In preparation for the 2014 session of the Alabama Legislature, which begins January 14, several of Alabama’s most prominent business and trade organizations have issued their 2014 tax legislative agendas. Most notably, the 5,000-member Business Council of Alabama (BCA) and the 4,000-member Alabama Retail Association (ARA) have adopted far-reaching tax legislative agendas. The Birmingham Business Alliance (BBA), the state’s largest chamber of commerce, has adopted many of the same tax agenda items, plus a few different ones.
In addition to the BCA, ARA, and BBA, two of the state’s leading professional organizations have also weighed in. The Alabama Society of CPAs (ASCPA) and the State Bar Tax Section are also—like the BCA, ARA and BBA—advocating for the passage of the Alabama Taxpayers’ Bill of Rights II (TBOR II) legislation outlined below.
According to ASCPA President Jeannine Birmingham, “the ASCPA plans to support efforts toward successful passage of TBOR II during the 2014 legislative session. Many members have been a part of this effort, and we intend to support the bill with concentrated emphasis on the independent tax appeals commission.”
Traditionally, the Alabama State Bar Tax Section has led the effort on this landmark legislation, which has also been endorsed by the American Bar Association, the Council On State Taxation, the Tax Executives Institute, and most recently, the American Institute of CPAs. Members of BABC’s SALT Practice Group are involved in drafting the TBOR II legislation as well as drafting or advocating the passage of several other tax proposals described below.
Business Council of Alabama State Tax Agenda
The BCA’s broad-based 2014 state tax legislative agenda renews its support for several legislative proposals from last year and adds a few new items. In keeping with its long-term policy, the BCA has announced that it “will not consider supporting [any proposed tax or tax reform initiatives] unless [the legislative proposal] is applied fairly without levying a disproportionate burden on any individual segment of Alabama’s economy. Any tax reform proposal must be tied to government accountability and the elimination of wasteful spending. It is further the policy of the BCA that taxes and regulatory fees be properly aligned such that they are commensurate with the actual costs of performing the necessary day-to-day functions of the affected state agencies.”
During the 2014 regular session, the BCA will actively work to:
- Create the Alabama Tax Appeals Commission (ATAC) as an independent state tax agency, headed by a judge selected in a non-partisan manner who has specific training in state and local taxation. The legislation would also abolish the Administrative Law Division of the Alabama Department of Revenue.
- Enact the Alabama Taxpayers’ Bill of Rights II, an update and expansion of the original landmark legislation enacted in 1992, which extends the appeals deadlines for taxpayers. [Rep. Paul DeMarco has pre-filed the bill as HB 105; Senator Bryan Taylor has pre-filed the Senate version as SB 74.]
During the 2014 regular session, the BCA will support efforts to:
- Streamline and simplify our sales/use tax system so that in-state and out-of-state retailers are on a level playing field.
- Implement a unified audit process to stop businesses from being audited by the Alabama Department of Revenue, and then by cities, counties and private auditing firms for the same tax and same tax periods.
- Provide for a research and development income tax credit parallel to the federal R&D credit, with an extra incentive if a qualified research institution performs the research.
During the 2014 regular session, the BCA will oppose:
- Establishing unitary combined reporting in Alabama.
- Any attempts by state taxing authorities to require disclosure, beyond those made in federal income tax returns, for uncertain tax positions or tax shelter items. Specifically, the BCA opposes any state-specific disclosures.
Alabama Retail Association State Tax Agenda
The ARA, along with the 31 member Business Associations’ Tax Coalition (BATC), will continue to push for TBOR II (HB 105/SB 74), which will centralize Alabama’s tax appeal process and make that process independent of taxing authorities. “An independent tax judge makes sense,” said ARA President Rick Brown. “The judge who decides your fate shouldn’t be an employee of the taxing authority you disagree with.”
In 2014, the ARA also will advocate for increasing the average monthly sales tax liability threshold for businesses required to remit estimated sales tax payments. Currently, the average monthly tax liability threshold for a taxpayer to be required to make estimated payments is $1,000. “Thousands of Alabama’s smallest businesses will benefit from this legislation to allow them to remit sales taxes after the fact, rather than in advance of sales,” said Brown.
The ARA will continue to lobby Congress to approve the Marketplace Fairness Act, S.336/S.743 and H.R.864, which would allow states to require all retailers to collect sales tax at the point of sale. “We feel good about the probability of final passage in 2014 of this much-needed and long-awaited legislation that will finally level the playing field for all retailers in regards to sales tax collection,” said Brown.
During the 2014 regular session, the ARA will actively support:
- Legislation to “levelize” sales and use tax collection and remittance between brick-and-mortar retailers and those that are internet- and/or catalog-based.
- Legislation to increase the average monthly sales tax liability threshold for businesses.
- Creation of the ATAC as an independent state tax agency headed by a judge with specific training in the area of state and local taxation. This legislation should also abolish the Administrative Law Division of the Alabama Department of Revenue.
- The TBOR II, as described above.
At the same time, the ARA will oppose:
- “Band-aid” or quick-fix tax schemes or singling out one particular industry or segment of business for punitive tax increases. Alabama Retail vehemently opposes any patchwork tax efforts.
- Required unitary combined reporting for corporate taxpayers.
In addition, the ARA will monitor any legislation that alters the sales tax paid on groceries and will work to make changes if they are needed to make the legislation more workable for retailers.
Birmingham Business Alliance State Tax Agenda
The BBA’s 2014 state legislative agenda is robust in ambitious tax initiatives. With regard to its tax agenda, BBA Vice President of Public Policy Alison Howell said, “Ensuring that the Birmingham region’s tax and incentives climate is competitive is a key component to job creation and capital investments. Over the past several years, the BBA, as well as many of its partner organizations across the state, has worked tirelessly to pass the Alabama Taxpayers’ Bill of Rights II legislation. There is great support and enthusiasm for this bill and many of our investors would like to see this much-needed and meaningful legislation finally make it across the finish line this year.”
During the 2014 regular session, the BBA will support:
- The proposed TBOR II/ATAC legislation (HB 105/SB 74), which improves the tax climate of the seven-county region and state by, among other things, creating a more independent taxpayer appeals process.
- Making permanent the tax credits for the rehabilitation, preservation and redevelopment of residential or commercial historic structures to stimulate private investment, downtown and neighborhood revitalization and job creation.
- Making permanent the tax credits available under the Alabama New Markets Development Act for certain investments in qualifying low-income communities.
- Legislation that would authorize an investment tax credit that encourages more early-stage company investments. The goal is to launch more companies capable of generating jobs and have a positive impact on the state’s economic growth.
- Legislation that would authorize a research and development (R&D) tax credit parallel to the federal tax credit (including financial institutions and their unique tax).
- Legislation to affirm the long-standing exemption for sales and use tax for private schools and colleges in Alabama, which are qualified as tax-exempt entities pursuant to § 501(c)(3) of the Internal Revenue Code.
- Legislation that implements the enabling federal legislation to allow state and local governments to require the larger online vendors to collect sales tax from their customers in Alabama and remit the tax to the Alabama Department of Revenue (ADOR), as the agent for both the state and the local governments. In turn, those vendors would have an enhanced single point filing, be subjected to only one audit, and could rely on tax rate information furnished monthly by the ADOR.
- Expanding the Alabama Accountability Act’s scholarship tax credit provisions to allow credit for the financial institution excise tax, insurance premium tax, and other taxation streams paid by pass-through business entities.
© January 2014. Bruce P. Ely/James E. Long, Jr./William T. Thistle, II/J. Sims Rhyne, III/Bradley Arant Boult Cummings LLP.