2019 Regular Session: Session Recap

The 2019 Regular Session of the Alabama Legislature ended on May 31. The first regular session of this legislature’s four-year term, and indeed the very first session for many newly-elected legislators, was punctuated with many more “big-ticket” items than might normally be expected. Throughout the session, representatives and senators debated issues such as raising gasoline taxes, establishing a lottery, outlawing abortions, replacing an elected state school board with an appointed one, and rewriting parts of the state’s ethics laws. Sen. Jabo Waggoner (R-Vestavia Hills), who was first elected in 1966 and is the longest serving member of the Alabama Legislature, called this “one of the toughest sessions ever.”

Insiders would testify that the “toughness” of the session was due not only to the subject matter discussed on the House and Senate floors but also the session’s schedule. While most sessions traditionally have a routine order – two legislative days per week for about 15 consecutive weeks – this year’s session was interrupted for two weeks at the very beginning (for the special session on gasoline taxes) and one week at the quarter-mark (for a spring break). Consequently, legislators were forced to squeeze in additional session days each week to reach their goal of ending the session by June 1.

Importantly, in the midst of these major discussion items and busy weeks, Alabama’s bankers can be proud of a successful legislative session.

Prior to the start of the session, the Alabama Bankers Association prepared and distributed to legislators a 5-piece legislative agenda.

Supporting the Future Advance Mortgage Protection Act, which preserves the traditional lien position of financial institutions executive future advance mortgages. Thanks in part to the association’s efforts, the Alabama Supreme Court, who issued an opinion last September calling into doubt the lien priority of future advance mortgages, issued a substitute opinion in late March that provided as much or more protections for banks than did the Future Advance Mortgage Protection Act. Lobbying for the passage of this Act no longer became necessary after the substitute opinion was released.
Supporting the Financial Institution Excise Tax Reform Act, which makes Department of Revenue-approved changes to bank income tax statutes that are technical, sensible, and revenue-neutral. The FIET Reform Act, House Bill 419, unanimously passed the House (98-0) and Senate (28-0) and was signed into law by Kay Ivey on March 28. The bill was sponsored by Rep. Kyle South (R-Fayette) and handled in the Senate by Sen. Shay Shelnutt (R-Trussville) and Sen. Steve Livingston (R-Scottsboro). The product of 12 months of work between ABA and the Department of Revenue, the legislation modernizes and clarifies nearly every facet of the FIET statutes.
Opposing legislation that diverts bank assessment fees away from the State Banking Department. Two bills were introduced in the House this session that, if enacted, could have resulted in all or substantially all of unspent funds at the department, including bank assessment fees, to be diverted to the State General Fund. Numerous trade groups, including ABA, opposed these efforts. The bills did not advance.
Opposing legislation that allows credit unions to become qualified public depositories. The topic of introducing this legislation was seriously considered by a legislator at about the half-way point of the session. Thankfully, that legislator approached the Association and wanted to know our thoughts. Our discussion resulted in the legislator requesting that the Department of Revenue calculate and compare the amount of FIET and Business Privilege Taxes (BPT) paid by banks and credit unions. According to the department’s response, of the $72 million in FIET receipts (total receipts were $56.8 million) and BPT receipts (receipts sourced to financial institutions totaled $15.5 million) sourced to banks and credit unions in 2018, credit unions paid a total of $575,000 in taxes. In other words, banks paid roughly $12,500 in FIET and BPT taxes for every $1 in FIET and BPT taxes paid by credit unions. No legislation was introduced.
Opposing legislation that weakens the banking industry’s tax position relative to other corporate taxpayers. No legislation fitting this description passed during the session. In fact, the opposite occurred. With House Bill 540, sponsored by Bill Poole (R-Tuscaloosa), banks and other corporate taxpayers will enjoy greater access to earn or purchase economic development-related tax credits that, for banks, can be used to reduce FIET liability.

In the end, representatives and senators introduced a total of 1,495 bills and resolutions during the 2019 session. As of this writing, 343 have been enacted (this total would include not only general laws but also local laws and joint legislative resolutions, which do not carry the force of law). Note that Gov. Ivey has 10 calendar days after the session concludes to sign bills and resolutions passed during the last five calendar days of the session.

In addition to the two bills listed above, House Bills 419 and 540, the following newly-enacted bills are important to note for Alabama’s banking industry.

Senate Bill 54 by Shay Shelnutt (R-Trussville) places data security requirements on insurance companies, but thanks to an ABA-added amendment, those requirements do not apply to insurance-related subsidiaries of financial institutions.
Senate Bill 106 by Andrew Jones (R-Centre) allows members of the U.S. Armed Services to contract with a financial institution even if the servicemember has not reached the age of majority. This was the first bill ever passed by Sen. Jones, who serves on the Senate Banking and Insurance Committee. An ABA amendment makes clear, first, that a contract entered into by a servicemember does not subsequently become void if the servicemember separates from the military before reaching the age of majority (which is 19 in Alabama), and second, that a financial institution has the ability to require the servicemember to show a valid form of military identification prior to entering into a contract with a financial institution.
Senate Bill 193 by Arthur Orr (R-Decatur) reduces the maximum number of weeks that unemployment compensation benefits are payable from the lesser of 26 weeks (or one-third of the wages paid for insured work during the base period), to the lesser of 14 weeks (or one-fourth of the wages paid for insured work during the base period). Statewide, this bill reduces employer contributions to the Unemployment Compensation Trust Fund by approximately $45 million annually.
Senate Bill 225 by Tim Melson (R-Florence) requires the state to develop and submit a plan for monitoring and regulating the production of hemp. If that plan is approved by the U.S. Department of Agriculture, hemp production in Alabama would be decriminalized at the state and federal levels, thus allowing compliant hemp-related businesses to legally receive banking services. Under current law, only hemp-related businesses licensed by the state Agriculture Commissioner can receive banking services.
House Bill 139 by K.L. Brown (R-Jacksonville) requires a lender to provide notice to an insured when an insurance payment is withheld, as well as the conditions for release of the insurance payment. This legislation is in response to concerns from some of Rep. Brown’s constituents that had trouble accessing home insurance proceeds in the wake of the deadly tornadoes in Rep. Brown’s district last year. Thanks to an ABA amendment, the notice period was lengthened (from 10 to 14 days), the penalty for noncompliance was cut in half (from 20% to 10%), and, most importantly, lenders maintain any rights provided under the agreement or by law to withhold these funds, including when providing the funds to the insured would be economically infeasible.
House Bill 225 by Adline Clarke (D-Mobile) provides that an employer may not pay any of its employees at wage rates less than the rates paid to employees of another sex or race for equal work within the same establishment on jobs the performance of which requires equal skill, effort, education, experience, and responsibility, and performance under similar working circumstances. Importantly, when viewed as a whole, the only additional obligation for Alabama employers based on this legislation is a provision prohibiting an employer from requiring the disclosure of wage history and retaliating against an applicant or employee for failing to do so. However, this provision does not appear to prevent an employer from asking about prior wage history.
House Bill 304 by Merika Coleman (D-Birmingham) provides that certified real estate appraisers, who previously were allowed by state law to only provide certified real estate appraisals, may provide real estate evaluations when such evaluations are requested by financial institutions in accordance with federal law (such as when the value of the property being evaluated is below a certain threshold). This bill does not otherwise alter the qualifications for who can and cannot perform an appraisal or evaluation.
House Bill 420 by Kyle South (R-Fayette) allows financial institutions and the Department of Revenue to voluntarily enter into data-sharing agreements to reduce the number of garnishment notices received by financial institutions for non-customers. The department reports that each month, approximately 500 garnishment notices for delinquent taxpayers are returned from financial institutions who receive a notice for a non-customer. ABA worked diligently with the department to ensure that the data-sharing agreement was purely voluntary, limited in scope, and revenue-neutral.