In preparation for the 2013 session of the Alabama Legislature, which begins on February 5, several of Alabama’s most prominent business and trade organizations have finalized their 2013 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.
Two leading professional organizations have also weighed in. The Alabama Society of CPAs (“ASCPA”) has a narrowly focused tax agenda this year, but—like the BCA, ARA and BBA—advocates 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 2013 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.” The Alabama State Bar Tax Section has traditionally 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 the firm’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 2013 state tax legislative agenda renews its support for several legislative proposals from last year and adds a few new items. “In keeping with long-term Business Council of Alabama policy,” BCA Senior Vice President/General Counsel Anita Archie stated, “should any tax or tax reform initiatives be proposed, BCA will not consider supporting legislation unless it is applied fairly without levying a disproportionate burden on any individual segment of Alabama's economy. Any tax proposal must be tied to governmental accountability and the elimination of wasteful spending.” During the 2013 regular session, the BCA will actively work to:
- Enact legislation creating 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 simultaneously abolish the Administrative Law Division of the Alabama Department of Revenue (“ADOR”). The ATAC provisions in TBOR II are based in large part on the ABA’s Model State Tax Tribunal Act, but also allow taxpayers to appeal final assessments of sales, use, rental, and lodgings taxes issued by self-administered localities or their contract auditing firms to the ATAC.
- Enact TBOR II, an update to and expansion of the original landmark legislation enacted in 1992, which among other things extends the appeal deadlines for taxpayers from 30 days to 60 days and enhances “innocent spouse” relief.
During 2013, 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 and provide a single point of filing for state and all local sales and use tax returns.
- Enact legislation that provides for the repayment of all funds transferred from the Alabama Trust Fund to the General Fund, as authorized under Act 2012-490 and ratified by the voters on September 18, 2012; provided that (1) the elected leaders of each branch of government continue to eliminate waste and duplication of services in state government and (2) no individual segment of the Alabama economy bear a disproportionate share of the financial burden.
- Enact legislation to establish a non-disclosure privilege for accountant workpapers.
- Enact legislation for state tax credits for the preservation and renovation of historic buildings.
- Enact legislation to provide for a research and development income tax/financial institution excise tax credit, parallel to the newly renewed federal R&D credit, with an extra incentive if a qualified research institution in the state performs the research.
At the same time, the BCA will oppose:
- Any efforts to establish 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.
The BCA will also monitor:
- Efforts to regulate and set minimum standards for individual tax preparers.
- Regulatory amendments related to the calculation and proper utilization of tax credits for tax payments to other states and foreign governments by Alabama residents.
- Legislation to provide for the carryforward of capital (income tax) credits on capital projects of less than $100 million of investment and that create less than 100 new jobs.
Business Council of Alabama Tentative Federal Tax Agenda
The BCA’s 2013 federal tax legislative agenda is subject to final approval later this month, but the tentative agenda renews the association’s support for several legislative proposals from last year and modifies a few others. During the 2013 regular session, the BCA will support efforts to:
- Pass comprehensive income tax reform that will lower the U.S. corporate tax rate, enabling American companies to compete for investment across the globe.
- Permanently repeal both the Estate Tax and the Alternative Minimum Tax (AMT).
- Create tax credits and incentives for small businesses that provide employee healthcare coverage, including prescription drugs.
- Enact the Business Activity Tax Simplification Act (BATSA) to clarify the requirement of physical presence as the nexus standard governing the assessment of state corporate income taxes and comparable taxes.
- Make the research and development (R&D) tax credit permanent.
- Make accelerated depreciation for capital investment permanent.
- Enact federal legislation to authorize states to streamline and simplify their sales/use tax system so that in-state and out-of-state retailers are on a level playing field.
At the same time, the BCA will oppose any efforts to:
- Impose retroactive tax increases on American businesses through modifications of tax rules applicable to closed or existing multi-year transactions.
- Change congressional tax policy where “revenue offsets” are used to underwrite the projected cost of tax cuts, and those offsets result in undue tax increases or undue new taxes on businesses.
- Alter the tax consequences of existing corporate compensation plans, including but not limited to taxing non-qualified deferred compensation plans and limiting deductions for compensation to business executives.
- Repeal the inventory method known as Last-In, First-Out (LIFO), which many manufacturers and retailers have employed for decades.
Alabama Retail Association Tax Agenda
The ARA’s 4,000+ members account for more than 75 percent of the total annual retail sales in Alabama. ARA President Rick Brown stated: “Retailers would like to see the Alabama Legislature continue its course toward streamlining state government and simplifying the state’s tax and regulatory processes.” During the 2013 regular session, the ARA will actively support:
- Legislation to “levelize” sales and use tax collection and remittance obligations between brick-and-mortar retailers and those that are catalog and/or internet-based.
- The 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, as described above.
- Enactment of TBOR II, as described above.
The ARA at the same time will oppose:
- “Band–Aid” or quick-fix tax schemes or singling-out one particular industry or segment of business for punitive tax increases.
- Patchwork tax efforts that would require unitary combined reporting for corporate taxpayers.
The ARA will monitor any legislation that alters the sales tax on groceries and will work to make changes if they are needed to make legislation more workable for retailers. ARA fully supports comprehensive tax reform.
Birmingham Business Alliance State Tax Agenda
The BBA supports the economic development and business prosperity of the Birmingham region. Vice President of Public Policy Alison Howell stated that the “[p]assage of legislation such as the Alabama Taxpayers’ Bill of Rights II, economic development incentives, and other important tax credit legislation will all play an integral role in the development of a vibrant and prosperous region and state. As an economic development organization, the BBA supports legislation that enhances our ability to recruit new businesses and industries to the region and that encourages growth and expansion of existing industry.” During 2013, the BBA will support:
- Legislation that would provide income 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.
- The proposed TBOR II/Alabama Tax Appeals Commission Act legislation which improves the tax climate of our seven-county region and state by, among other things, creating a more independent taxpayer appeals process.
- Legislation that would enact an investment tax credit that encourages more early-stage company investments. The goal is to launch more companies capable of generating jobs and having a positive impact on the state's economic growth.
- Legislation that would enact an R&D tax credit to parallel the federal credit, but would also be available to financial institutions.
- Legislation that implements the enabling legislation that Congress will pass 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 as the agent for both the state and the local governments. In turn, those vendors would have a single point of filing, be subjected to only one audit, and could rely on tax rate information furnished monthly by the ADOR.
Birmingham Business Alliance Federal Tax Agenda
The BBA also focuses on federal legislation that will have an impact on the economic development of the Birmingham region. During 2013, the BBA will support the following federal agenda items:
- Legislation that would authorize states, with proper enabling legislation, to require internet-based vendors to begin collecting state and local sales tax from their customers and remitting the tax to authorized states. Such legislation would also require a one-stop filing with and coordinated tax audit by the ‘single entity administrator,’ such as the Alabama Department of Revenue.
- Definite standards to govern when states may impose business activity taxes, such as BATSA, making it easier to determine the economics of interstate transactions.
At the same time, the BBA will oppose any efforts to repeal the LIFO inventory method, which would affect a number of its members.
Justin B. Cureton contributed to this article and is a third-year law student at Cumberland School of Law at Samford University in Birmingham.