Jefferson County Sales Tax Ruling Appealed, Constitutional Amendment on November Ballot

State and Local Tax Alert: Alabama Edition

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A decision affecting Jefferson County’s one-cent sales tax increase to pay for a bond refinancing has been appealed to the Alabama Supreme Court, but the ramifications of the circuit court ruling have proved to be much broader. The appeal comes from the decision rendered by Jefferson County Circuit Judge Michael Graffeo in Jefferson Cnty. v. The Taxpayers and Citizens of Jefferson Cnty. In his decision, Judge Graffeo held that a local sales and use tax authorized by HB 573 was unconstitutional due to the method by which it was passed. At issue is a requirement in the Alabama Constitution stipulating that three-fifths of a quorum in the House of Representatives must be reached for any budget isolation amendment to pass, after which the subject bill may be brought up and passed in due course. Since a quorum of the House is 53 members, a minimum of 32 votes would have been necessary to pass HB 573. However, only 13 members voted in favor of HB 573, which ultimately passed due to a conflicting but longstanding House rule that the necessary threshold for passing a budget isolation amendment (BIR) is merely three-fifths of the members present and voting.

Not only Jefferson County officials but numerous mayors, city councils, county commissioners and state legislative leaders warn that, through invalidating this law, literally hundreds of other local bills passed by the same quorum requirement over the years are potentially at risk. These bills reportedly include matters pertaining to school funding measures, outlays for local hospitals, municipal boundary lines, and even permits for neighborhood craft beer brewers.

In an attempt to remedy the dispute, a proposed constitutional amendment introduced by Sen. Cam Ward (R-Alabaster), SB 7 (Act 2016-430) was passed with little debate and will be included on the statewide ballot in November. The amendment would solidify the House quorum requirement for future budget isolation amendments, while also applying retroactively – thereby relieving the Alabama Supreme Court from having to rule on this delicate matter.