Friday, Sept. 11, 2015

Some Revenue Measures Pass
in 1st Week of 2nd Special Session

CapitolSlantAlabama’s second special session to produce a workable general operating budget for the state is in progress and could last through the end of the month. Today marked the session’s fourth of 12 possible meeting days. The Legislature is expected to meet the first three days of next week.

Taxes have dominated discussion in the session that began Tuesday as they have throughout this year’s legislative season. The difference is several are making their way through the process.

So far, one chamber has approved up to $108 million in new General Fund revenue and money transfers of up to $125 million. Another $22 million for the General Fund and more than $150 million for roads and bridges have made it through committee approval. Unitary combined reporting (SB12), property tax (SB10), pornography tax (HB17) and lottery bills have either been rejected or their consideration put aside.

Avoiding discussion altogether so far is the elimination of the income tax deduction for the Federal Insurance Contribution Act, or FICA, which was part of the governor’s call for the special session.

The Alabama Legislature is taking advantage of the open-endedness of the governor’s call and is branching out on its own to find budget solutions. Vote margins in the House have been as tight as one vote. A few of those narrowly approved bills made it through a Senate budget committee today.

The 2016 budget year begins Oct. 1 and without a budget, state government will shut down. The House redrafted its version of the General Fund budget after a bill reforming the state’s business privilege tax stalled.

The dynamic of a special session changes quickly. The Alabama Retail Association is there to represent you in the hallways of the Alabama Legislature. We urge you to provide feedback to your legislators and your association, especially on the legislation included in this issue of the Capitol Retail Report. Talking to legislators and your association helps ensure the voice of retail is heard as public policy is made.

TAX STALLS

House Carries Over Business Privilege Tax;
Causes Budget Rewrite

The Alabama House today carried over a revision to the state’s business privilege tax, which was estimated to generate $22.5 million annually for the state’s General Fund. The House then approved a General Fund budget (HB1) without that $22.5 million in revenue.

Wednesday on an 8-5 vote, the House Ways and Means General Fund Committee approved HB21 by Rep. Mike Hill, R-Columbiana, which would eliminate the business privilege tax liability for more than 100,000 of the state’s smallest businesses, double the maximum tax for larger businesses and increase rates by up to 25 percent. The business privilege tax is a part of both the governor’s and the House leadership’s plan to help fill the budget gap. It could resurface later in the special session.

>> Read an analysis of the business privilege legislation

TAXES MOVING

(In order of projected revenue)

Full House, Senate Panel Approve
25-Cent-Per-Pack Cigarette Tax

The largest money producer of the taxes moving through the Legislature, a 25-cent-per-pack cigarette tax, narrowly passed out of the Alabama House of Representatives while the Senate Finance and Taxation General Fund Committee approved it today on a vote of 9-3.

HB3 by Rep. Connie Rowe, R-Jasper, passed the lower chamber by a six-vote margin Thursday. The bill raises the per-pack tax from 42.5 cents to 67.5 cents and also decreases the tobacco tax stamp discount for wholesalers from 7 percent to 4.75 percent. The Senate committee amended the bill to earmark the tax increase for the state’s Medicaid agency. The increase should bring in about $60.5 million in the first year and $66.5 million annually for the General Fund agency, according to the bill’s fiscal note. Rowe said, “I support the cigarette tax because I feel like this is part of the solution and not part of the problem.” The increase does not impact e-cigarettes, cigars and other tobacco products.

Lawmakers Vote to Increase Car Title Fee

By a two-vote margin, the Alabama House on Thursday approved HB14 by Rep. Reed Ingram, R-Matthews, which would raise vehicle title fees from $15 to $28. It sets the fee for requesting a title history at $15. The bill would raise an estimated $16 million in 2016 and $19.15 million annually thereafter for the General Fund. Ingram referred to the bill as an inflation adjustment. Alabama’s car title fee hasn’t been altered in more than two decades, he said. The Senate Finance and Taxation Education Committee discussed the bill this morning, then carried it over for later consideration.

Prescription Tax for Pharmacies Moving;
Sponsor Says Medicaid Will Increase Dispensing Fee

The Alabama House on a vote of 53-38 Thursday and the Senate Finance and Taxation General Fund Committee this afternoon approved legislation to create a two-year additional 15-cent provider tax on every prescription filled in Alabama. Under HB8 by Rep. Elaine Beech, D-Chatom, Alabama’s pharmacists would send 25 cents, rather than the current 10 cents, to the state every time they fill a prescription. Pharmacists filled 92.3 million prescriptions last year in Alabama, Beech said. Based on the bill’s fiscal note, the increase would generate almost $14 million.

“Medicaid will increase the dispensing fee on Medicaid prescriptions” to help offset the loss to pharmacies from the tax increase, Beech told representatives. For a pharmacy to break even after the loss of the tax increase and the gain from the promised dispensing fee increase, 8 percent of its prescriptions would have to be for Medicaid participants, Beech added. During the Senate committee meeting, Beech said the intent is to increase the dispensing fee from $10.64 to $13.90. According to the bill’s fiscal note, Medicaid would see a net gain of $8 million after it pays the higher dispensing fee to pharmacists.

The per-prescription tax, which is paid by pharmacists, not consumers, would be retroactive to Sept.1, with the September tax due to be paid by Oct. 20. Before the increase could become law, the Centers for Medicare and Medicaid Services would have to approve it.

House Approves .5% Increase in Rental Car Tax

In a vote of 50-49, the House voted Thursday to increase Alabama’s vehicle rental and lease tax from 1.5 percent to 2 percent. HB15 by Rep. Chris Sells, R-Greenville, is expected to increase motor vehicle rental tax collections to the General Fund by $5.1 million in the upcoming budget year and an estimated $6.1 million annually thereafter, according to the bill’s fiscal note. Sells said Alabama currently has the lowest rental car tax rate among the 40 states that charge rental taxes. This tax increase brings the rental car tax to the same tax rate paid when you purchase a car. The bill now awaits consideration by the Senate Finance and Taxation General Fund Committee.

TAXES WITH COMMITTEE APPROVAL ONLY

Gas Tax Would Fund State and Local Roads, Bridges

The House Transportation, Utilities and Infrastructure on Thursday approved a bill that would put a 5-cent per gallon tax on fuel. HB28 by Rep. Mac McCutcheon, R- Huntsville, awaits action by the full House. The bill adjusts the tax up or down by two cents each year, depending on consumer prices and other factors. The bill would generate $66 million to go directly to the Alabama Department of Transportation in 2016 and $100 million in 2017. It also would yield $36 million for local governments in 2016, rising to $54 million in 2017 and would also provide lesser amounts to the Alabama Department of Conservation and Natural Resources and the Alabama Law Enforcement Agency.

Bill Repeals Certain Insurance Premium Credits

The Senate Finance and Taxation Education Committee this morning approved $29 million in changes to the state’s insurance premium tax. Specifically, the bill repeals facility and investment credits. SB35 by the committee’s chairman, Sen. Trip Pittman, R-Daphne, passed on a 9-4 vote. It now awaits consideration by the full Senate.

TAX THAT DIDN’T MAKE IT
OUT OF COMMITTEE SO FAR

Senate Panel Discusses, Doesn’t Vote
on Unitary Combined Reported

As she did in the first special session, Sen. Linda Coleman, D-Birmingham, called for the mandatory unitary combined reporting of corporate income tax, something no other Southeastern state requires. The Senate Finance and Taxation Education Committee decided Wednesday not to vote on SB12. The bill would have applied to every business, both inside and outside the state, with multi-state tax obligations. The legislation most likely will reemerge in the next regular session.

MINIMUM WAGE

Bill Would Ban Local Minimum Wages in Alabama

The House Ways and Means General Fund Committee today voted 10-4 in favor of HB 27 by Rep. David Faulkner, R-Mountain Brook, which would prohibit cities and counties from setting their own minimum wages. In August, the Birmingham City Council voted to raise the minimum wage in that city to $8.50 in July 2016, then to $10.10 in July 2017. If signed into law, the state ban would negate the Birmingham minimum wage. The bill now moves to the full House for consideration.

NEXT LEGISLATIVE DAY

The Alabama House of Representatives will meet at 10 a.m. Monday, Sept. 14, 2015, for the fifth legislative day of the second 2015 special session. The Senate had not specified a meeting time at press time.