April 5, 2016 – The Alabama Legislature returns to Montgomery today from their “spring break” week to begin the second half of the regular session. Many eyes will be watching the House of Representatives because of Rep. Ed Henry’s (R-Hartselle) indication that he will file Articles of Impeachment against Gov. Robert Bentley. In the Senate, Sen. Arthur Orr (R-Decatur) has promised to bring up the FY 2017 Education Trust Fund budget in committee as soon as possible, and many expect to see the budget on the Senate floor in the very near future.
But the first substantial event of the session’s second half will likely be Gov. Bentley’s veto of the FY 2017 State General Fund budget, and the Legislature’s reaction to that veto. On the one hand, it’s probably never been politically easier for a sitting legislator to override a governor’s veto, even if the legislator and the governor are in the same political party. On the other hand, a legislator voting to override the veto is, in many ways, also casting a vote to return to the State House this summer for a special legislative session dealing with Medicaid funding. Nevertheless, the Legislature will more than likely easily override the governor’s veto.
As for the Legislature’s schedule for the remainder of the session, many have assumed that the session would end early because of the legal proceedings involving Speaker Mike Hubbard’s (R-Auburn). Over the break, the attorney general’s office requested that the start of the speaker’s trial be pushed back to mid-May, a request that was granted by the judge. Since the session must end on or before May 16, the chances of it ending early because of anything happening in Lee County are miniscule at best. It’s thus expected that Speaker Hubbard will continue to preside over the House for the duration of the session.
At the end of the 18th legislative day, 476 bills have been introduced in, and 114 have been passed out of, the House of Representatives, while 374 bills have been introduced in, and 115 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). The Senate bill is in position to be approved by the full Senate, and the House bill is in position to be approved by the full House.
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 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 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 209, sponsored by Sen. Bill Holtzclaw (R-Huntsville) and House Bill 367, sponsored by Rep. Ken Johnson (R-Moulton): 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. The Senate bill passed the House last week and now awaits Gov. Bentley’s signature.
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 299, 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. Each bill is in position to be passed out of its house of origin.
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 will consider this 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 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 $20,000,000 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 $5,000,000 per project) or qualified pre-1936 non-historic structures (credit equals 10 percent of qualified rehabilitation expenditures, up to $5,000,000 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.
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 a member insurance company goes into receivership. By improving the lien position, FHLB members could potentially see higher rates of return. This bill passed out of committee last week and is now in a position to be voted on by the full House.
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.
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 bill, as amended, is now in position to be passed by the full House.
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 will be considered in committee this week.
Counting bills and joint resolutions, 97 measures have been enacted into law since the beginning of the session. The Legislature has met for 18 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 on Tuesday, April 5 at 1 p.m. and 2 p.m., respectively, for the 19th legislative day. The House and Senate are expected to meet for two legislative days this week.
Questions or comments? Email Jason Isbell, vice president of legal and governmental affairs.
