Republican Gov. Kay Ivey on Tuesday evening asked legislators to prioritize exempting funds received from the Coronavirus Aid, Relief and Economic Security Act
and renewing economic development incentives, saying that she hoped the measures would pass in the first few weeks of the legislative session.Ivey said the state's tax revenue remained resilient despite the economic downturn caused by the pandemic, helped in part by the 2017 law expanding state sales tax requirements to include out-of-state sellers. As a result, Ivey said she would focus on granting CARES Act relief and avoid discussing tax hikes.
"After all, these monies were meant to tide people over until the economy recovered; it was never meant as an opportunity to grow the state's bank account," Ivey said.
Republicans control a supermajority in the state House of Representatives and Senate, and legislators have already put forward measures that would deliver on parts of Ivey's agenda.
H.B. 192, introduced Tuesday by Rep. Bill Poole, R-Tuscaloosa, would reinstate an expired tax credit for cash contributions to local economic development organizations and double the annual credit cap to $20 million, according to a fiscal note.
The bill would also create a new jobs credit against the utility taxes for minority-owned and female-owned businesses and some medical companies, and modify the requirements and limits of other credits.
Two identical bills introduced Tuesday, H.B. 170 and S.B. 98, would provide a state income tax exclusion for federal tax credits, subsidies, grants, loans, loan forgiveness and other aid from federal pandemic relief legislation.
The bills, which were sponsored by Rep. Danny Garrett, R-Trussville, and Sen. Dan Roberts, R-Mountain Brook, also include provisions from bills the legislators proposed last year that would decouple the state from the federal treatment of global intangible low-taxed income, adopt a single-sales-factor apportionment and create a state and local taxes cap workaround.
Under the bills, pass-through entities could elect to pay income tax at the entity level, an effort to prevent the tax from flowing through to owners, who would be subject to the $10,000 federal deduction cap for state and local taxes.
The measures would also exclude qualified consolidated groups from the business interest deduction limit under Section 163(j)
of the Internal Revenue Code and replace the current income apportionment formula — which uses property, payroll and sales factors — with a single sales factor.Garrett and Roberts put forward legislation with many of the same policies last year to implement the recommendations of a task force they both chaired, which was commissioned to study the effects of the 2017 Tax Cuts and Jobs Act
. None of the bills advanced beyond their chambers.Alabama is one of a handful of states that haven't fully decoupled from GILTI, and it does not offer a full dividends-received deduction. GILTI, a provision of the TCJA, was meant to target income earned from intangible assets — such as patents or other intellectual property — in foreign jurisdictions with low tax rates.
H.B. 192 and H.B. 170 were referred to the House Committee on Ways and Means Education, which Poole chairs, and S.B. 98 was referred to the Senate Committee on Finance and Taxation Education.
Garrett told Law360 that Ivey worked with him on H.B. 170 and fully supported the measure. He said that it made sense to include other tax changes in a bill already dealing with the state tax code and that the need for broader tax relief became clear in discussions about pandemic assistance.
"The discussion morphed into: Businesses have been hurt, what we can do to help, from a longer-term perspective, rather than just COVID relief?" Garrett said.
House Minority Leader Anthony Daniels, D-Madison, told Law360 on Wednesday that he supported the renewal of credits and establishment of new credits contained in H.B. 192, and expects the bill to receive a floor vote on Thursday.
"I'm looking forward to helping small businesses and our citizens during this time of need with respect to the difficulties that COVID-19 has brought to them and their communities and their businesses," Daniels said.
Senate Minority Leader Bobby Singleton, D-Greensboro, said in response to Ivey's address that he supported the tax relief for federal aid and renewing credits. However, he raised concerns over other proposals put forward by the governor, including expanded legal immunity for certain companies.
"Families are in need of food, families are hurting and we as a legislature, along with the governor's administration, felt that we need to give a tax break to Alabamanians during this trying time," Singleton said.
The offices of Ivey, Poole, Roberts and leadership for the majority in the House and Senate did not immediately respond to requests for comment on Wednesday.
--Additional reporting by Paul Williams, Natalie Olivo, Maria Koklanaris and Daniel Tay. Editing by Neil Cohen.
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