LWVAL Action Priority Level II - Monitoring occurs; action dependent on opportunity and available resources.
Click a bill to see sponsor(s), summary (including link to full text), League action and justification for that action, and progress of the bill through the legislative process.
Legend: = LWVAL's support for the legislation. = LWVAL's opposition to the legislation. = new bill activity; change from previous week's report such as new progress in the legislature and/or League action. Bill may be one newly added to the report. These updates are in green font.
LWVAL has taken a position on these bills:
SB119 - Legislative Fiscal Office, tax exemptions, annual report to Legislature of "tax expenditures" from exemptions
Summary/Synopsis: Under current tax statutes there are several taxes which are dedicated to: the Education Trust Fund to be appropriated by the Legislature for educational purposes and to the State General Fund to be appropriated by the Legislature for any lawful purpose. There are also many exemptions from those taxes which although not appropriated annually by the Legislature nevertheless provide a benefit to those entities, groups or organizations which are the recipients of these tax expenditures.
Most states require a report to be prepared providing the estimated revenue loss to the state caused by each tax exemption. Alabama is currently not one of those states.
This bill would require the Legislative Fiscal Office to annually submit a report to the Legislature which lists all of the tax expenditures in effect for each fiscal year with an estimate of the amount of the exemption (tax expenditure) and the fund source to which the revenue source is dedicated.
The League believes the state’s system of taxation should be broad, equitable and efficient for the taxpayers of the state.
Tax expenditure refers to an exception to the payment of a tax that normally would be collected and represents lost revenue. An exception may be granted to a whole class of entities or to a specific named entity. Understanding the amounts of revenue lost through such exemptions and which entities receive this special treatment is an important step toward reforming the tax system.
Bill Progress in Legislature:
03/03/2015: Read of the First time and referred to the Senate Committee on Finance and Taxation Education (F&TE). 03/11/2015: Read for the First time and placed on the Calendar with 1 Amendment (165665-2); pending 3rd Reading and favorable from FT&E with 1 Amendment; Finance and Taxation Education first Amendment Offered
03/18/2015: 3rd Reading Passed; F&TE Amendment (165665-2) Offered; Motion to Adopt adopted by Roll Call; Motion to Read a Third Time and Pass adopted by Roll Call;
04/02/2015: 2nd Read and placed on the Calendar with 1 Amendment (166796-2) from W&ME; Pending 3rd Read and Favorable from W&ME with 1 Amendment.
05/19/2015: 3rd Reading Passed; W&ME Amendment (166796-2) Offered; Motion to Adopt adopted by Roll Call; Motion to Read a 3rd Time and Pass adopted by Roll Call; Collins motion to reconsider the bill adopted Voice Vote; Collins Amendment (168595-1) Offered; Motion to Adopt adopted by Roll Call; Motion to again Read a Third Time and Pass adopted Roll Call
05/21/2015: Concurrence Requested; Marsh motion to Concur In and Adopt adopted by Roll Call; Enrolled; Forwarded to Governor on May 21, 2015 at 1:15 p.m.
House: 05/26/2015: Concurred in 2nd House Amendment; Enrolled; Signature Requested;
Assigned Act No. 2015-237.
HB142 - Corporate income tax, combined reporting of income required, Secs. 40-18-1, 40-18-30, 40-18-31 am'd.
Sponsor(s): Representative Hill (M)
Summary/Synopsis: Under current law, each entity, subject to the Alabama corporate income tax, is required to file a separate return and calculate the income tax on its separately accounted for taxable income, regardless whether the entity is part of a larger business that consists of an affiliated group of entities. This filing method allows large corporate taxpayers to take advantage of tax planning options to shift income to other entities within the affiliated group located in tax favorable states. Most large corporate businesses consist of a parent corporation and a number of corporate subsidiaries. This bill would amend the corporate income tax law to require the operations of all related entities, involved in a unitary business, file one corporate income tax return on a combined basis, known as combined reporting.
HB476 (Constitutional Amendment) - Income tax, Alabama Individual Income Tax Reform Act of 2015, subject to repeal of federal income tax credit, increases deductions and creates State Earned Income tax credit, Secs. 40-18-15, 40-18-19 am'd. HB478 (Constitutional Amendment) - State income tax, federal deduction limited for individual taxpayers, state sales tax on food removed, Amendment 225 (Section 211.04, Recompiled Constitution of Alabama of 1901, as amended), repealed, const. amend.
Sponsor(s): HB476 - Representatives Knight, Scott, Robinson, and Rogers HB478 - Representatives Knight, Scott and Rogers
Summary/Synopsis: HB476 and HB478 are related bills. If HB476 passes the constitutional amendment outlined in HB478 must also pass in order to eliminate federal income tax payments as a deduction on the state income tax form. The first bill would increase the standard deductions and personal exemptions allowed for Alabama income tax purposes to the amounts allowed for federal income tax purposes, and it creates a state earned income tax credit. The second bill eliminates the state sales tax on food and over-the-counter drugs.
[Note: The Legislative Fiscal Office indicates that in FY2014 60% of the Education Fund monies came from the income tax and 28% from the sales tax. The General Fund received 4.8% of its income from the sales tax and 8.3% from property taxes.]
League Action and Justification: Support HB476 and HB478
The LWVAL positions on taxation are based on extensive study and consensus building that included participation of Local League throughout the state. These bills are consistent with the following positions:
“The League of Women Voters of Alabama supports action to reform the state system of finance and taxation. “
“The taxation and finance provisions in the constitution should provide for the flexibility to address changing conditions, an equitable distribution of the tax burden, and the economical use of the state’s financial resources.”
“The state’s system of taxation should be broad, equitable and efficient for the taxpayers of the state. It should balance regressive and non- regressive taxes.
The constitution should contain no fixed tax rates.
The constitution should place no limitations on ad valorem and income taxes.
The constitution should neither mandate nor prohibit earmarking of taxes.
With the prerequisite of an open accountable legislature, responsive to all the people, the legislature should be allowed flexibility in tax decisions to meet changing needs through statutory law rather than constitutional amendment.”
“The present mix of Alabama's taxes should be changed so that there is more reliance on property tax and income tax and less reliance (dependence) on general and selective sales taxes.”
The sales tax on food should be eliminated, as it was for prescription drugs, but sales tax exemptions that are designed to benefit specific groups should be reduced.
HB477 (Constitutional Amendment) - State ad valorem tax, additional one mill, proceeds distributed to State General Fund, const. amend.
Sponsors(s): Representatives Knight, Scott, Rogers and Moore (M)
Summary/Synopsis: Currently, the state levies a 6.5 mill annual ad valorem tax on the assessed value of taxable property in the state. This bill would propose a constitutional amendment to levy an additional one mill annual state ad valorem tax. The net proceeds of the additional levy would be distributed to the State General Fund.
[Note: The Legislative Fiscal Office indicates that in FY2014 the General Fund received 8.3% of its revenue from property taxes.]
While League positions on tax reform prefer an end to constitutional limits on ad valorem taxes and earmarking, such change is not likely in the immediate future. Due to the funding problems for the General Fund and the major crises in state programs the GF supports, including the Medicaid and corrections, other League positions lead to support for the bill because the programs covered in the positions are dependent upon the General Fund. Examples include:
“The League of Women Voters favors an adequate budget to support criminal justice needs throughout the state.”
“The LWVAL advocates taxes sufficient to support social welfare programs. The Department of Human Resources (DHR) must have adequate funding in order to administer those programs designed to deliver services to the needy.”
“The LWVAL supports access to basic health care services for all Alabama citizens.”
SB375 - Taxation, receipts, state entities, authority to unearmark and use for other areas where funding has been reduced
Sponsor(s): Senator Orr
Summary/Synopsis: Currently, some Alabama tax and revenue statutes dedicate specific tax receipts to be expended for specific entities for specific purposes. This earmarking of tax receipts does not give the entity which receives these funds the flexibility to use those funds for other purposes for which the need may be greater. This bill will provide flexibility for state entities to utilize state revenue for purposes which are in addition to the stated purpose under current law. This provision will not apply to revenues which are distributed pursuant to the state constitution or to revenue which is directed by federal law or specific court order to be used for a particular purpose.
[Note: Most researchers set earmarked funds as composing at least 90% of Alabama revenues. The Fiscal Note posted does not estimate how much money would be freed up by the bill. Effective large-scale un-earmarking would require constitutional changes.]
05/14/2015: 2nd Read and placed on the calendar; pending 3rd Read and Favorable from W&MGF
05/21/2015; 3rd Reading passed; Clouse Amendment (169828-1) offered; Motion to Adopt adopted by Roll Call; Motion to Read a 3rd Time and Pass adopted by Roll Call
05/21/2015: Concurrence Requested; Marsh Motion to Concur in and Adopt adopted by Roll Call; Enrolled 05/26/2015: Concurred in 2nd House Amendment; Enrolled; Signature Requested;
House: 06/02/2015: House of Origin Concurs in Executive Amendment; Clouse motion to Concur In and Adopt adopted Roll Call; Signature Requested 06/02/2015: Forwarded to Governor; Executive Amendment Offered; Orr motion to Concur In and Adopt adopted Roll Call;; 2nd House Concurs in Executive Amendment; Enrolled; Assigned Act No. 2015-327
HB570 - Sales and use tax on food, phase out over a four-year period
Sponsor(s): Representative Knight
Summary/Synopsis: Basically the same as HB569 with one exception – the phase out of the state sales tax on food would be over a four-year period with rates reduced by one percentage point per year beginning September 1, 2015. The phase out would be completed in 2018.
Summary/Synopsis: This bill provides for the establishment of the Alabama Recurring Revenue Fund and provides for the distribution of the proceeds of the recurring revenue sources of the Education Trust Fund and the State General Fund initially into this fund to be allocated to the Education Trust Fund and the State General Fund based upon the percentages established in this bill – 78 percent Education Fund, 22% General Fund.
Recurring Revenue is defined as: Any existing permanent and continuing source of revenue to the Education Trust Fund or the State General Fund of any kind or type that has been enacted, established, or provided for in fiscal years prior to the current fiscal year or any new revenue source enacted for the current and/or future fiscal year which is permanent and continuing. The act is not to affect the Education Trust Fund Rolling Reserve Act and the Ed Fund is supposed to receive an amount at least as high as it would receive normally.
Summary/Synopsis: Under Act 2013-6, The People's Trust Act, the Legislature is required to repay all amounts transferred from the Alabama Trust Fund to the State General Fund pursuant to Amendment 856 to the Constitution of Alabama of 1901 by not later than September 30, 2026 based on a schedule of minimum cumulative amounts that must be repaid at the end of each fiscal year between the fiscal year ending September 30, 2014 and the fiscal year ending September 30, 2026. This bill would revise the repayment schedule for the People's Trust Act to provide the repayment by not later than September 30, 2027.
[Note: The revision is to not pay anything back in September 2016 and shift back all payments from then on by one year.]
HB533 - Taxation, state tax revenue, distribution, provided further for, Secs. 2-21-24, 2-22-9, 2-23-5, etc.
Sponsor(s): Representatives Ainsworth, Henry, Farley, Moore (B), Mooney, Williams (P), Fridy, Holmes (M), Wingo, Greer, Wilcox and Butler
Summary/Synopsis: This bill removes a wide variety of earmarks that give monies to specific agencies or policy areas or allow their accounts to keep unspent funds. It directs the funds to the General Fund. Areas impacted, for example, include Agricultural Fund, some Forestry Fund fees; monies usually kept by Sec. of State; some State Board of Health and Department of Public Health; some fees for solid waste; some insurance fees; and more.
League Action and Justification: Monitor
While we might like to have earmarked funding to continue for some of the areas listed (e.g., solid waste), we support elimination of earmarking and greater legislative control over revenue. Given the funding crisis in the General Fund, the move makes sense. So, we could support it.
However, the lobbying activity on this could be huge if it moves. Also the bill has been sent to Ways and Means – Educ. which is odd. It could be a mistake, but sometimes an odd committee routing means an attempt to kill a bill or hold it up. In other instances, it may be done to insure action on the bill. Also there is no Fiscal Note available.
Summary/Synopsis: Simplified Flat Tax Act of 2015, to repeal Amendment 25 of the Constitution of Alabama of 1901, Amendment 212, as amended by Amendment 662, [state tax on net income of corporations] and Amendment 225 [federal income tax deduction]; to revise the personal and corporate income tax structure by providing a specific tax rate; to provide an exemption for certain income earned in other jurisdictions; to provide for certain tax credits and deductions under certain conditions; and to authorize the Legislature to enact general laws to implement the amendment.
Major changes outlined include:
Alabama residents would pay 2.75% of their adjusted gross income as reported on their federal tax return. Nonresidents would pay 2.75% of the portion of their adjusted gross income earned in Alabama.
A 2.75% tax would be on interest received from obligations of states other than Alabama and agencies, instrumentalities, and political subdivisions of states other than Alabama.
Effective January 1, 2017, a tax imposed at the rate of 4.59 percent on the taxable income, as defined for federal income tax purposes, of every corporation incorporated in Alabama, doing business in Alabama, or deriving income from Alabama. Tax
An individual may not claim any deduction, credit, or exemption unless it is a deduction for charitable contributions, is required under federal law, or is pursuant to a deduction, credit, or exemption adopted by the Legislature by an 80 percent vote in each house.
Any general law providing for a credit, exemption, or deduction may only contain a single credit, exemption, or deduction.
The Legislature shall enact general laws The Legislature shall enact general laws for the implementation of this amendment.
There is no LFO Fiscal Note on the bill. The main author claims it is revenue neutral which means there is no overall change in the amount of revenue taken in.
The bill goes against some League positions and supports others. Those positions most relevant to the recommended action include:
“The state’s system of taxation should be broad, equitable and efficient for the taxpayers of the state.” Tax preparation would be easier if based on the federal adjusted gross income.
“The constitution should contain no fixed tax rates.” The bill sets fixed rates.
“The constitution should place no limitations on . . . income taxes.” The bill sets limits.
“With the prerequisite of an open accountable legislature, responsive to all the people, the legislature should be allowed flexibility in tax decisions to meet changing needs through statutory law rather than constitutional amendment.” The bill both limits and expands legislative flexibility.
HB576 and HB577 (Very similar) - Tax credits, for businesses and individuals who donate to schools for certain equipment
Sponsor(s): Representative Williams (P) Summary/Synopsis: These bills would provide an annual tax credit of up to 50 percent of the tax liability of an individual or business who donates to a nonprofit organization that provides grants to a school to support digital learning through the use of technology to increase student academic performance, subject to certain annual maximum amounts. They would require the Department of Revenue to establish a procedure to approve the formation of a nonprofit organization that provides digital learning grants for a school to improve learning with technology. They provide that the grants may be used to purchase technology devices, improve infrastructure, strengthen wireless connectivity, or improve instructional practices with technology. A grant funding request would require a 50 percent match by the requesting organization in cash or other form of negotiable instrument. This bill would provide that a nonprofit organization, to remain eligible, shall expend 98 percent of its funds on sub-grants, and have an established record of administering funds throughout the state. Credits would be given on first come basis and priority for the credit in subsequent years would go to credit recipients from the previous year for at least the amount they then gave. Limits on the amount of credits allowed in total for each tax year are set.
SB424 - Alabama Recurring Revenue Fund, established, to receive certain percentages of recurring revenue sources of the Education Trust Fund and the State General Fund
Sponsor(s): Senator Sanford
Summary/Synopsis: This bill provides for the establishment of the Alabama Recurring Revenue Fund and provides for the distribution of the proceeds of the recurring revenue sources of the Education Trust Fund and the State General Fund initially into this fund to be allocated to the Education Trust Fund and the State General Fund based upon the percentages established in this bill.
Recurring Revenue is defined in the bill as: “Any existing permanent and continuing source of revenue to the Education Trust Fund or the State General Fund of any kind or type that has been enacted, established, or provided for in fiscal years prior to the current fiscal year or any new revenue source enacted for the current and/or future fiscal year which is permanent and continuing.”
It further provides that: “Notwithstanding any other provision of law to the contrary, the amounts standing in the Alabama Recurring Revenue Fund on the last day of each month that receipts from recurring revenues are deposited in the Fund shall be distributed to the Education Trust Fund and the State General Fund based on the following percentages: (i) Education Trust Fund -- 80 percent (ii) State General Fund -- 20 percent.”
SB502/HB700 (Constitutional Amendment) - Unified appropriations for state General Fund and Education Trust Fund; state revenue sources unearmarked, effective Jan. 1, 2017, constitutional amendment
Sponsor(s): SB502: Senators Dial, Sanford, Albritton, Bussman, Marsh, McClendon, Williams, Holley and Melson HB700: Representatives Mooney, Ainsworth, Moore (B), Holmes (M), Wingo, Beech, Butler, Farley, Fridy, Henry, Williams (P), Greer, Hanes, Ledbetter and Johnson (K)
Summary/Synopsis: Under current law there exist a number of statutory and constitutional earmarks for the spending of state revenues. This proposed amendment to the Constitution of Alabama of 1901, to become effective January 1, 2017, would eliminate all requirements that limit the appropriation or spending of state revenues in a particular manner contained in the Constitution of Alabama of 1901 and prohibit any general or local law that directs state revenue to be appropriated or spent in a particular manner. The proposed amendment would further allow for a unified appropriations bill.
While LWVAL positions in the areas of tax reform and budgeting support the concepts outlined in this bill, League also supports: “Legislation that will assure adequate financing for the total needs of Alabama public schools.” LWVAL “supports maintaining and improving a system of free public schools in Alabama based on the belief that a free public education which provides equal opportunity for all its citizens is an investment in the future.”
League is concerned that this bill, if enacted and ratified by the voters as written, will be used by legislators to transfer large amounts of money from public education which would badly damage an already troubled system.