Week 9 of the 2018 Session

The chairs of the Senate and House Judiciary Committees were the speakers at this week’s Business Council of Alabama’s Tuesday Briefing. They urged business community support for juvenile- and adult-justice system reforms.

Sen. Cam Ward, R-Alabaster, chairman of the Senate Judiciary Committee and Rep. Jim Hill, R-Moody, chairman of the House Judiciary Committee, discussed the role of their committees that get the first look at criminal justice issues, including prison reform.

Tuesday’s briefing was sponsored by the Alabama Aerospace Industry Association (AAIA) and the Alabama Automotive Manufacturers Association (AAMA). Both are partners of the BCA and provide tens of thousands of jobs in Alabama.

The House passed Senate President Pro Tem Del Marsh’s middle-class income tax cut and sent it to the governor. It was part of the Senate Republican Caucus agenda in January.

The Legislature began its ninth week in regular session with consideration of local and non-controversial bills and concluded the week after consideration of state employee and public education employee pay raises and one-time bonuses for retirees, a Senate data breach bill, and the 2018-19 General Fund Senate bill.

Legislators also considered Ethics Law updates.

The leaders of the Alabama House and Senate at a news conference expressed a desire to seek a deliberate approach to legislation concerning school safety and guns. A bill that would allow Alabama school systems to use money from an education savings fund for school security is moving in the state Senate.

Through the 18th legislative day, legislators have introduced 506 bills in the House and the Senate, 380. The Legislature will reconvene on Tuesday for the 19th legislative day.


ETF Rolling Reserve Savings Account Fund Interest Could be Tapped for School Safety

The Senate Finance and Taxation Education Committee on Thursday voting 10-0 favorably reported SB 323 by Sen. Trip Pittman, R-Montrose. It would allow schools to use money from an education savings fund for school safety measures.

Senate Passes Appointed School Superintendent Bill

The Senate Thursday voting 24-2 passed SB 280 by Sen. Dick Brewbaker, R-Pike Road, that would require county school boards to appoint their county superintendents of education, unless otherwise provided for in the state constitution. The bill now goes to the House.

Currently, most county superintendents are elected, while most if not all city superintendents are appointed by their respective boards of education. Like most management positions reporting to a board of directors, an appointed superintendent is likely to be more responsive to a board because he or she would not have to worry about reelection, which could put the superintendent at odds with his or her board.

The provisions of SB 280 call for a transition period for currently elected superintendents. The provisions would become effective for an elected superintendent at the expiration of his or her term of office or upon a vacancy occurring before the expiration of his or her term of office and after Jan. 25, 2021.
The bill was amended to allow school boards the option of securing the services of a search firm for hiring a superintendent using a competitive bidding process.


Committee Reports Rural Hospital Resource Center Bill

The Senate Health and Human Services Committee voted 8-1 on Wednesday to favorably report an amended SB 351 by Sen. Greg Reed, R-Jasper.

Sen. Reed’s bill seeks to establish the Alabama Rural Hospital Resource Center at the University of Alabama at Birmingham. A committee amendment clarifies that funding is not included in the bill, but financing will be needed to implement its provisions, which UAB estimates will be about $1 million.

The new center would work to increase the viability and capabilities of nonprofit or public rural hospitals. The center would establish a rural administrative residency program and pursue funding for administrative residents who wish to work in rural health care, hire necessary staff, act as a resource for the Alabama Rural Hospital Global Budget Board, and report annually to the Legislature, state finance director, and Medicaid commissioner on the effectiveness of the resource center.

RCO Repeal Law Needs Further Discussion

The Senate Health and Human Services Committee on Wednesday carried over SB 362 by Sen. Paul Sanford, R-Huntsville.

SB 362 would repeal the Regional Care Organization Act that in 2013 required Medicaid to provide service on a managed care basis through RCOs. The Medicaid Agency has not implemented RCOs to provide services due to lack of funding, and no one is enrolled in an RCO.

Sen. Sanford said the bill is necessary due to changes in federal law and a changing health care environment. Sen. Reed, the sponsor of the original RCO law, other stakeholders, and Sen. Sanford, seek to determine prior to a committee vote whether certain provisions of the law should remain. Sen. Reed said the Affordable Care Act is still the law, so some provisions of the RCO law may still apply or could be relevant in the future.


House Committee Favorably Reports Senate Data Breach Notification Bill

The House Technology and Research Committee on Wednesday favorably reported SB 318, the Data Breach Notification bill sponsored by Sen. Arthur Orr, R-Decatur. The House version, HB 410 by Rep. Phil Williams, R-Monrovia, is on the House calendar.

The House committee amended Sen. Orr’s bill to authorize that management of a government entity subject to the law may appropriately be informed of the status of its security measures through a properly convened executive session under the Open Meetings Act.

Consumer protection data breach legislation is the result of ongoing discussions between interest groups that include the business community and the Alabama Attorney General’s office. The legislation would require businesses and other entities to provide notice to affected individuals upon a breach of security that results in the unauthorized acquisition of sensitive, personally identifying information.

Bill Clarifies Economic Developers Are Not Required to Register as Lobbyists

The House on Tuesday voting 79-7 passed HB 317, by Rep. Ken Johnson, R-Moulton, which clarifies that Alabama economic developers (such as site selectors, industrial developers, and chamber of commerce officials) would not be classified as lobbyists as has always been the case in Alabama and in surrounding states.

This clarification became necessary when the Alabama Ethics Commission requested that the Legislature address this legal gray area involving lobbying registration. If not clarified, this gray area of the law will likely have a negative impact on economic development due to the lack of confidentiality for companies seeking to locate or expand in Alabama.

This subject has been the topic of conversation among national site selectors and is already being used against Alabama by competing states. The Department of Commerce fears that site selectors when developing shortlists for major economic development projects will simply mark Alabama off their list if they are required to register as lobbyists.

For the last few weeks, the Attorney General’s Office, the Department of Commerce, and local economic developers have been negotiating a compromise which resulted in the amended version of HB 317.

The compromise exempts full-time economic developers from lobbyist registration requirements; allows part-time economic developers to ask for permission from the Ethics Commission for the same exemption; does not change the ethics law as it applies to public officials and public employees; does not apply to public officials and others who are otherwise lobbyists; and does not allow public officials to lobby the Legislature or any other body.

The AG, Alabama Press Association, Department of Commerce, and local economic developers agree on this compromise version.

“With this clarification, this does not weaken our Ethics Law one bit,” Rep. Johnson said. Other proponents of the bill, including Rep. Mike Jones, R-Andalusia, said the bill is necessary, but that a long-term fix should be included in the comprehensive update to the Ethics Act, which is expected next year.

He added that the language in HB 317 is nearly identical to language in the draft of the Ethics Law update released by the AG’s office. HB 317 now goes to the Senate.


State Employee, Retiree Pay Bills Advance

The House Ways and Means General Fund Committee on Wednesday approved state employee pay raise bills and retiree lump-sum bonus bills. The committee favorably reported SB 185, HB 150, the two pay raise bills, and SB 215, and HB 440, the retiree bonus bills.

SB 185 by Sen. Clyde Chambliss, R-Prattville, would grant a 3 percent pay raise for state employees beginning Oct. 1, 2018. HB 150 by Rep. Dimitri Polizos, R-Montgomery, is the House version. Although there have been periodic merit increases, this would be the first cost-of-living increase for state employees in 10 years.

SB 215 by Sen. Gerald Dial, R-Lineville, and HB 440 by Rep. Kerry Rich, R-Albertville, are the retired state employee one-time bonus bills.

The lump-sum bonus would be $1 per month of service prior to retirement for retirees prior to May 1, 2018. State education employees are to receive raises under separate legislation and retired education employees are to receive a one-time bonus, both in separate bills.

Workforce Council Update Goes to Senate

The House voted 63-0 Tuesday to pass HB 170 by Rep. Alan Baker, R-Brewton, and send it to the Senate where it was assigned to the Committee on Fiscal Responsibility and Economic Development.

His bill would amend the Alabama Workforce Council law, limit the number of future members to no more than 35, and add to the board the executive director of the Alabama Commission on Higher Education, the secretary of the Department of Labor or his or her designee, and the chair of the Alabama Workforce Innovation and Opportunity Act Board as ex officio members with no voting rights.

The council shall be business-driven and -led, and appointing authorities shall coordinate their appointments to assure that at least 75 percent of the voting council members are employed by business and industry, and that at least two individuals from each region of the regional workforce development councils are voting members, according to the legislation.


Veterans’ Hire Tax Credit Bill Sent to Governor’s Office

The Senate on Tuesday voting 27-0 concurred with the conference report of HB 83, the veterans’ tax credit hiring bill sponsored by Rep. Connie Rowe, R-Jasper. The House previously voting 95-0 approved the conference report on the bill, which was sent to the governor’s office for consideration.

Under existing law, certain small businesses may qualify for an income tax or financial institution excise tax credit for hiring recently deployed and unemployed veterans who have been discharged from active service within two years from the date of hire.

HB 83 renames the Heroes for Hire Tax Credit Act of 2012 as the Veterans Employment Act and will allow certain small businesses to qualify for a tax credit for hiring an unemployed veteran regardless of when the veteran was discharged from active service for each unemployed veteran hired for a full-time position paying at least $14 per hour.


Alabama Income Tax Cut Bill Goes to Governor

The House voting 89-0 on Thursday gave final passage to SB 76, a bill that will give Alabamians a modest income tax break.

SB 76 sponsored Senate President Pro Tem Del Marsh, R-Anniston, will allow more Alabamians to take the maximum standard deduction when doing their taxes. “It’s a tax break for working-class Alabamians,” Marsh said.

The tax cut was part of the Senate Republican Caucus “Fighting for Alabama” agenda. It will save Alabamians between $4 million and $6 million a year, an average of $21 per family.

The bill will increase the adjusted gross income level so that married filing jointly, head of family, and single taxpayers will qualify for the full $7,500 standard deduction, from $20,000 to $23,000, and married filing separate from $10,000 to $10,500.

Out-of-State Income Tax Credit Clarification Is Subject of House, Senate Bills

The Senate Finance and Taxation Education Committee on Wednesday voting 12-0 favorably reported HB 384 by Rep. Rod Scott, D-Fairfield. The Senate version, SB 342 by Sen. Rodger Smitherman, D-Birmingham, is on the Senate calendar.

The legislation would provide certainty regarding how Alabama residents calculate their credit for taxes paid to other states. In keeping with sound tax policy and an existing Department of Revenue regulation, this bill would provide that the credit for taxes paid to another state shall not be used to offset that portion of a taxpayer’s income tax liability attributable to Alabama sources. In other words, the credit will only be used to offset a taxpayer’s income tax liability that is attributable to income from other jurisdictions.

This compromise legislation is the result of litigation invalidating Department Rule 810-3-21-.03, which provided an additional limitation not authorized by the existing statute, Ala. Code § 40-18-21. This legislation essentially codifies Department Rule 810-3-21-.03, which has been in effect since 2013.

Income Tax Credit Bill for Employee Loss to Incentive Recipient Advances

The Senate Finance and Taxation Education Committee on Thursday narrowly approved SB 356 by Sen. Sanford, which would authorize an income tax credit to any Alabama business that loses an employee to another Alabama business receiving an economic tax incentive from the state.

The allowable income tax credit of $2,000 per each employee could not be used to decrease a taxpayer’s liability to less than zero for any tax year. The credit would be available for tax years beginning on or after Jan. 1, 2019, and expire in 2023. The bill also would require the Department of Labor to create a business and employee database and for businesses to update the database as employees are hired and depart.

Simplified Sellers Use Tax Program Bill Advances

The House Ways and Means General Fund Committee amended and favorably reported HB 470 on Thursday, putting it in position for the full House to consider it as early as next week.

SB 470 sponsored by Rep. Rod Scott, D-Fairfield, is the Simplified Sellers Use Tax Program (SSUTP) bill. It and SB 307 by Sen. Pittman, would amend the SSUTP.On Tuesday, the Senate carried over SB 307 to the call of the chair.

Under current law, the SSUTP allows an eligible seller to voluntarily collect and remit the simplified sellers use tax.The bills would clarify that sellers remain eligible to pay the lower rate even if they acquire a brick-and-mortar presence in the state but clarifies that purchases at those brick-and-mortar locations do not qualify for SSUTP.

Introduction of the bill was prompted by Amazon’s acquisition of Whole Foods last year, which triggered a review of whether the online retailer could continue to pay sales tax through the SSUT program. In addition, a House amendment keeps the tax at 8 percent.

The bill would clarify that certain sales of tangible personal property cannot be reported under the program and would be subject to sales tax. This bill would establish a marketplace facilitator filing and remitting program. The marketplace facilitator is required to collect and remit simplified sellers use tax on transactions made by or on behalf of third party marketplace sellers or be subject to information reporting requirements.

CA Tax Credit Bill Fails to Get Committee Approval

The Senate Fiscal Responsibility and Economic Development Committee on Wednesday failed to favorably report SB 187 by a vote of 4-5. The bill sponsored by Sen. Bill Hightower, R-Mobile, proposes a constitutional amendment to require any tax credit, exemption, deduction, or preferential tax rate enacted beginning in the 2019 regular legislative session would expire within seven years from the effective date of the act authorizing the tax expenditure, unless extended by the Legislature.

House Committee Approves Substitute Senate General Fund Budget

The House Ways and Means General Fund Committee on Wednesday substituted and favorably reported SB 178, the $2 billion General Fund budget by Sen. Pittman. The budget could be on the floor as early as Tuesday.

The proposed budget would give state employees a 3 percent cost of living increase and $1.7 million for state retiree bonuses, a dollar for every month worked.

The GF bill would increase the Alabama Department of Corrections budget by $55 million in order to increase staffing and implement a new health care contract for improving mental health care for the state’s 21,000 inmates and an increase of $53 million for Alabama Medicaid, an addition of $4.5 million to the Department of Transportation by Sen. Pittman was removed in the House version.

‘Dark Store’ Property Valuation Legislation Emerges from House

The House on Thursday voting 94-0 passed SB 182, the so-called “dark store” bill, sponsored by Sen. Phil Williams, R-Rainbow City.The House companion isHB 157 by Rep. Corley Ellis, R-Columbiana, who handled Sen. Williams’ bill in the House.

“A commercial property that argues it’s taxed at a lesser amount due to it being closed, or vacant, it must disclose that it’s vacant or closed,” Rep. Ellis said.

Under this legislation, disclosure would allow a court to consider a taxpayer’s protest or appeal of a tax ruling on commercial or industrial property whether the proposed comparable property is sufficiently similar to be used as evidence in considering the appeal.

Representatives of the business community and counties met to negotiate compromise language. Rather than prohibit a court from receiving certain evidence in the original bill, the solution would require more disclosure on the part of the entity seeking to introduce the evidence.

Senate Bill Cuts Alabama Payday Loan Interest Rate

The Senate on Thursday voting 20-4 approved SB 138 by Sen. Orr that would reduce the maximum payday loan interest rate by more than half and make it easier for Alabamians to repay loans.

Under current law, lenders can set terms of their loans from 10 to 31 days, charge a fee of up to 17.5 percent, and require the loan payment due in 14 days for an annualized interest rate of 456 percent.

SB 138 would reduce the rate by 200 percent by requiring payday lenders to give borrowers 30 days to repay a loan.

“This simple reform enjoys bipartisan, overwhelming, statewide support, we are grateful for the responsive leadership that carried this bill through the Senate,” Sen. Orr said. The bill goes to the House.