April 25, 2016 – Last week, the Alabama Bankers Association hosted a very successful Legislative Day. A total of 288 students and chaperones representing 21 banks visited Montgomery for tours of the State Capitol, the State House, and the Department of Archives and History. Attendees heard from Secretary of State John Merrill and visited with Treasurer Young Boozer at lunch, and spent time with Sen. Billy Beasley (D-Clayton), Sen. Clyde Chambliss (R-Prattville), Sen. Tim Melson (R-Florence), Sen. Larry Stutts (R-Sheffield), Rep. Marcel Black (D-Tuscumbia), Rep. Alan Boothe (R-Troy), Rep. Steve Clouse (R-Ozark), Rep. Dexter Grimsley (D-Newville), Rep. Jimmy Martin (R-Clanton), Rep. Johnny Mack Morrow (D-Red Bay), and Rep. Bill Poole (R-Tuscaloosa) while in the State House. Go ahead and mark your calendar for April 19, 2017, for next year’s Legislative Day.
On the legislative front, two bills advocated by the association are inching closer to final passage. The first, House Bill 451, alters the process the state would use in crafting future regulations that govern how multi-state banks calculate their taxable income in Alabama. Sponsored by Rep. Oliver Robinson (D-Birmingham), the bill passed the House 105-0, was favorably reported by the Senate Banking and Insurance Committee, and is in position to be considered by the full Senate. The second, House Bill 370, improves the membership landscape for banks, credit unions, and insurance companies that join the Federal Home Loan Bank system. Sponsored by Rep. A.J. McCampbell (D-Demopolis), the bill passed the House 99-0 and will likely be considered by the Senate Banking and Insurance Committee this week.
More generally, the FY 2017 Education Trust Fund budget was transmitted to the governor after the House and Senate approved a conference committee report on the bill. Sponsored by Rep. Bill Poole (R-Tuscaloosa) and Sen. Arthur Orr (R-Decatur), the budget appropriates $6.327 billion for next fiscal year, which begins Oct. 1. This represents an increase of almost $340 million more than the current year appropriation. Gov. Bentley has indicated that he will sign the bill into law. The FY 2017 State General Fund budget has already been signed into law.
The bill currently generating the most buzz in the State House is Senate Bill 287, the “Alabama Prison Transformation Initiative Act.” Sponsored by Sen. Trip Pittman (R-Montrose), the bill allows a state financing authority to issue up to $800 million in bonds to pay for the construction of regional and women’s prison facilities. It is estimated that the annual debt service on this bond issue would be $50 million if the entire $800 million in bonds are issued. Proponents of the measure, including the governor and House and Senate leaders, believe that replacing several of the outdated, crowded prisons that currently exist will reduce Department of Corrections expenditures by approximately $50 million each year, thus allowing the debt service to be paid without an additional strain on the budget. The bill passed the Senate 23-11, and was favorably reported by the House Ways and Means General Fund Committee last week. The bill, handled in the House by Rep. Mike Jones (R-Enterprise), is now in a position to pass the full House.
At the end of the 25th legislative day, 569 bills have been introduced in, and 193 have been passed out of, the House of Representatives, while 430 bills have been introduced in, and 164 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), and House Bill 395, sponsored by Rep. Chris Pringle (R-Mobile): 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). Both bills are in position to be approved by the full Senate.
Senate Bill 90, sponsored by Sen. Arthur Orr (R-Decatur), and House Bill 217, sponsored by Rep. Alan Baker (R-Brewton): This bill, the “Thompson Apprenticeship Tax Credit Act,” 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.” Thanks to an amendment the association worked to add to this bill, banks can qualify for this tax credit. The Senate bill is in position to be approved by the full House.
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 passed the Senate last week after lengthy debate, and is now in a position to be considered by the House Financial Services Committee. The committee will vote on the bill this week.
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 bill is in position to be passed by the House Judiciary Committee.
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. The Senate bill is in position to be passed by the full Senate.
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 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 Senate bill is in position to be voted on by the full Senate.
Senate Bill 262, sponsored by Sen. Shay Shelnutt (R-Trussville), and House Bill 266, sponsored by Rep. David Faulkner (R-Mountain Brook): This bill would standardize several insurance-related laws as they apply to “transportation network companies” such as Uber. The association worked to have an amendment added in the Senate and the House that improved a bank’s positions if it is a lienholder on a vehicle used by an Uber driver. The House bill is in position to be voted on by the full House, while the House Insurance Committee will consider the Senate bill this week.
Senate Bill 288, sponsored by Sen. Bobby Singleton (D-Greensboro): This bill would cut in half, from six years to three years, the statute of limitations for actions to recover money due by open or unliquidated account, “including a credit card or other revolving credit account.” Proponents claim this bill merely brings clarity to a situation that has been confused by several court rulings. Senate Bill 288 was carried over last week and is not likely to be brought up again this session.
Senate Bill 327, sponsored by Sen. Quinton Ross (D-Montgomery), and House Bill 412, sponsored by Rep. Juandalynn Givan (D-Birmingham): This bill would forbid every public agency, as well as a private employer employing four or more employees, from inquiring into or considering a job applicant’s conviction history until after the applicant has received a conditional offer. Because this bill potentially conflicts with Section 19 of the Federal Deposit Insurance Act (which prohibits banks from hiring any employee who has been convicted of crimes related to dishonesty, money laundering, or breach of trust), the association is working to have the bill amended in committee so that this potential conflict is eliminated. The Senate Judiciary Committee amended the bill so that it only applies to public employees and contractors. The bill is now in position to be considered by the full Senate. The association will continue to monitor this legislation.
Senate Bill 385, sponsored by Sen. Slade Blackwell (R-Mountain Brook): This bill would require application to, and prior approval by, the state superintendent of banks for a bank shareholder to acquire 25 percent of the voting shares of a bank, or application and approval to acquire 10 percent of the voting shares if another person already had a majority ownership. These requirements are consistent with federal regulations, but reduce the current 50 percent “change of control” threshold currently applicable to state-chartered banks and the State Banking Department. The department is advocating for the bill because, as the primary regulator of a state-chartered bank, they feel they deserve to be more involved in the change of control process. The department plans to use the same change of control forms that are required at the federal level. The bill passed the Senate 31-0 last week. An amendment was added on the Senate floor that prohibits the State Banking Department from charging a fee whenever a change of control application is filed.
Senate Bill 428, sponsored by Sen. Jimmy Holley (R-Elba), and House Bill 370, sponsored by Rep. A.J. McCampbell (D-Demopolis): This bill would improve the lien position of the Federal Home Loan Banking system in the event an member insurance company goes into receivership. By improving the lien position, FHLB members could potentially see higher rates of return. The Senate bill is now in position to be considered by the full House, while the House bill is now in position to be considered by a Senate committee, which may vote on the bill this week.
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 bill passed the Senate last week and now awaits the governor’s signature.
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 millon per project) or qualified pre-1936 non-historic structures (credit equals 10 percent of qualified rehabilitation expenditures, up to $5 millon per project). The tax credit program, which expires in April, would under this legislation be renewed until 2022. The bill is in position to be considered by a Senate committee.
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. The bill is not expected to move this session.
House Bill 390, sponsored by Rep. Chris Pringle (R-Mobile): This bill, the “Alabama Innovation Act,” would provide for a tax credit to certain Alabama companies, including banks, to offset qualified research expenses incurred to conduct qualified research for new or improved products or services. The bill is not expected to move this session.
House Bill 400, sponsored by Rep. Chris Blackshear (R-Phenix City): This bill, as introduced, would impact tax credits earned by banks against their Financial Institution Excise Tax (FIET) liability. Under current law, FIET receipts are distributed to the State General Fund, to cities, and to counties. Additionally, some current FIET tax credits can be used to reduce the State General Fund liability only, while other FIET tax credits can be used to reduce the entire tax liability. As introduced, this bill would allow all past and future FIET tax credits to limit a bank’s State General Fund FIET liability only. Working with the sponsor and several key legislators, the association was able to persuade the House County and Municipal Government Committee to amend the bill so that it applies to any FIET tax credits enacted after Jan. 1. The amended bill is now in position to be considered by the full Senate.
House Bill 451, sponsored by Rep. Oliver Robinson (D-Birmingham): This bill would allow the Department of Revenue to have more flexibility in prescribing regulations that address how multi-state financial institutions calculate their taxable income in Alabama. Current law requires such a regulation to be “substantially the same” as the allocation and apportionment regulation recommended by a group known as the Multistate Tax Commission. This bill, introduced at the association’s urging, eliminates this particular requirement. This bill is now in a position to be voted on by the full Senate.
Counting bills and joint resolutions, 147 measures have been enacted into law since the beginning of the session. 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 on April 26 at 1 p.m. for the 26th legislative day. The 26th legislative day is important in the Senate because, after the day has concluded, no Senate bill can be transmitted to the House without the unanimous consent of the entire Senate membership. The House and Senate are expected to meet for three legislative days this week and then return next week for the last two days of the session.
