Friday, May 29, 2015
Summer Special Session Clear;
Budget Issues Remain Murky
Several truths became clear Thursday in the Alabama Legislature:
- The governor, the House and the Senate don’t agree on where to find growth funds for the state’s general operating budget.
- After 26 legislative days, the executive and the legislative branches of government have found no common ground for compromise.
- A special session later this summer is a given.
What isn’t clear is whether lawmakers will adopt a General Fund budget in the four remaining days of the 30-day 2015 regular session. The Senate Finance and Taxation Committee on Wednesday approved a $1.64 billion General Fund budget (HB135) that is about $204 million short of the current budget. The governor had said he would veto the House-passed budget, which the Senate committee didn’t alter much.
The House clearly didn’t plan to change the budget or earmarking process this late in the session. House Speaker Mike Hubbard at mid-week appointed a commission of representatives to study how to provide more flexibility in budgeting and have legislation ready for the 2016 session.
Almost $19 million in revenue measures were acted on this week and are detailed elsewhere in this report. Other revenue measures that received committee approval but stalled weeks ago would increase cigarette taxes ($66 million), raise the business privilege tax maximum ($39 million), create a lubricating oil sales tax ($8.5 million), increase the car rental/lease tax ($6.1 million) and create an annual license fee for amusement/entertainment machines ($1.4 million).
Hubbard said the Senate should pass the austere General Fund budget, which includes conditional appropriations if the Legislature later approves revenue bills in a special session. Senate President Pro Tem Del Marsh of Anniston said he expects gambling, earmarking and unifying the two state budgets to be part of an anticipated August special session. Hubbard called those proposals too “out there,” fortifying that the two legislative bodies remain far apart on any funding solutions.
Four days remain in the 2015 regular session. The Legislature is expected to meet three days next week, possibly take a week break to catch up on record keeping, then end the session on the last possible day it can meet. Monday, June 15, is the absolute last day lawmakers can meet in regular session, although the session can end sooner than that date.
TAXES
Prescription Privilege Tax
Ready for House Consideration
In an effort to continue Medicaid pharmacy benefits, committees this week approved legislation that would increase the privilege tax on pharmacy services from 10 cents to 25 cents on each prescription filled or refilled. According to its fiscal note, the legislation would net $8 million for Medicaid.
The extra 15-cent tax would be supplemental and take effect Aug. 1 under HB698 by Rep. Elaine Beech (pictured), D-Chatom, which the House Ways and Means General Fund Committee approved Thursday morning. The bill also calls for an “appropriate increase in the pharmacy dispensing fee” paid to pharmacists filling Medicaid prescriptions by Oct. 1. The supplemental privilege tax would end if the dispensing fee increase does not occur. In a Senate committee meeting on similar legislation, State Health Officer Don Williamson mentioned raising the dispensing fee to $13.90, a figure derived from a recent cost of dispensing survey.
Williamson (pictured) told legislators that the bill would also negate the need for a pharmacy benefit manager for Medicaid. Such a manager could save about $12 million through the use of a mail-order pharmacy, but the state would lose $5 million to $5.5 million in drug rebates, which would result in a gain to Medicaid of only $7 million, Williamson said. After deducting the increase in dispensing fees from the tax proceeds, the increased privilege tax would net $8 million for Medicaid, he said.
“This way we keep control of the drug rebate, we net more money for Medicaid and we don’t put Alabama pharmacies out of business,” Williamson said.
Senate Bill Seeking Voluntary Sales Tax Collection
by Amazon, Other Remote Sellers Ready for House
A Senate bill to give certain mega online retailers a tax break if they start collecting taxes from Alabama customers is ready for House consideration. The House Ways and Means General Fund Committee on Wednesday approved a substitute version of SB437 by Sen. Trip Pittman, R-Daphne. The bill is “long overdue,” Rep. Rod Scott (pictured), D-Fairfield, author of the House companion (HB660), told the committee. If the House approves the committee-altered bill, the Senate still must concur in the changes for it to pass.
The legislation, pushed by the state’s cities and counties, promotes the voluntary collection of use taxes Alabama customers owe on items delivered to our state at a flat rate of 8 percent, no matter where in the state the seller ships the purchased items. It would apply to any seller that has no physical presence in Alabama.
The goal is to collect at least some of the estimated $200 million in sales taxes that currently are not collected annually in the state by certain large, online retail merchants without stores in Alabama. It is unknown if a voluntary program would result in any tax collection.
Federal legislation allowing states to require remote retailers to collect and remit sales taxes has stalled, and many states have reverted to enacting “Amazon bills” to get the giant online retailer and others to compete more evenly with local, brick-and-mortar retailers, who must collect taxes. U.S. Rep. Jason Chaffetz, R-Utah, is expected to introduce new federal legislation in early June. The Stand with Main Street coalition is seeking signatures for a letter to let Chaffetz know support exists for federal legislation to provide a level playing field for all sellers with respect to the collection of state sales taxes. Any remote sellers that participate in the voluntary remittance program established under SB437 would be allowed to continue in that program even if Congress eventually passes federal legislation.
A committee member pointed out that the state legislation favors incorporated areas where sales tax rates are higher and means customers in unincorporated areas with taxes lower than 8 percent will end up having to request tax refunds from the state.
Senate OKs Factor Presence Nexus Standard
A factor presence nexus standard for business activity for income tax purposes cleared the Alabama Senate on a vote of 28-2 Thursday. SB497 by Sen. Greg Albritton, R-Bay Minette, would make Alabama’s standard for establishing substantial nexus different than any other Southern state and the majority of the other U.S. states. The fiscal note says the bill will result in an increase of $2 million to $8.5 million annually in state revenue. The House companion, HB466 by Rep. Rod Scott, D-Fairfield, has not had a committee hearing. Similar legislation by Scott died last year in a House committee.
Senate Passes Bill Tying Fees
to Consumer Price Index
State agencies would be able to increase fees without seeking legislative approval under a bill the Alabama Senate approved 21-8 Thursday. SB216 by Sen. Gerald Dial, R-Lineville, would allow agencies to increase fees by whatever percentage the Consumer Price Index had increased over the previous 10 years or since the last change in the fee, whichever was the shorter period of time, as long as that increase does not exceed two percent for each year. The agency would have to wait five years before considering another fee increase. If a state agency wanted to increase fees more than two percent for each year since the last increase, it would have to seek legislative approval. The Senate amended the bill to exclude the Public Service Commission and the Alabama Banking Department. If the bill becomes law, it would mean more money for the state’s General Fund, but it is unknown how much more. The bill now goes to the House Ways and Means General Fund Committee.
Senate Approves Car Drive-Out Sales Tax
Currently, Alabama does not charge a sales tax on automobiles, motorcycles, trucks, truck trailers or semitrailers purchased within the state by out-of-state residents and then driven out-of-state. SB501 by Sen. Clyde Chambliss, R-Prattville, which the Alabama Senate approved Thursday, would remove that exemption for out-of-state residents unless their state allows an Alabama resident to purchase a vehicle without paying tax to that state. The bill excludes vehicle campers and motor homes. SB501 is one of the Republican majority’s revenue proposals and is estimated to generate $2 million. The House Ways and Means General Fund Committee will consider the bill Tuesday.
The House General Fund Committee already approved the companion, HB593 by Rep. Ken Johnson, R-Moulton. Both bills exclude county and local taxes and remove a car buyer’s liability for remitting the incorrect tax if the state-provided tax rate information is incorrect.
Companion bills that make possession or use of an automated sales suppression device a Class C felony advanced this week. Tuesday, the Alabama House unanimously approved HB140 by Rep. Steve McMillan, R-Bay Minette, sending it to the Senate Judiciary Committee. The next day, the Senate Finance and Taxation General Fund Committee approved SB505 by Sen. Tim Melson, R-Florence, and amended it so it mirrors the House bill. Melson’s bill now awaits action by the full Senate.
The sponsors equate using an automated sales suppression device to having two sets of books. The devices, also known as phantom ware or zappers, are used to delete records of sales transactions from cash register records, so that sales taxes are under-reported to the taxing authorities. In addition to the felony charge, individual violators would be subject to fines up to $100,000, while corporate violators could be fined up to $500,000. The legislation also makes convicted violators liable for all taxes, fees, penalties and interest due to the state.
Repeal of Withholding Exemption
Ready for Senate or House Consideration
House and Senate committees have now approved a repeal of the total exemption from withholding for employees. The Senate Finance and Taxation General Fund on Wednesday approved SB504 by Sen. Shay Shelnutt, R-Trussville, which would repeal the provision allowing some people to have no state income tax withheld from their paychecks. The House Ways and Means Education Committee already approved the companion, HB240 by Rep. Ken Johnson, R-Moulton. It is unclear if either will be considered by their respective chambers in time to pass in the final four days of the regular session. The governor, who included the legislation in his revenue package, estimates it will generate $12 million.
Currently, an employer is not required to withhold income taxes from an employee’s wages if that employee has an exemption certificate that says he or she had no income tax liability in the preceding tax year and anticipates not having a tax liability in the current year. State law says anyone earning more than $5,000 for the year has to file a return.
NEW LAWS
Small Claims Changes, Revisions
to Motor Fuel Marketing Act Now Law
The governor signed two bills of interest to retailers into law this week.
Act. No. 2015 – 224 allows more claims to be settled in small claims court rather than having to go to district or circuit court. The new law, which is effective Aug. 1, increases from $3,000 to $6,000 the maximum claims that can be settled in small claims court.
Act. No. 2015 – 225 allows retailers that sell fuel plus other goods to discount gasoline below the market price as long as the retail price of the fuel doesn’t dip below the actual cost of the fuel.
DEBT
House Panel Votes to Raise Exemptions for Debt
The House Judiciary Committee on Wednesday approved a substitute version of SB327 by Sen. Cam Ward, R-Alabaster, which would increase Alabama’s debt exemptions. The substituted bill increases Alabama’s homestead exemption from $6,000 for a surviving spouse and $5,000 for a debtor to $15,000 for both; and the personal property exemption from $3,000 for a debtor and $3,500 for a surviving spouse to $7,500 for either. The bill now goes to the House for final consideration. A similar substitute version of the House companion, HB396 by Rep. Jim Hill, R-Moody, also awaits consideration by the full House.
Bill Leaving Wages Available
for Debt Collection Gets Committee OK
Compensation, such as wages and salaries, could not be exempt from garnishment or debt collection under HB634 by Rep. Mike Hill, R-Columbiana, which the House Judiciary Committee approved Tuesday. The bill now goes to the full House for consideration.
ELECTRONIC FILING
Electronic Business Entity Filings Ready for Final OK
The House State Government Committee on Wednesday approved SB229 by Sen. Steve Livingston, R-Scottsboro, which would create an electronic process for business entity and nonprofit filings with probate judges and the secretary of state. The secretary of state would create the pilot online filing system, while counties’ participation would be voluntary. The online system will include form filing, online fee recording and payment through credit or debit cards. The bill now goes to the full House for final consideration.
WORKPLACE ISSUES
Senate Panel Votes to Reduce UC Benefits
Only for Employer-Financed Pensioners
The Senate Governmental Affairs Committee on Tuesday approved HB506 by Rep. Napoleon Bracy, D-Prichard, which would reduce unemployment benefits for those receiving a pension or retirement benefits only if those benefits were 100 percent employer financed. Under the legislation, if an out-of-work individual who is still looking for work pulls from an employee-contributed 401K retirement plan, the income from that withdrawal would not reduce the individual’s unemployment compensation, supporters told the committee. The bill now goes to the Senate for final approval.
Committee OKs Bill Allowing Labor Department
to Sue Child Labor Violators to Collect Penalties
The House State Government Committee on Wednesday approved SB219 by Sen. Steve Livingston, R-Scottsboro, which allows the Alabama Department of Labor to file a lawsuit to collect civil penalties for child labor law violations. The suit must be filed in the county where the violation occurred. Civil penalties for violations of child labor law range from $300 to $5,000 for each employee affected by a violation. The bill now goes to the full House for final approval.
House Bill Banning Local Government Interference
with Hiring/Labor Relations Moves; Senate Version Stalls
Legislation that would prevent local governments from interfering with such employment issues as minimum pay, time off, background checks and other labor issues cleared a House committee this week and got caught up in a dispute on other issues on the Senate floor. The House State Government Committee on Wednesday amended and approved HB495 by Rep. Arnold Mooney, R-Birmingham, setting the bill up for consideration by the full House. Meanwhile, the Senate was on the companion bill, SB403 by Sen. Greg Albritton, R-Bay Minette, when senators began fillibustering related to other legislation. Albritton’s bill did not receive a vote before the Senate adjourned. The bill will require unanimous consent to move forward in the Senate.
Panel Carries Over Bill
Creating New Discrimination Classes
The House Judiciary Committee carried over legislation Wednesday that would have asserted a state right to be free from discrimination because of race, color, religion, national origin, sex, sexual orientation, gender identity, disability or familial status in employment, housing, accommodations, financial transactions and voting. HB615 by Rep. Chris England, D-Tuscaloosa, would have created a new cause of action related to such discrimination.
HEALTH
Regulation of Pharmacy Benefit
Management to Get Public Hearing
The Senate Banking and Insurance Committee will conduct a public hearing next week on SB483, which would bring pharmacy benefit managers under the Alabama Insurance Department, allow the department to develop rules for the regulation of PBMs and change pharmacy audit procedures. The bill by Sen. Del Marsh, R-Anniston, bans pharmacy benefit managers from mandating a specific pharmacy be used, specifically prohibiting mandated use of a particular community or mail-order pharmacy.
ALCOHOL
Alcohol Bills Continue to Flow
This week, the governor signed Act No. 2015 – 267, which allows the Hoover and Vestavia Hills city councils to designate up to three entertainment districts per city.
Several other bills regarding alcohol await the governor’s signature:
- HB620 allows the Jasper City Council to designate up to two entertainment districts.
- HB623, HB625 and HB280 authorize governments in Dallas County and its cities, the city of Fayette and the town of Rogersville to allow draft beer sales. The Dallas County bill applies only to on-premises consumption. The Rogersville bill excludes Sundays.
- HB125 gives the Oak Grove Town Council authority to ask voters if they would like to allow alcohol sales after 1 p.m. on Sundays.
The House passed HB667, which would lengthen the time between wet/dry referendums from 720 days to 1,440 days; while the Senate approved SB457, which outlines the parameters for the wine supplier/wholesaler relationship in Lee County.
On the last day possible, Sen. Del Marsh, R-Anniston, introduced SB509, which would allow the Piedmont City Council to authorize Sunday alcohol sales for on- and off-premises consumption.
House to Consider Outlawing Powdered Alcohol
Senate legislation to make powdered alcohol illegal in Alabama (SB365/HB421) is on the House’s agenda for Tuesday. Powdered alcohol is a new product expected to launch this summer. On first offense for possession, selling or use of the substance, individuals or businesses could face a Class A misdemeanor fine, which is up to $6,000. On second or subsequent offenses, a business or person caught selling powdered alcohol would be charged with a Class C felony.
NEXT LEGISLATIVE DAY
Both the Alabama Senate and House will convene at 2 p.m. Tuesday, June 2, for the 27th legislative day of the Alabama Legislature’s 2015 regular session.
