March 1, 2016 – The Legislature met for three days last week, and has now met for 10 legislative days. Though legislators have only been in Montgomery for four weeks, the session is one-third complete.
Last Thursday, on a 23-10 vote, the Senate passed the Uniform Minimum Wage Act, House Bill 174. Sponsored by Rep. David Faulkner (R-Mountain Brook), the legislation prohibits counties and municipalities from adopting local minimum wage rates. Less than an hour after passage, the legislation had already been signed into law by the governor – the first general law of the session – effectively voiding a Birmingham ordinance that would have raised the minimum wage from $7.25 per hour to $10.10 per hour. Technically, Birmingham’s ordinance went into effect the day before the new law, but Attorney General Strange publicly stated that Birmingham businesses would not be penalized for failing to comply with the law during the short period that the ordinance was technically in force. Interestingly, had the Legislature not met for three days last week, the Birmingham ordinance, at a minimum, would have been in effect for nearly a week before the new law could have taken effect.
After passing the minimum wage bill, the Senate took up the State General Fund (SGF) budget for FY 2017, which begins Oct. 1. After hours of debate, the new chairman of the Finance and Taxation-General Fund Committee, Sen. Trip Pittman (R-Montrose), was able to secure passage on a 23-10 vote. In short, the Senate-approved budget is 3 percent larger than the current budget, but is nearly $100 million smaller than the budget originally recommended by Gov. Bentley (which relied heavily on transfers from the Education Trust Fund). On average, the Senate-approved budget made small cuts to most state agencies, and level-funded the Medicaid Agency at $685 million. The largest recipient of SGF funds, the Medicaid Agency had requested an additional appropriation of nearly $150 million, and the agency’s director has stated that the Senate-approved budget would result in the elimination of several of the agency’s programs, such as outpatient dialysis and hospice care. Gov. Bentley has threatened to veto this budget if the House passes it without change.
Importantly, the Senate-approved version of the budget does not transfer any funds from the State Banking Department to the State General Fund.
At the end of the 10th legislative day, 342 bills have been introduced in, and 31 have been passed out of, the House of Representatives, while 302 bills have been introduced in, and 64 have passed out of, the Senate. Some of the measures that could impact Alabama banks include the following:
Senate Bill 67, sponsored by Sen. Cam Ward (R-Alabaster): This bill, the “Alabama Consumer Lawsuit Lending Act,” would regulate the process of consumer lawsuit lending in the state. The bill includes provisions related to consumer lawsuit lending agreements as well as interest rates applicable to such agreements (currently capped at 10 percent APR). By a 7-4 vote, the Senate Judiciary Committee favorably reported this bill out of committee last week.
Senate Bill 90, sponsored by Sen. Arthur Orr (R-Decatur), and House Bill 217, sponsored by Rep. Alan Baker (R-Brewton): This bill would provide an income tax credit of $1,000 to an employer for each qualified apprentice of an employer, based on Department of Labor standards of “qualified apprentice.” On the Senate floor, an amendment was added that allowed banks to qualify for the tax credit. The Senate passed the amendment and the bill unanimously. The bill will be taken up in House committee this week.
Senate Bill 91, sponsored by Sen. Arthur Orr (R-Decatur): This bill makes significant changes to laws related to payday loans, including a provision that caps the annual finance rate at 45 percent. The bill was favorably reported by the Senate Banking and Insurance Committee last week, but could still face significant opposition on the Senate floor.
Senate Bill 144, sponsored by Sen. Cam Ward (R-Alabaster) and House Bill 113, sponsored by Rep. Matt Fridy (R-Montevallo): This bill makes a declaratory finding that the term “transfer” in the Alabama Fraudulent Transfer Act includes transfers made pursuant to a divorce settlement or domestic settlement. While the bill merely seeks to clarify, rather than amend existing law, this bill is written as a response to a recent ruling of the Alabama Court of Civil Appeals that could potentially have a negative impact on banks. The Senate unanimously passed the bill last week, and the House is expected to take up the bill soon.
Senate Bill 164, sponsored by Sen. Rodger Smitherman (D-Birmingham) and House Bill 269, sponsored by Rep. Juandalynn Givan (D-Birmingham): This bill would adopt the Revised Uniform Fiduciary Access to Digital Assets Act, which would extend the traditional power of a fiduciary to manage tangible property to include the management of digital assets. These bills are on this week’s House and Senate Judiciary Committee agendas.
Senate Bill 202, sponsored by Sen. Linda Coleman (D-Birmingham): This bill would amend the corporate income tax law to require the operations of all related entities involved in a unitary business to file one corporate income tax return on a combined based, known as combined reporting. ABA, as well as other business advocacy groups, will undoubtedly oppose this measure if it ever makes it onto a committee agenda.
Senate Bill 209, sponsored by Sen. Bill Holtzclaw (R-Huntsville): This bill would make substantial, but mostly technical, revisions to Alabama’s Credit Union statute. The Alabama Credit Union Administration drafted the 51-page bill, which includes specific provisions about the appellate rights of persons affected by a suspension of operation of a credit union. These changes, and others, were likely prompted in the wake of the ACUA’s actions towards the Tuscaloosa-based Alabama One Credit Union. Working with the Credit Union industry, ABA was able to persuade the Senate Banking and Insurance Committee to adopt an amendment that alleviated our concerns about this mostly technical bill.
Senate Bill 238, sponsored by Sen. Arthur Orr (R-Decatur), and House Bill 291, sponsored by Rep. Connie Rowe (R-Jasper): This bill, the “Alabama Information Protection Act,” would provide for the protection of sensitive personally identifying information and notice to individuals whose personal information has been breached. Working with Attorney General Strange, ABA was able to have language included in the bill that exempts financial institutions subject to the privacy provisions of the Gramm-Leach-Bliley Act. The bill is in position to be voted on by the full Senate.
House Bill 36, sponsored by Rep. Kyle South (R-Fayette): This bill, the “Alabama Small Business Jobs Act,” would, as introduced, give businesses, including banks, an income/FIET tax credit under certain conditions. Specifically, a bank headquartered in Alabama with 75 or fewer employees would receive a one-time tax credit valued at $1,500 for each employee hiring that results in a “net employee growth” from one tax year to the next. Working with Sen. Jim McClendon (R-Springville), the ABA was able to persuade the Senate Fiscal Responsibility and Economic Development Committee to adopt an amendment that re-inserted banks and FIET taxpayers into the bill. The amended bill is now in position to be voted on by the full Senate.
House Bill 62, sponsored by Rep. Victor Gaston (R-Mobile): This bill would authorize a seven-year extension of the tax credit against the tax liability of certain taxpayers, including banks with an FIET liability, for the substantial rehabilitation of qualified structures. Currently, up to $20 million in tax credits are available each year for rehabilitation projects involving certified historic structures (credit equals 25 percent of the qualified rehabilitation expenditures, up to $5 million per project) or qualified pre-1936 non-historic structures (credit equals 10 percent of qualified rehabilitation expenditures, up to $5 million per project). The tax credit program, which expires in April, would under this legislation be renewed until 2022. The bill is now in a position to be voted on by the full House.
House Bill 341, sponsored by Rep. Patricia Todd (D-Birmingham): This bill would double the fee for the recording of mortgages, deeds of trust, contracts of conditional sales, or other similar instruments recorded to secure the payment of debt. The current recording fee is effectively $150 for every $100,000 worth of debt, with two-thirds of the fee revenue distributed to the State General Fund (SGF) and one-third distributed to the county in which the tax is collected. Under this bill, the recording fee would be $300 for every $100,000 worth of debt, with 3 percent distributed to the county Judge of Probate, 35 percent to the SGF, 23 percent to the Alabama Housing Trust Fund, 23 percent to the Alabama Homebuyer’s Initiative, and 16 percent to the county in which the tax is collected.
Counting bills and joint resolutions, 18 measures have been enacted into law since the beginning of the session. The Legislature has met for 10 legislative days as of this writing. A Regular Legislative Session can contain no more than 30 legislative days, and all legislative days must take place on or before May 16, which is 105 days after the beginning of the session. The House of Representatives and Senate will convene today at 2 p.m. for the 11th legislative day and are expected to meet for two legislative days this week.
Questions or comments? Email Jason Isbell, vice president of legal and governmental affairs.