unitary Combined Reporting bill that would have had a profound effect on business.
The House unanimously passed the Franchise Business Protection Act, and a Senate committee favorably reported the important lawsuit lending bill that protects consumers against unregulated lending practices.
The Senate passed the $6.4 billion Education Trust Fund budget bill and sent it to the House.
At Tuesday’s briefing, BCA Chairman Jeff Coleman, president and CEO of Coleman Worldwide Movers/Coleman Allied that sponsored the briefing, introduced House Rules Committee Chairman Rep. Alan Boothe, R-Troy, and Senate Rules Committee Chairman Sen. Jabo Waggoner, R-Vestavia Hills.
Rep. Boothe outlined options for the remainder of the session and Sen. Waggoner discussed the historic building tax credit bill.
Through Day 15 of the session, the House has introduced 487 bills and the Senate 364. A total of 52 bills have passed both houses.
The BCA informed the Alabama Department of Revenue of its opposition to a proposal to tax streaming content such as movies. An ADOR hearing on the proposal is scheduled for Tuesday in Montgomery.
In other news, the Alabama Ethics Commission on Wednesday found probable cause that Governor Bentley violated the Ethics Law and state Campaign Finance Law.
EDUCATION
$6.4 Billion FY 2017-18 ETF
After rejecting a proposal to shift $20 million from higher education to K-12, the Alabama Senate voting 29-2 on Tuesday passed the $6.4 billion Education Trust Fund budget for 2017-18. The bill was assigned to the House Ways and Means Education Committee.
The budget bill, SB 129 by Sen. Arthur Orr, R-Decatur, would appropriate $90 million more than this year for the fiscal year beginning Oct. 1, an amount set by the spending cap under the Rolling Reserve Act.
The budget zeroed out money for the longitudinal data system that is vital to help Alabama’s education system create adequate scholastic and workforce training courses for future employees. The BCA supports creation of an LDS that the governor created by executive order in 2015.
Sen. Orr’s budget recommends $15 million for voluntary pre-Kindergarten for 4-year-olds, which is $5 million less than the governor requested. Alabama School Readiness Alliance Executive Director Allison Muhlendorf said the $15 million would enable about 2,000 more 4-year-olds to enter the program, an enrollment increase of 14 percent. The proposed budget would add about 150 new teachers in grades 4-6, but the Alabama Math, Science, and Technology Initiative and the Alabama Reading Initiative and most other education functions would be level-funded.
The ETF budget also would provide about $1.5 million to the Science in Motion program. The Senate earmarked $4.9 million for Industry Certification Initiatives, formerly called Workforce Development, a $1.75 million increase for this important BCA-supported initiative.
Public School Choice Law Update Aired in Committee
The House Ways and Means Education Committee conducted a public hearing on SB 123 by Senate President Pro Tem Del Marsh, R-Anniston. It would tweak the 2013 Accountability Act and expand options for tax credits for donors to the AAA scholarship program. No vote was taken, but one is expected next week.
The Senate previously passed SB 123 by a vote of 17-15. Public-school choice advocates including the BCA support it while superintendents, the Alabama Education Association, and school boards oppose the legislation.
Sen. Marsh said more tax credit options are needed to boost donations to the scholarship program. Last year, donors claimed $19.9 million in income tax credits for donations to the scholarship granting organizations, down from $25.8 million in 2015, and below the $30 million cap, according to al.com. Sen. Marsh said the intent of his bill is to ensure students who receive scholarships under the AAA don’t lose them in subsequent years because funding falls short.
SB 123 would allow companies to receive a credit on their utility gross receipts tax for scholarship donations and would allow taxpayers and companies to claim larger portions of their tax liability as credits. Sen. Marsh’s bill does not affect the $30 million cap on annual tax credits. The bill keeps scholarships at $6,000, $8,000, or $10,000.
Senate Votes to Revise Disabled Veterans Scholarship Program
The Senate on Tuesday passed a substitute SB 315 by Sen. Gerald Dial, R-Lineville, by a vote of 27-0. SB 315 would update the Alabama G. I. Dependent Scholarship Program to provide scholarships to eligible recipients to the cost of in-state tuition and would amend the Alabama National Guard Education Assistance Program to increase the cap on grants from $2,000 to $4,800. It also would increase the current disability qualification requirement from 20 percent to 40 percent.
Importantly, the bill would grandfather in current scholarship recipients, applicants for scholarships, and disability requirements. Effective with the 2017-18 fall term and thereafter, the value of tuition paid per semester hour (or equivalent) would be limited to the rate of the Department of Defense Tuition Assistance Cap.
Sen. Dial’s substitute would limit scholarships to the cost of tuition for two-year schools and the cost of tuition for a four-year school in the final two years. Sen. Dial said the scholarship program needs modifying to prevent it from becoming an open-ended appropriation from the ETF. The bill went to the House.
ETF Supplemental Appropriations Bills See Action
The Senate voting 30-0 on Tuesday passed SB 308 by Sen. Orr. It’s a supplemental appropriation bill to transfer $5 million from the ETF to the Department of Veterans’ Affairs for the scholarship program in the current fiscal year. The bill was assigned to the House Ways and Means Education Committee.
SB 307 also by Sen. Orr was on Tuesday’s Senate special order calendar, but it was carried over. It’s a supplemental appropriation bill that would transfer $15 million from the ETF Advancement and Technology Fund to public institutions of higher learning and $41 million to local school systems.
ENVIRONMENT AND ENERGY
Bill Updates Solid Waste Evaluation Process
The House on Tuesday passed HB 328 by Rep. Alan Baker, R-Brewton, and sent it to the Senate for consideration. It’s the House version of SB 259 by Sen. Greg Albritton, R-Bay Minette. SB 259 was on the Senate calendar on Thursday.
The bills would remove the requirement that a new solid waste management facility or modification of a permit for an existing facility be evaluated by the regional planning and development commission. The bills would require the approval for a new facility by a local governing body and review by the circuit court.
These bills are the result of a working group of stakeholders and legislators including the BCA.
HEALTH
Educate House Committee Members That Health Mandates Are Not Free
The House Insurance Committee is scheduled to vote Wednesday, April 12, on HB 284, a bill that would require all private health insurance policies offered in Alabama to cover autism therapies.
The bill has no age restrictions, no limit to annual benefits, and allows virtually any treatment, all paid for by employers and taxpayers. It would not cover children on Medicaid or the Children’s Health Insurance Program (CHIPs), also known as ALL Kids, those who need it the most financially.
In a recent op-ed, Business Council of Alabama President and CEO William J. Canary wrote: “If the Alabama Legislature is going to start aggressively inserting itself in health insurance agreements, it should be honest about who is footing the bill and call it what it is: a new health insurance tax.”
Let members of the House Insurance Committee know your feelings about this mandated health insurance tax.
JUDICIAL AND LEGAL REFORM
Consumer Lawsuit Lending Protection Bill Advances
The Senate Judiciary Committee on Wednesday voting 8-1 favorably reported SB 261, the Consumer Lawsuit Lending bill that would subject lawsuit loans to regulation by the Alabama Banking Department. SB 261 is sponsored by Sen. Tom Whatley, R-Auburn.
Passage of this legislation would bring fairness to consumers and the lawsuit process.
The BCA, working with the U.S. Chamber of Commerce’s Institute for Legal Reform, supports SB 261.
Consumer lawsuit lending is the unregulated practice of loaning money to plaintiffs seeking settlements or judgments. Plaintiffs must repay lenders if any settlement or judgment is received at interest rates that can exceed 100 percent. This practice targets a vulnerable population, introduces third-party interests into the attorney-client relationship, and both slows the pace of and increases the cost of litigation for plaintiffs and defendants.
Gun Bill Carried Over in Senate
SB 24 by Sen. Gerald Allen, R-Cottondale, would repeal the restrictions against carrying a concealed pistol in a car or on oneself as well as other restrictions against carrying a pistol on certain property. It was carried over in the Senate at the call of the chair after opposition surfaced.
House Passes Criminal Record Expungement Bill
The House on Thursday voting 99-0-1 passed HB 279 by Rep. Alan Baker, R-Brewton. HB 279 would expand the list of crimes eligible for expungement from a criminal record to include violent felony offenses that an individual was charged with but found not guilty.
LABOR AND EMPLOYMENT
Bill Would Protect Franchise Businesses
The House voted Tuesday 96-0 to pass an amended HB 390, the Franchise Business Protection Act, by Rep. Jim Carns, R-Birmingham. This bill has broad support from the business community.
The bill would protect franchise businesses from harmful National Labor Relations Board rulings such as the precedent set by the NLRB’s McDonald’s and Browning-Ferris decisions that classified a franchisee and a franchisee’s employees as being employees of the franchisor.
HB 390 provides that the following persons may not be construed to be employees of a franchisor: a franchisee, an employee of a franchisee, or an independent contractor working for a franchisee. The bill would apply to the enforcement or enactment of rules or ordinances by state agencies or local governmental bodies and to labor relations and collective bargaining.
HB 390 would clarify the definition of the employment relationship and would help ensure that state enforcement agencies and state courts do not adopt the expansive new federal joint-employer standard in state actions. Although federal law broadly defines this issue, state legislatures still retain control over the standard by which state-level employment law is enforced.
Workers’ Compensation Fraud Protections Expanded
The Senate voting 23-5 on Thursday passed SB 196 by Sen. Orr that would expand what constitutes punishable violations of workers’ compensation fraud to include using or coercing someone to make false statements or destroy or conceal documents to obtain compensation. Conviction would be a Class C felony.
TAX AND FISCAL POLICY
Committee Lauded for Defeating Harmful Mandatory Unitary Combined Reporting Bill
The Senate Fiscal Responsibility and Economic Development Committee on Wednesday correctly defeated arbitrary tax increase legislation that the Business Council of Alabama and the state’s business community has opposed for years.
The committee voted 12-2 not to advance the Mandatory Unitary Combined Reporting bill, SB 67 by Sen. Linda Coleman-Madison, D-Birmingham.
The BCA, the Business Associations’ Tax Coalition, and the broader business community have maintained long-standing opposition to MUCR.
“The members of the committee are to be commended for their correct decision to defeat this legislation,” Canary said in a statement. “We thank them for their courageous stance and for listening to our concerns.”
Speakers opposing the MUCR included Rick Davis of the Birmingham Business Alliance, McWane Inc. Chief Financial Officer Charles Nowlin, Jim Searcy, executive director of the Economic Development Association of Alabama, and Manufacture Alabama President George Clark.
Davis said the BBA is working two business projects that have said they will avoid Alabama if MUCR becomes law. Nowlin said McWane, a company founded in Alabama and which operates internationally, believes that a fair state tax structure is vital to continued success.
Searcy said MUCR would be “extremely detrimental” to Alabama’s economic development efforts because it would make Alabama an island in the Southeast regarding economic development and would chill efforts to work with existing Alabama companies to create additional jobs and investment.
The BCA’s Canary has said that Mandatory Unitary Combined Reporting is nothing more than an arbitrary tax increase. “It hurts jobs, it hurts income, it hurts economic recruitment and retention, and it creates confusion in the tax code,” he said.
MUCR is costly for business and state government and was simply another effort to expand the bureaucracy and authority of the Alabama Department of Revenue.
“The notion by proponents that it only targets ‘out-of-state corporations’ is complete and utter fiction,” Canary said. “The truth is combined reporting unfairly targets companies in Alabama that provide thousands of quality jobs.”
Historic Tax Credit Bills
The House Ways and Means Committee on Wednesday amended and then favorably reported HB 345, the historic building tax credit bill by Rep. Victor Gaston, R-Mobile.
HB 345 and the companion SB 262 by Sen. Waggoner would restore and update the historic building renovation tax credit law.
HB 345 was amended to limit the tax credit to five years, until Dec. 31, 2022, instead of 10 years as introduced, and cap its credits at $100 million. In addition, previous tax credit amounts would be grandfathered in and the tax credits could not exceed $20 million in any one year.
During Tuesday’s briefing, Sen. Waggoner said the previous law allowing tax credits for building renovation and upgrades has preserved and repurposed historic buildings, giving them new life. SB 262 has been favorably reported by the Senate Finance and Taxation Education Committee.
The BCA is a member of a coalition of business and community groups that support renewing the Historic Renovation Tax Credit. Stakeholders support the historic tax credit and are working to reach a broad consensus to address several concerns so that this economic development tool can be used once again to help revitalize Alabama communities.
Irrigation Tax Credit Bills Advance in Senate and House
The Senate voting 32-0 on Thursday passed a substituted SB 257 by Sen. Orr, the irrigation tax credit bill. Sen. Orr said tax credits will encourage more irrigation of Alabama crops and help farmers be more competitive and financially productive. He said the tax credit will pay for itself in higher agriculture production. Sen. Orr said that Georgia and Mississippi have irrigation tax credits and have more than six times the acreage under irrigation than Alabama.
The House Ways and Means Education Committee favorably reported HB 387, the House irrigation tax credit bill by Rep. Chesteen. He said the bill will incentivize land owners to increase the number of irrigated acres in the state to help Alabama better compete with neighboring states.
The bills provide a tax credit for qualified farmers or any land owners who irrigate property. It provides for an alternative income tax credit in addition to the income tax credit provided for irrigation equipment, fuel conversions, and reservoirs by Act 2013-66.
The tax credit would be carried forward five years from the taxable year the qualified irrigation system or reservoir was placed in service but could not exceed the taxpayer’s Alabama income tax liability. The income tax credit authorized by the bill would expire in five years and be repealed effective Dec. 31, 2022.
Government-Owned Network Expansion Bill Fails in Committee
The Senate Transportation and Energy Committee on Wednesday failed to give a favorable report to SB 228 by Sen. Whatley. SB 228 would allow a Class 6 municipal public provider to offer cable, Internet access, and other Internet services to the county in which the Class 6 municipality is located.
Under this bill, which would be government competition to private industry, the public provider could buy, maintain, extend, lease, improve, and operate cable systems, telecommunications equipment, and telecommunications systems, and furnish cable service, interactive computer service, Internet access, other Internet services, and advanced telecommunications service.
Companion bills, SB 151 and SB 192, both by Sen. Whatley, were not brought up for a vote.
Following the vote, in the House Commerce and Small Business Committee, the companion bill, HB 375 by Rep. Joe Lovvorn, R-Auburn, was carried over at his request.
Senate, House Advance Tax Exemption Legislation for Birmingham Research Non-Profit
The Senate voting 28-0 on Thursday passed SB 75 by Sen. Rodger Smitherman, D-Birmingham, to exempt BCA member Southern Research in Birmingham from paying municipal, county, and state taxes. Exemption from taxes extends the impact of grants and spending by non-profits. If the bill becomes law, the exemption would expire Sept. 30, 2022, unless extended by joint resolution.
The House Ways and Means Committee this week favorably reported HB 135, the House companion bill by Rep. Jim Carns, R-Birmingham.
BCA Opposes Unilateral Taxing of Digital Transmissions
The BCA’s Canary this week wrote the Alabama Department of Revenue to register opposition to the Department’s renewed proposal to tax digital transmissions, citing no legal authority.
The Department has scheduled an administrative hearing at 1:30 p.m. Tuesday, April 11, in Room 1203 of the first floor of the Gordon Persons Building, 50 N. Ripley St. Affected business owners and individuals are encouraged to attend and express opposition.
The Department proposes to define digital transmissions such as “on demand” movies, television programs, streaming video and the like, as tangible personal property subject to taxation. Copies of this proposed rule can be found here.
In his letter to Revenue Department Secretary Michael D. Gamble, Canary noted that while there is no legal provision for imposing a tax on streaming video, the Department is proposing to do just that by extending the state’s rental tax to digital transmissions. The Department tried unsuccessfully in previous years to enact nearly identical regulatory changes.
“In our opinion the proposed regulation far exceeds the authority of the Department by attempting to expand the tax beyond the statute, thereby intruding into the exclusive province of the Legislature,” Canary wrote. “Therefore, on behalf of the thousands of member businesses of the BCA and their employees, I respectfully request that the Department withdraw the proposed Amended Regulation.”
OTHER NEWS
Business Champion Award Goes to Rep. Chesteen
Rep. Chesteen this week received the Business Champion Award for sponsorship and support of the Wireless Infrastructure Renovation for Education Act that authorizes high-speed broadband access in Alabama’s K-12 public schools.
BCA Chairman Jeff Coleman presented Rep. Chesteen the award during a ceremony at the Dothan Area Chamber of Commerce.
“Rep. Chesteen’s efforts bring our classrooms up to date by providing the technology for each student whether in a rural or urban setting to have access broadband wireless high-speed Internet access that will greatly enhance their education opportunities,” Coleman said. “Student access to the Web will put them in good position to further their educations and work experience after they graduate from high school. Business benefits from a work force already schooled in the basics.”
The Legislature passed HB 41 known as the “WIRED Act” in the 2016 legislative session. The House passed the bill in final form by a vote of 103-1 and the Senate passed it 29-2. It became Act 2016-139.
A companion bill authorizes $12 million to match federal funds for purchase and installation of the technology. The Business Champion Award recognizes legislators for sponsorship and support of policies that better Alabama’s business climate and the lives of employees, families, and citizens.
BCA Staffer Goes Over the Edge to Support Hope Inspired Ministries
BCA staffer Nathan Lindsay took a leap of faith last weekend and went over the edge for a good cause. Lindsay, vice president for political affairs, regional operations and executive director of ProgressPAC, strapped up and rappelled down the side of a 110-foot building in downtown Montgomery to help raise money for charity.
Lindsay, on behalf of the BCA, participated in “Over the Edge,” a fundraiser for Hope Inspired Ministries in Montgomery, conducted March 31 and April 1. Sponsors selected volunteers to rappel.
“Hope Inspired Ministries is a shining light in Montgomery that does such important work to help others and grow our economy,” Lindsay said. “Stepping off the edge of a 10-story building and overcoming a fear of heights was definitely worth it to help bring attention to this incredible ministry.”
HIM is a faith-based, non-profit designed to train chronically unemployed men and women to obtain and maintain employment through a rigorous 11-week training program. In doing so, they become self-sufficient and productive, while building self-worth and dignity in their lives.
Hope Inspired Ministries was established in 2012 by Michael Coleman, who currently serves as executive director.
Report on Tax Exemptions is Available On-Line
Alabama Senate Republicans this week tweeted the release of its report on tax exemptions required by a bill sponsored by Sen. Bill Hightower, R-Mobile. The Legislative Fiscal Office issued the report in January.
The purpose of the report is to list the tax expenditures for major tax sources and, where possible, provide an estimate of the value of the tax expenditures. The report by the Legislative Fiscal Office said the value of exemptions exceeds $4.5 billion.
Ethics Commission Finds Alleged Violations by Governor Bentley
The Alabama Ethics Commission has found probable cause that Gov. Robert Bentley violated one count of the ethics law and three counts of the campaign finance law. The findings go to the Montgomery County district attorney.
Bentley has denied wrongdoing. If charged, tried, and convicted of a felony, he would be removed from office.
The House Judiciary Committee is considering impeachment charges against the governor and was to release a report on his investigation today, with impeachment hearings tentatively scheduled to begin on Monday.
Senate President Pro Tem Marsh and House Speaker Mac McCutcheon have called on Governor Bentley to resign. In an interview, Sen. Marsh said the state is unable to effectively deal with major issues like state prisons, education, budgets and infrastructure because of Bentley’s weakened leadership. The governor said he would not resign.
CBER Survey: Business Confidence Is Up
Business confidence increased to 65.2 in the second quarter, according to the 2017 Alabama Business Confidence Index TM (ABCI) survey conducted by the Center for Business and Economic Research at the University of Alabama’s Culverhouse College of Commerce.
The ABCI gained 2.5 points to reach 65.2 for the second quarter as business leaders throughout the state continue to forecast growth with confidence, the CBER reported. Confidence in the national and statewide economy remain high moving into the second quarter of 2017. The Alabama economic index gained 1.9 points to reach 67.6 while the national index basically remained at 69. Both indexes are more than 10 points above their three-year averages.