2016 Legislative Session Closes on Mixed Note
This week’s finale of the 2016 regular legislative session included nearly unanimous bipartisan passage of Business Council of Alabama priority legislation that clarifies a court ruling concerning class-action lawsuits against businesses, another bill to extend the operational deadline for Medicaid Regional Care Organizations, and a bill to provide tax relief to small businesses.
A small business investment measure passed as well as did the Apprenticeship Tax Credit Act. Legislation creating the Governor’s Office of Minority Affairs was approved.
Although the 2016 Legislature passed noteworthy pro-business bills, some unresolved big issues await the House and Senate in the next legislative session. They include unfinished prison construction, Medicaid funding, and needed transportation investment, all of which didn’t make it in the hectic final week of the 30-day session that ended Wednesday.
In the session that began Feb. 2, legislators introduced 1,005 bills – 574 in the House and 431 in the Senate. The Legislature next meets in regular session in February 2017.
Education Supplemental Appropriation Goes to Governor
The Senate voting 27-0 on Tuesday passed an amended HB 122 by Rep. Bill Poole, R-Northport, that went back to the House for a final concurring vote of 101-0. The bill authorizes a supplemental appropriation of $800,000 this fiscal year for the Governor’s Local School and School System and Financial Improvement (At-Risk) Program and $800,000 for the Governor’s High Hopes for Alabama Students Program.
While HB 125 by Rep. Terri Collins, R-Decatur, which would have created a student performance and workforce link called the Alabama Longitudinal Data System was carried over, moving the money earmarked for the LDS to two programs was a logical compromise.
Medicaid RCO Certification Deadline Extended
The Senate on Wednesday passed HB 530 by Rep. April Weaver, R-Brierfield, to extend the Medicaid Regional Care Organizations’ certification deadline of Oct. 1. It gives the RCOs breathing room until implementation funding can be found.
RCOs are the new system of delivering and managing Medicaid services for the nearly 1 million Alabamians on the combined state-federal program. The House previously passed the bill 97-1 and the Senate passed it 26-1. An extension is required because the RCOs won’t be operational by the Oct. 1 deadline.
Hospital Assessment That Supports Medicaid Extended One Year
HB 191 by Rep. Steve Clouse, R-Ozark, extends for one fiscal year the 5.5 percent assessment on net patient revenue currently levied on all private hospitals as a cost of doing business in Alabama. The assessment was to expire Sept. 30.
HB 191 updates the base year for calculating the assessment from FY 2011 to FY 2014. This change will increase assessment revenue receipts to the Alabama Medicaid Agency by approximately $21 million annually. In the last fiscal year the assessment produced $257.45 million.
The House on Tuesday concurred in Senate changes on a bipartisan vote of 95-0.
JUDICIAL AND LEGAL REFORM
The BCA Commends the Legislature for Protecting Businesses with Passage of SB 270
SB 270 is the deceptive trade practices bill by Sen. Phil Williams, R-Rainbow City. It will head off proliferation of deceptive trade class-action lawsuits that would try to slip into court due to a technical ruling by a federal appellate court.
The bill was an important part of the BCA’s 2016 State Legislative Agenda.
“The House and Senate deserve a heartfelt thank you from the business community for their decisive clarification to a law that unfixed could have had a dangerous effect on business,” BCA President and CEO William J. Canary said after final passage.
The Senate previously had passed SB 270 by a vote of 31-1, but when it was amended and passed by the House 101-1 on Tuesday the Senate had to reconsider it. The Senate concurred 29-0 on Wednesday, and it went to the Governor for his signature.
Passage of SB 270 was necessary due to a recent opinion by the 11th U.S. Circuit Court of Appeals that threatened to expose Alabama businesses to class-action lawsuits brought by private parties under the Alabama Deceptive Trade Practices Act. District attorneys and the Attorney General will have the authority to declare class-action lawsuits.
SB 270 simply reestablishes the original legislative intent of the ADTPA that the limitation barring private parties from bringing class-actions is a “substantive” one. The 11th Circuit ruling that created this problem interpreted this aspect of the statute to be “procedural” rather than “substantive,” which created a serious threat of increased litigation for business.
Canary praised bill sponsor Sen. Williams, Rep. David Faulkner, R-Birmingham, and Rep. Matt Fridy, R-Montevallo, for their expert handling of the bill in committees and on their respective floors. Rep. Fridy advocated for the bill for more than six hours due a filibuster over the unrelated BP bill, which stalled in the Senate.
Scaled-Back Prison Bond Issue Dies When Clock Ends Session
SB 287 by Sen. Trip Pittman, R-Montrose, previously passed the Senate and House in different versions, requiring a conference report that the Senate approved 23-12 late Wednesday night.
The conference report scaled down the original bill that would have closed most of the state’s men’s prisons and the women’s prison and built four super-prisons with an $800 million bond issue. The conference report cut the cost to $550 million and called for two men’s and one women’s prison.
The House previously voted 52-33 to pass the prison reform legislation. The Senate concurred in the conference report after delaying the vote throughout most of the day. But due to the Senate’s delay in voting, the House did not have ample time to consider the conference committee report and the bill died.
House Speaker Mike Hubbard, R-Auburn, said the legislation did not have the votes to break a possible filibuster from membership and changes in a bill of such complexity were too much to take in the few hours the House had to consider them, the Montgomery Advertiser reported.
Governor Bentley’s plan to borrow $800 million to build four new state prisons would have been repaid with $50 million a year that officials said would be realized from consolidation and reduced employee costs.
On the Senate floor, Sen. Cam Ward, R-Alabaster, warned of the consequences for failure to deal with prison overcrowding.
“If you do not replace these facilities a federal judge will do it for you and it will not be cheap,” Sen. Ward said. “You will have to raise revenue to do that and you won’t like it.”
BCA-Supported Health Savings Account Tax Deduction Bill Goes to Governor
The Senate voting 29-0 on Tuesday passed HB 109, the Health Savings Account Income Tax Deduction bill by Rep. Becky Nordgren, R-Gadsden. The bill that previously had passed the House 97-1 was sent to the Governor.
HB 109 mirrors federal law and creates a state income tax deduction for contributions to health savings accounts. Sen. Paul Sanford, R-Huntsville, introduced the companion SB 131 and carried HB 109 in the Senate.
The BCA’s Small Business Agenda supports Health Savings Accounts for Alabama small businesses.
Under HB 109, a new state income tax deduction would be available for contributions made after Dec. 31, 2017. The bill would limit the total annual amount exempt from income taxation to the annual deduction amount allowed by federal law or regulation, currently $3,350 for individuals and $6,750 for families. An additional amount is allowed for individuals over the age of 55.
Small Business Investment Company Act Dies in Senate
On the last day of the legislative session, HB 224 by Rep. Danny Garrett, R-Trussville, was brought up for deliberation twice in the Alabama Senate only to be carried over both times due to points of contention. The Senate Finance and Taxation Education Committee gave it a favorable report on Wednesday, leaving a very short time frame to pass the Senate. Sen. Phil Williams, R-Rainbow City, carried the bill in the Senate.
HB 224 would have created the Alabama Small Business Investment Company Act and provided insurance premium tax credits to companies making contributions to an Alabama small business investment fund approved by the Alabama Department of Commerce.
Qualified Alabama small business investment funds would have provided access to capital for the state’s small businesses of fewer than 150 employees and with no more than $5 million in net income for the preceding taxable year. To qualify, businesses would have been required to hold their principal business operations in Alabama or plan to use the investment to establish their principal business operations in the state.
The Alabama Small Business Investment Company Act was designed to help grow small businesses and provide a way to use private money that otherwise would not be invested in Alabama.
The credits provided by the legislation would not have been allowed to exceed $12.5 million per year up to a maximum of $100 million over the eight-year life of the program. The credits would be nonrefundable and could not be sold, transferred, or allocated to any other entity other than an affiliate subject to insurance premium taxes.
The Department of Commerce would have provided oversight to the program and established the necessary rules and regulations for its administration.
The BCA remains committed to working with both houses in the Legislature to pass this important legislation that would provide much needed access to capital for small businesses.
TAX AND FISCAL POLICY
Bill Limiting Local Government Use of Third-Party Collecting Firms Passes
The House voting 81-8 on Tuesday passed SB 335, an update of the Alabama Taxpayers’ Bill of Rights and Uniform Revenue Procedures Act. It will restrict aggressive third-party auditing and collecting firms from mistreating businesses when collecting local sales and use taxes and protect businesses from becoming overburdened by the audit process.
The Senate previously voted 30-0 to pass the bill sponsored by Sen. Paul Sanford, R-Huntsville. The House version was HB 375 by Rep. Paul Lee, R-Dothan.
The bill would add specific requirements and disclosures that would have to be made by third-party auditing and collecting firms when they are contracted by a municipality or county. They include certain confidentiality requirements, requiring the taxing authority to use an independent hearing and appeals officer, and requiring a public official or employee of the local government to sign the final assessment.
Apprenticeship Tax Credit Bill Approved
After passage by the House on Tuesday by a vote of 84-3, the Apprenticeship Tax Credit Act of 2016 went to the Governor for his consideration. The Act, SB 90, previously passed the Senate 29-0. The BCA supported this legislation.
Beginning Jan. 1, 2017, SB 90 by Sen. Arthur Orr, R-Decatur, will authorize a tax credit of $1,000 per employee hired as an apprentice, up to five employees per year.
The tax credit will be allowed for an apprentice employee who is on the job at least seven full months for up to four years. The credit will be capped annually at $3 million. Businesses that hire apprentices will benefit from the tax credit while an apprentice will benefit by being employed.
State Income Tax Filing Dates Aligned to Federal Dates
SB 263 by Sen. Quinton Ross, D-Montgomery, simply aligns state income tax reporting dates with the federal deadlines. This change will make it easier for state income tax filers by saving time and duplication.
The Senate approved the bill 29-0, and the House gave final passage 99-0 on Wednesday. The bill went to the Governor for consideration.
State Tax Increment District Tool CA Approved for Local Governments
The Senate on Tuesday voting 28-0 passed HB 311 by Rep. Anthony Daniels, D-Huntsville, The House previously passed the bill 98-0.
HB 311 is a constitutional amendment that would allow counties and municipalities that use tax increment districts within a Major 21st Century Manufacturing Zone to redevelop property to determine, in their discretion, the sale price of the property.
Tax Incentive Use Reporting System Created
SB 208 by Sen. Orr will allow the Legislature to track and study tax incentives that have been authorized by law or voter intent. This bill requires the Department of Revenue to create a report format for state agencies administering economic tax incentives to report annually beginning in the 2018 Regular Session of the Legislature.
The Senate previously passed the bill 29-0, and the House passed the bill 91-2 on Wednesday, sending it to the Governor.
Governor’s Office on Minority Affairs Will Now Become Law
Governor Bentley on Wednesday praised the Legislature for final passage of HB 534, which creates the Governor’s Office on Minority Affairs, a cabinet-level position.
“I commend the Legislature, especially Rep. John Knight and Sen. Rodger Smitherman who sponsored the legislation, for recognizing the importance of this office,” Bentley said in a statement. “The Office of Minority Affairs is a great resource for constituents, and creates a new opportunity to specifically address issues important to minorities and women.”
Governor Bentley created the office in March and named Mobile native Nichelle Williams Nix, an attorney formerly with Maynard Cooper & Gale as director.
Rep. Knight sponsored HB 534 and Sen. Smitherman sponsored the Senate version, SB 411.