JANUARY 26, 2018 — If I told you that two major topics of discussions in the Capital City this week were taxes and elections, you would probably think those conversations were taking place in Washington, D.C. But during the third week of the 2018 session, taxes and elections were actually the focus on the House and Senate floors here in Montgomery.
By a 67-31 party-line vote, the Alabama House on Monday approved House Bill 17, a measure sponsored by Rep. Steve Clouse (R-Ozark) that changes how the state would fill future U.S. Senate vacancies. As demonstrated last February, current Alabama law allows the governor to temporarily fill any vacancy in the office of U.S. Senator, but also requires the governor to “forthwith order an election” to choose the person who will fill the remainder of the unexpired term. With no clear definition of “forthwith,” a governor was well within his or her rights to quickly call for a special election rather than allow the appointee to serve until voters were already scheduled to be at their polling places. And while calling for an unscheduled election is an appropriate and legal decision, it is also a costly one. In fact, some state officials have pegged the cost of last year’s special election cycle – the August primaries, the September run-off, and the December general election – at more than $10 million, a cost that must be paid from the State General Fund. For that reason, Clouse, who chairs the committee charged with writing the State General Fund budget, is seeking to amend the law so that while the governor would continue to make a temporary appointment to fill a U.S. Senate vacancy, the appointee would serve until the next general election. If, for example, this bill had been enacted prior to Alabama’s recent vacancy in the office of U.S. Senator, Luther Strange would have served as our state’s junior senator from February of 2017 until November of this year, and the primary, run-off, and general elections to fill the unexpired U.S. Senate term would have been held at the same time as the primary, run-off, and general elections for all of the state offices on the 2018 ballot. In the floor debate, Clouse made clear that this legislation was developed and filed long before Alabamians sent U.S. Sen. Doug Jones to Washington, D.C. He also acknowledged that while this legislation might lengthen the time a temporary appointee might serve in the U.S. Senate, that change in state law is more than justified by the cost savings that would be realized in the State General Fund if no statewide special election needed to be scheduled. The bill now goes to the Alabama Senate.
As for taxes, taking a page from President Donald Trump’s playbook, Senate President Pro Tempore Del Marsh (R-Anniston) spearheaded Senate passage of Senate Bill 76, legislation he sponsored that allows more Alabama taxpayers to take the maximum standard deduction on their state income taxes. Reportedly, this is the first across-the-board income tax cut bill to pass the Alabama Senate since 2006. Passed unanimously on Thursday, the bill is expected to positively affect 182,000 Alabama state income tax returns, saving taxpayers a collective $4 million by allowing more taxpayers to qualify for the full standard state income tax deduction. The bill now goes to the Alabama House where, given the bipartisan support the bill garnered in the upper chamber, it will likely face little-to-no opposition.
As always, Capitol Notes provides readers with a brief summary of legislation that might impact Alabama’s banking industry. Those summaries are as follows:
House Bill 90 by Rep. Kerry Rich (R-Albertville) and Senate Bill 30 by Sen. Clay Scofield (R-Arab) make technical changes to an association-supported law passed in 2015 related to the right of redemption for homesteaded properties. Current law caps the redemption period for these properties at 180 days, while the redemption period for all other types of properties is one year. In exchange for the shorter redemption period, legislators in 2015 required that a property owner be notified via certified mail of his redemption rights. These bills merely stipulate that even if this notice is defective, the redemption period is the same as it is for all other types of properties (i.e., one year). It also states that being able to prove the notice was mailed is a defense to a claim that the notice was never received. Both bills are expected to see action in the Senate Banking and Insurance Committee as early as next week.
House Bill 100 by Rep. Will Ainsworth (R-Guntersville) and Senate Bill 60 by Sen. Clay Scofield (R-Arab) are association-drafted bills aimed at correcting an issue in state law that was discovered last year. With the exception of county commissions, all public depositors are allowed to elect their qualified public depository at any time, meaning a local school board could theoretically deposit its public funds in Bank A on a Monday, only to draw them out and deposit them in Bank B the next day. With county commissions, however, the qualified public depository must be elected the first week of every December and used for the entirety of the subsequent year. These bills simply allow county commissions, like all other public depositors, to elect their depository at any time. Both bills await action by the full House and Senate, as House Bill 100 was approved by the House County and Municipal Government Committee earlier this week. A technical amendment was added to the bill to clarify that county commissions are not required to accept unsolicited offers from financial institutions to comply with the provisions of this bill.
House Bill 117 by Rep. Paul Beckman (R-Prattville) would specify that a civil action to recover debt on an open-end credit plan, including credit card or similar revolving debt, would be required to be commenced within six years. Proponents of this legislation believe that this bill merely cements current law, though opponents say that, under certain circumstances, the appropriate Statute of Limitations is three years. The House Financial Services Committee debated this bill in a Public Hearing this week, with the association assisting a group of debt collection attorneys in speaking favorably for the bill during the hearing. The committee is slated to vote on the bill’s passage next Wednesday.
House Bill 183 by Rep. Paul Beckman (R-Prattville) and Senate Bill 227 by Sen. Greg Albritton (R-Atmore) is the Uniform Trust Decanting Act (UTDA). Drafted by the Alabama Law Institute, the UTDA allows a trustee to reform an irrevocable trust document within reasonable limits that ensure the trust will achieve the settlor’s original intent. The act prevents decanting when it would defeat a charitable or tax-related purpose of the settlor. Approved in 2015 by the Uniform Law Commission, Alabama would be the sixth state to adopt the UTDA. The House Financial Services Committee favorably reported the House bill out of committee on Wednesday. It now awaits action by the full House.
House Bill 181 by Rep. Matt Fridy (R-Montevallo) and Senate Bill 152 by Sen. Rodger Smitherman (D-Birmingham) is the Uniform Voidable Transfers Act (UVTA), another Alabama Law Institute/Uniform Law Commission bill. In short, the UVTA, which would replace Alabama’s version of the Uniform Fraudulent Transfers Act, strengthens creditor protections by providing remedies for certain transactions by a debtor that are unfair to the debtor’s creditors. The House bill was favorably reported last week by the House Judiciary Committee. It now awaits action by the full House.
House Bill 248 by Rep. Kyle South (R-Fayette) and Senate Bill 201 by Sen. Trip Pittman (R-Montrose) is the Alabama First-time Home Buyer Savings Account Act, which allows first-time home buyers to establish a first-time home buyer savings account to save funds for a down payment and closing costs for the purchase of a home. The holder of one of these special accounts would be provided with an annual state income tax deduction of up to $6,000 (or $12,000 for joint accounts) for up to five years. The association is working with the Alabama Association of Realtors on the legislation, and it is expected to be in committee soon.
House Bill 273 by Rep. Patricia Todd (D-Birmingham) doubles the Mortgage Record Tax and allocates the revenues to the Alabama Housing Trust Fund, which has never before received funding from this tax (or from the state), as well as to the state, the counties, and the Probate Judges, each of which already received a portion of the Mortgage Record Tax. This legislation has been introduced in each of the past few sessions, but it has never advanced out of committee.
Senate Bill 53 by Sen. Clyde Chambliss (R-Prattville) requires the closing statement used to finalize real estate transactions to delineate, if applicable, the amount of the real estate appraisal fee that went to an appraisal management company. While the association has no position on the fee disclosure provisions of this legislation, it strongly objects to modifying the closing statement. Sen. Chambliss understands our concerns and has agreed to work with us on a solution.
Senate Bill 92 by Sen. Arthur Orr (R-Decatur) revises Alabama law related to unemployment compensation by basing the maximum amount of unemployment benefits on a variable rate. The rate would vary based on the state’s unemployment rate, meaning a recipient would receive benefits for a longer duration during tough economic times and a shorter duration during positive economic times. According to the National Federation of Independent Businesses, Alabama would be the sixth state to pass this bill (or something similar) and the state’s unemployment compensation trust fund would likely realize a savings of over $50 million annually. The Senate passed this bill on Thursday. It now awaits action by a House committee.
As of the end of the sixth legislative day, representatives and senators have introduced 554 bills – 318 in the House and 236 in the Senate – and 152 resolutions. The 2018 Regular Session can last for no more than 30 legislative days and must end on or before April 23.
The Legislature will reconvene for the seventh legislative day on Jan. 30.
Questions or comments? Contact Jason Isbell, vice president of legal and governmental affairs, at email@example.com.