BCA-BACKED TAX FAIRNESS BILL IN POSITION FOR PASSAGE     

A long-standing Business Council of Alabama goal and a significant piece of business tax fairness legislation neared finality Thursday as the Senate placed the House-passed Taxpayers Bill of Rights II on its calendar for possible consideration next week.

For years TBOR II has been on the business community's must-do list. In Wednesday's Senate committee meeting, supporters, including the BCA, had the opportunity to explain its merits and dispel incorrect assumptions and statements.

On Wednesday the Senate Fiscal Responsibility and Accountability Committee on a 5-2 vote approved HB105 by Rep. Paul DeMarco, R-Homewood, which had passed the House 97-2 on Jan. 16. (Technically, the Senate committee conducted a public hearing on SB74, the Senate version of the bill sponsored by Sen. Bryan Taylor, R-Prattville, but carried it over and favorably reported the House bill.)

TBOR II, would update the original, 22-year-old TBOR, abolish the Department of Revenue's Administrative Law Division, and change it to an independent Alabama Tax Appeals Commission within the executive branch. The bill would allow local governments the option of using this tax appeals commission or their existing appeals process to settle local tax disputes.

Members of the Alabama business community have joined forces with the BCA in support of the legislation under the banner of the Business Associations' Tax Coalition (BATC), which includes 27-member business and trade associations.

Attempts to pass this legislation stretch back to the late 1990s. Over the years, the legislation has not been enacted for various reasons, including anti-business leanings of previous legislatures, misunderstandings, erroneous conclusions, apathy concerning the bill, and even simple bad luck.

BCA President and CEO William J. Canary said "modernizing the TBOR and creating some form of independent tax appeals model has been the business community's priority for years. And this (bill) is important to smaller taxpayers who cannot afford to file a lawsuit," Canary said.

"A majority of states (31) have passed some version of this," Canary testified. Georgia is among the latest.

Opponents signed up at Wednesday's Senate committee public hearing included the state director of the Alabama chapter of the National Federation of Independent Business and the Alabama Education Association teacher's union.

Canary said, for example, the Tennessee chapter of the National Federation of Independent Business has made similar legislation its top 2014 legislative priority: "NFIB continues to advocate strongly for legislation that would enable taxpayers under audit to appeal to a tax tribunal independent from the Department of Revenue," the Tennessee NFIB says on its website.

"Not passing this legislation in Alabama will create an economic development disadvantage for our state in attracting new business and maintain a positive tax environment for existing business because Georgia, Mississippi and now likely, Tennessee will adopt a form of this legislation," Canary stated.

AEA Revenue and Funding Manager Susan Kennedy said she feared that the bill would create a new agency funded by the Education Trust Fund and decrease the amount available for schools. "We don't know what the cost of the bill is," Kennedy said, adding that the union sees it as potentially harmful to the ETF.

Birmingham tax attorney Bruce Ely, who represents the BATC, said the Administrative Law Judge is visible as a line item in the annual budget. "There is no extra cost," he said.

Jennifer Hand, a CPA and the accounting manager for Allied Energy Co. LLC in Birmingham, said an independent tax appeals process is important because it creates the appearance of neutrality.

Hand also said that the bill's "innocent spouse" provision is important to small businesses that are generally operated by a husband or wife without intimate knowledge of business operations by the non-involved spouse.

The annual appropriation to the Administrative Law Division is assigned to the ATAC so there will be no additional cost. "We're not creating a new agency," Sen. Taylor said. "We're abolishing it in DOR and setting it under an independent commission."

During last week's legislative briefing at BCA for the business community, Governor Bentley's Chief of Staff, David Perry, said the governor would sign the legislation if it reaches his desk.

During committee hearings on the bills, House and Senate members stressed that there has been no allegation of bias or unfairness by the current DOR's administrative law judge.

The measure is listed on the House Republican Caucus' 2014 "Commonsense Conservative" legislative agenda, an endorsement that dispels misguided conclusions and instead speaks to the merits of the legislation in promoting tax fairness for business taxpayers of all sizes and sectors.

HOUSE SPEAKER VOWS TO MAINTAIN A BUSINESS-FRIENDLY HOUSE OF REPS

Hubbard, R-Auburn, the first Republican House speaker in 136 years, spoke at the BCA's  Governmental Affairs Committee's weekly pre-legislative session briefing.

The House and Senate on Tuesday began their second work week of the 2014 Legislature, the final one of the four-year quadrennium in an election year for legislators and state constitutional officers.

Hubbard became speaker in 2010 when voters elected a supermajority of Republicans to both the House and Senate. He and Senate President Pro Tem Del Marsh, R-Anniston, who formed and operated their own companies, listened to business and promoted private-sector friendly legislation.

"Our No. 1 objective from day one was to make Alabama business-friendly," Hubbard said. "We have done that and are continuing."

Hubbard said there is a plan to protect the pro-business Republican majority in both houses during the June primaries when election challenges to incumbents are expected and in the November general election.

"This Legislature obviously is a conservative, pro-business, and pro-private sector Legislature," Hubbard said. "We will be protecting those and hopefully will put up a few more."

Hubbard said the Legislature's first week was "very productive" and actually resulted in the passage of more bills than anticipated.

They included HB105, the Taxpayers' Bill of Rights, by Rep. Paul DeMarco, R-Homewood. The BCA actively supports this bill, known as TBOR II, which would update the 1992 Taxpayers' Bill of Rights law and would conform to federal law and promote tax fairness and compliance.

The Senate Fiscal Responsibility and Accountability Committee passed HB105 Wednesday, and carried over SB74.

The bill also would create a tax appeal tribunal independent of the Alabama Department of Revenue and would allow local governing bodies the option of using this tax appeals commission or their existing appeals process to settle local tax disputes.  The legislation has been a BCA priority for several years and got a boost this year when it became part of the House Republican Caucus's "Commonsense Conservative" legislative agenda.

The House also passed and sent to the Senate the Small Business Tax Relief Act by Rep. Barry Moore, R-Enterprise. Moore's HB151 raises the threshold for sales taxes that a business must pay in advance from $1,000 per month to $2,500 per month. The House bill was assigned to Senate Committee on Finance and Taxation Education. The Senate passed its own version of this bill.

Also passing the House last week was the Business Tax Streamlining Act, HB108, by Rep. Greg Wren, R-Montgomery. It would create a new, online filing system for business personal property taxes. The bill was sent to the Senate for consideration.

The House passed and sent to the Senate another business-friendly bill, the Tax Elimination Act, by Rep. Jim Patterson, R-Meridianville. Patterson's HB97 would give the Alabama Department of Revenue the authority to suspend taxes and fees when the cost of collecting the tax exceeds the amount of tax to be collected.

The "anti-patent trolling" bill, SB121 sponsored by Sen. Arthur Orr, R-Decatur, is on the Senate calendar in position for consideration when the legislature returns to Montgomery on Tuesday.

The Senate Financial Responsibility and Accountability Committee on Wednesday voted 7-0 to favorably report the bill that, if it becomes law, would prohibit a person or company from asserting a claim of patent infringement in bad faith and would authorize the attorney general to investigate and prosecute enforcement action.

The patent-litigation, or patent-trolling, industry, removes significant finances from businesses that often cannot afford to fight a massive legal attack. The patent-trolling industry buys up or acquires broad patents not to use the technology but to extract licensing fees from companies that might accidentally infringe on the patent.

"It's legal extortion," said Orr, who added that the various sides in the issue agreed to a compromise bill.

Senate committee Chairman Sen. Phil Williams, R-Rainbow City, explained an important part of the bill. "It doesn't limit the right to file a lawsuit if there is a legitimate patent issue," Williams said.

Patent litigation has become a significant issue not only to the BCA but also to the Alabama Bankers Association and the Alabama Grocers Association. "We should be doing everything we can to stifle the patent-troll business model and protect American businesses from expensive and meritless legal distractions," according to a position paper by the presidents of three organizations.

Similar anti-patent trolling efforts are under way in the U.S. Congress that is reacting partly to a Boston University study showing that the direct cost to the patent abuse system in 2011 was $29 billion.

The U.S. House in December on a vote of 321-95 approved the federal Innovation Act, H.R. 3309, sponsored by U.S. Rep. Bob Goodlatte, R-Va. "More Democrats than Republicans opposed the legislation, but the legislation enjoyed large majorities in both parties," the Washington Post reported.

According to the Post, "trolls" have moved beyond targeting conventional technology companies and are suing restaurants, supermarkets, airlines, casinos, real estate agents, and other brick-and-mortar businesses. Sometimes they charge the businesses a set fee per employee to avoid a lawsuit.

For example, a patent troll might sue a small coffee shop that offers wi-fi service provided by a major technology company, scaring the coffee shop into paying an exorbitant "patent" fee. The Post said that internet companies such as Google have been a driving force behind the bill.

The House State Government Committee on Wednesday approved the Fair and Open Competition in Governmental Construction Act, HB195, sponsored by Rep. Mack Butler, R-Rainbow City. The bill that was approved on a voice vote is on the House calendar in position for consideration when the House returns in session on Tuesday.

The bill would require state and local public agencies, with some valid exceptions, to remain neutral by prohibiting any requirement to use union labor in public improvement contracts by state or local public agencies, unless there is an imminent threat to public health or safety.

"This would go on merit and price on your bid," Butler said. "(Requiring a union agreement) could escalate the cost 20 percent to 30 percent."

According to the bill's synopsis, the measure would promote "the economical, nondiscriminatory, and efficient administration and completion of state and state-funded or state-assisted construction projects" and provide for "fair and open competition for construction contracts, grants, tax abatements, and tax credits awarded by governmental units."

Four years ago, President Obama issued an executive order encouraging federal agencies to require project labor agreements with project-specific collective bargaining unions on projects of more than $25 million.

According to the bill's overview, a PLA can force contractors to recognize unions and use union halls to hire workers for projects. If mandated in Alabama, PLA requirements would make it nearly impossible for 90 percent of Alabama's construction employers that choose not to join a labor union to compete for project paid for with their own tax dollars. The legislation would ensure that Alabama is protected against the PLA initiative on public construction projects and create a level playing field.

The BCA supports this legislation.

The Senate on Wednesday passed a bill to change the Legislature's oversight of its various offices and functions, sending the bill to the House.

The Senate voting 18-15 approved SB11 by Sen. Jimmy Holley, R-Elba, to alter the oversight system. SB11 would change the current Legislative Council, which acts as an executive committee for legislative functions, to a 20-member Legislative Council consisting of 10 House and Senate members each.

The bill was assigned to the House Internal Affairs Committee.

The Legislature's non-member functions are controlled by an appointed House clerk and Senate secretary under the authority of various committees that can have dozens of legislators as members. The new council reduces the number of potential legislators involved in oversight.

Holley's bill would abolish the Legislative Council, the Joint Fiscal Committee, the Legislative Building Authority, and the Permanent Legislative Committee on Reapportionment, and shift their responsibilities to a reconstituted Legislative Council consisting of the House Legislative Council and the Senate Legislative Council.

"Let's do for the legislative branch what we did for the executive branch," Holley said at a previous committee hearing on the bill, referring to legislative approval to streamline government.

The Legislative Council would recommend salaries and responsibilities of employees of its support offices and would create a new office of Executive Secretary of the Legislative Council, director of Human Resources, and Director of Technology. The new oversight would become effective on the first day of the 2015-2018 legislative quadrennium.

SB122, by Sen. Arthur Orr, R-Decatur, provides a limited tax credit and refundable tax credit against the state income tax for "qualified research expenses" incurred by businesses. The proposed credit is parallel to the federal research and development tax credit.

The Commerce, Transportation, and Utilities Committee approved SB122, and it was placed on the Senate calendar for consideration by the full Senate.

The bill provides a two-tiered research credit, with an enhanced credit allowed if the taxpayer made "basic research payments," as determined under the Internal Revenue Code, to a public university or other research institutes. Any amount of the enhanced credit that exceeds the taxes due may be carried forward for up to five consecutive years.

A taxpayer that employs fewer than 150 employees whose research credit exceeds the taxes otherwise due may receive a refundable credit of 75 percent of the excess. The bill limits the aggregate amount of the research credit to not more than $5 million per year, with the aggregate amount of the refundable credit not to exceed $2 million annually.

Rep. Terri Collins, R-Decatur, has the companion HB345, which is in the House Small Business and Commerce Committee.

The BCA supports this legislation.

During Governor Robert Bentley's State of the State speech at the start of the 2014 regular legislative session, he mentioned his intent to follow through on a recommendation from his College and Career Ready Task Force calling for the creation of a workforce council.

SB217, sponsored by Sen. Paul Bussman, R-Cullman, provides for the creation of the 16-member Alabama Workforce Council to be comprised of senior officers from business and industry who will advise and support the State Superintendent of Education and the chancellor of the Department of Postsecondary Education.

The Senate passed Bussman's bill 28-0 on Thursday and sent it to the House. It was assigned to the Commerce and Small Business Committee for consideration.

The Council will be charged with reporting annually to the governor, the legislature, the State Board of Education, and the Council of University and College Presidents.

The Council will advise state officials on ways to better streamline and align the workforce functions of the state, strategies to market and promote awareness of the career opportunities available in various industry sectors and on how to replicate best practices, particularly those public-private partnerships that have proven to be successful in developing pipelines of qualified trainees and retrained workers for available jobs.

The BCA supports this legislation.

The Senate this week by a vote of 28-0 passed the drought bill, SB20 by Sen. Billy Beasley, D-Clayton. The bill then went to the House where it was referred to the Agriculture and Forestry Committee. The legislation would codify the Alabama Drought Assessment and Planning Team (ADAPT) process that has been in place through executive order for more than a decade. The bill also will require the development of drought plans for water utilities and the State of Alabama. Prior to passing the Senate, Beasley amended the bill to specifically add the director of the Choctawhatchee-Pea Water Authority to the ADAPT, giving this group two members on ADAPT.  

This week, the House companion, HB49, by Rep. Alan Boothe, R-Troy, was substituted and favorably reported out of the House Agriculture and Forestry Committee. The substitute specifically adds the director of the Choctawhatchee Pea River Watershed Authority to ADAPT, but it does not create two appointments for this organization.

The landfill bill, HB292 by Rep. Alan Baker, R-Brewton, was discussed and carried over in the House Committee on County and Municipal Government this week. The bill would amend the Solid Waste law, Section 22-27-48 of the Code of Alabama, to require a local governing body to affirmatively approve a new or modified permit application for a solid waste disposal facility within 180 days. Otherwise, the application would be deemed denied. The current law specifies that if a local governing body doesn't act on an application within 90 days, the application is considered approved. HB292 also requires that an applicant provide specific written documentation to be considered by the local governing body.