In preparation for the 2016 regular session, which begins on February 2, several of Alabama's key trade and business organizations recently announced their tax legislative agendas. As reflected in these agendas, the 2016 session promises to be an active one as these organizations work with legislators to reintroduce tax bills previously considered or introduce new strategies for securing the state's economic growth and prosperity. And in some cases, to work to defeat anti-business legislation such as mandatory unitary combined reporting.
Undoubtedly, General Electric’s decision to leave Connecticut in large part due to that state’s enactment of a mandatory unitary combined reporting bill will be mentioned during any debate on an Alabama “MUCR” bill. It is uncertain, however, whether the Alabama Department of Revenue (ADOR) will again lead the effort to enact such a bill, in light of recent statements by the Governor.
As summarized below, the influential Business Council of Alabama (BCA) and the Birmingham Business Alliance (BBA), the state’s largest chamber of commerce, have adopted extensive state tax legislative agendas. One of the state's leading professional organizations, the Alabama Society of CPAs (ASCPA), also weighed-in, but did not issue a formal agenda. ASCPA President Jeannine Birmingham said, "The ASCPA will align our legislative support with the state tax agenda of the BCA. We do not have any legislative issues this year that are specific to the Uniform Accountancy Act." Ms. Birmingham co-chairs the BCA’s Tax & Fiscal Policy Committee, along with our own Chris Grissom.
Business Council of Alabama Tax Agenda
Building on last year's legislative successes, the BCA will urge passage of proposals that provide additional economic growth and industrial recruitment.
During this year's regular session, the BCA will support:
- Streamlining and simplifying the sales/use tax system so that in-state and out-of-state retailers are on a level playing field, and implementing 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.
- Legislation to provide for a Research and Development Tax Credit parallel to the federal R&D credit, with an extra incentive if a qualified research institution in the state performs the research.
- Coordinating with other stakeholder organizations to develop proposals, including a multistate compact among the Southeastern states, to increase compliance with Alabama’s sales and use tax laws by Internet and other out-of-state vendors.
- Legislation to provide for the carry-forward of capital credits on capital projects of less than $100 million of investment and that create fewer than 100 new jobs.
- Reforming state-county business license statutes to provide a simpler and more uniform process for businesses to apply and receive an annual business license.
- Monitoring efforts to regulate and set minimum standards for individual tax preparers.
- Increasing Alabama’s public investment in transportation infrastructure to sustain and promote economic growth, job creation, quality of life, and public safety.
- Effective and accountable proposals for economic development incentives for the recruitment and retention of business and industry.
- Reauthorization and extension of proven economic development incentives and tax credits, including the Historic Structures Tax Credit, the New Markets Tax Credit, and the Certified Capital Company Tax Credit.
- Legislation conforming Alabama tax return due dates to new federal (IRS) tax return due dates.
- Researching efforts to simplify Alabama’s income tax code.
- Reducing the administrative burden and streamlining the process by which non-profit organizations exempt from paying sales, use and lodging tax receive a certificate of exemption annually from the Alabama Department of Revenue and file information returns.
- Clarifying the exemption from the Alabama business privilege tax for any limited liability company that is wholly-owned by a tax-exempt organization.
Conversely, in 2016, the BCA will oppose:
- Further efforts to establish mandatory unitary combined reporting or “MUCR” 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, BCA opposes any state-specific disclosures.
- State and local efforts to authorize and fund government-owned broadband networks that would directly compete with the private sector outside of the jurisdiction allowed under current law, which would create an un-level playing field.
- The unilateral expansion of existing taxes and revenue measures through the regulatory process and/or agency interpretations of existing laws beyond the constitutional and statutory authority of the agency or regulatory body.
Birmingham Business Alliance Tax Agenda
The BBA also endorses several tax legislative proposals at both the state and federal levels. According to Alison Howell, the organization's Vice President of Public Policy, "The Birmingham Business Alliance continues to support responsible and economically feasible tax incentives legislation that will propel our region and state into a competitive position, nationally and globally." As such, the BBA's tax agenda endorses several of the same proposals as the BCA, but also addresses several measures not included in the BCA's agenda. Specifically, the BBA advocates:
- An Early Stage Investment Tax Credit 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.
- State legislation that implements the Remote Transactions Parity Act of 2015, once that bill or a similar bill is enacted by Congress, 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 of filing, be subjected to only one audit, and could rely on tax rate information furnished monthly by the ADOR.
- The continuation of the Insurance Premium Tax Credit at the current level which offsets insurance premium taxes paid to the Alabama General Fund. The premium tax credits offer incentives to insurance companies operating in the state to invest in Alabama and create jobs.
- Modifying the state sales and use tax certificate of exemption legislation enacted last year so as to reduce the administrative burden and streamline the process by which non-profit organizations exempt from sales, use, and lodging tax must now apply annually for a certificate of exemption from the Alabama Department of Revenue and file as-yet unspecified information returns.
- Efforts to make permanent the tax credits available under the Alabama New Markets Development Act for certain investments in qualifying low-income communities and the Alabama Historic Structures Tax Credit for renovating certified historic structures. Birmingham area developers claim these two credits have jump-started a number of renovation/restoration projects in downtown Birmingham.
- A Research and Development Income Tax Credit parallel to the now permanent federal R&D credit, with an extra incentive if a qualified research institution in the state performs the research.
- The proposed federal Business Activity Tax Simplification Act (BATSA) that would provide definite standards to govern when states may impose business activity taxes such as income and business privilege taxes, thus making it easier to determine the economics of interstate transactions.
- The federal Short Line Tax Credit Extension, which extends the Short Line Tax Credit that expired on December 31, 2014. This credit assists the smaller freight railroads across Alabama and the United States with upgrades to their lines, enabling them to handle larger, already-existing freight car shipments traveling across the country. The lines of these smaller freight railroads are often the key for prosperity and economic growth for areas they serve.
Conversely, the BBA stated that it will oppose any Congressional effort to repeal the "Last In, First Out" (LIFO) Inventory Method.
Note: Several members of the firm’s SALT Practice Group and Governmental Affairs Practice Group are involved in drafting or advocating the passage of many of the above legislative proposals. Special thanks to our law clerk, Sarah Bothma, for her research and drafting in this annual effort. If you have any questions regarding the contents of this bulletin, please contact Bruce Ely at firstname.lastname@example.org, James Long at email@example.com, Chris Grissom at firstname.lastname@example.org, or Dave Stewart at email@example.com.