Legislative Report – February 5, 2021

Volume 22 Number 1 – February 5, 2021

1st, 2nd, & 3rd legislative days

Legislative session off to a busy start despite almost empty State House

The House and Senate gaveled in at noon on Tuesday for the 2021 legislative session despite COVID-19 protocols that are changing operations in the State House. The 105 House members are socially-distanced throughout the House floor, House gallery, and two overflow rooms while all 35 Senators are allowed on the Senate floor; all legislators, staff, and members of the public must wear masks and have their temperatures checked upon entry. Public access is limited to those with appointments with legislators or those speaking at public hearings. Committee meetings are streamed online, but technology glitches on Wednesday made it impossible to see or hear many committee meetings in the Senate.

Despite these challenges, several substantial bills were approved in committee and on the floor this week.

  • COVID liability: On Thursday, the Senate quickly approved SB30 by Sen. Arthur Orr (R – Decatur), which would provide businesses, schools, churches, healthcare providers, nonprofits, and others protection from liability in coronavirus-related lawsuits, provided the entities were taking precautions to limit the spread of the virus. The bill is a priority for the business community. It was approved 28 – 1.
  • Small Cells: Small cells, as their name suggests, are small, wireless technology that provide additional capacity to congested areas. SB76 by Sen. Orr would establish a procedure by which wireless providers would be authorized to install small cell facilities on poles in the right-of-way. The bill has been a priority for wireless providers for many years. It was approved by the Senate on Thursday 27 – 3.
  • Medical marijuana: SB 46 by Sen. Tim Melson (R – Florence) would allow doctors to prescribe medical cannabis for more than a dozen qualifying medical conditions. The bill also creates a Medical Cannabis Commission to oversee regulations and licensing for medical marijuana cultivators, processors, and dispensaries and requires a statewide seed-to-sale tracking system for all cannabis in the state. The Senate Judiciary committee approved the bill 8 – 3.
  • Alcohol delivery: SB 126 by Sen. Jabo Waggoner (R – Vestavia) would allow the home delivery of wine, beer, and spirits by companies like Shipt and other grocery delivery services. The bill allows for a limit of 48 12-ounce beers, six 750 milliliter bottles of wine, and 1750 milliliters of spirits in a 24-hour period. It also requires an annual delivery licensing fee of $1,000. The Senate Judiciary committee approved the bill 10 – 1.
  • Emergency Orders: SB 97 would provide that a state of emergency terminates after 14 days and may be extended only by joint resolution of the Legislature or, if the Legislature is not in session, by joint proclamation of the President Pro Tempore of the Senate and the Speaker of the House of Representatives. Sen. Tom Whatley (R – Auburn), the sponsor, said he wants to balance power between the Executive and Legislative branches during states of emergency like the coronavirus pandemic. The Senate Judiciary committee approved the bill by a vote of 7 – 4.

House approves bills to exempt stimulus money, extend economic incentives

The House, on Thursday, approved two priority bills. HB 170 by Rep. Danny Garrett (R – Trussville) 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 bill also includes provisions from bills Garrett 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 bill, 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 measure 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 put forward legislation with many of the same policies last year to implement the recommendations of a task force he co-chaired, which was commissioned to study the effects of the 2017 Tax Cuts and Jobs Act. None of the bills advanced beyond the House.

The House approved the HB 170 by a vote of 94 – 0. It is scheduled for a hearing in Senate Finance & Taxation – Education committee on Tuesday.

Following the approval of HB 170, the House moved on to the extension of the Growing Alabama Credit as part of the existing Alabama Jobs Act, a major cornerstone of the state’s economic development incentives that expired in December 2020.

Rep. Bill Poole (R – Tuscaloosa), chairman of the House Ways and Means – Education committee, introduced HB 192 on Tuesday and pushed the legislation vigorously this week with the active assistance of other members of the House leadership.

The existing legislation provides tax credits for specific industries outlined in the current act including manufacturing and other key business segments. These tax credits are afforded to specific businesses after they have made defined expenditures and achieved certain benchmarks related to job creation.

One of the major changes included in HB 192 is to allow additional credits for minority owned and women owned businesses and to expand the tax credit for companies involved in pharmaceutical and medical research and technology companies, all industry segments the state is targeting for location, expansion, and growth in Alabama.

During consideration of the legislation, Christie Strategy Group worked with Rep. Rod Scott (R – Fairfield), the ranking minority member of the Ways and Means – Education committee, and Chairman Poole to offer a clarification on the $3.00 per net ton tax credit included in the legislation for shipment of bulk products through and adjacent to the Port of Mobile.

As originally written, the legislation would have limited the tax credit only to bulk products that are shipped through a publicly owned facility within the state’s port of entry. The language offered by Reps. Scott and Poole clarified that the $3.00 per net ton tax credit would be available to those using “any type of deep draft ship terminal” located within the state’s ports of entry. The impact of this change is that the credit is now available to companies that ship product through private terminals that are located within the Port of Mobile.

The Senate Finance & Taxation – Education committee will take up HB 192 on Tuesday.

Governor releases budget recommendations

On Wednesday, Governor Ivey submitted her budget proposals to the legislature. Her proposed Education Trust Fund for fiscal year 2022 totals $7.65 billion, an increase of more than $440 million from the current fiscal year. Her General Fund budget totals $2.45 billion, which is a decrease of $31 million from the current year’s budget.

As promised, Ivey is proposing a 2% pay raise for education and state employees. The educators’ raises will cost the state $90 million, while the state employees’ raises will cost $13.6 million, Butler said. Teachers will also see an increase in their annual school supply funds from $600 to $1,000.

Among Ivey’s education budget priorities are expanding the state’s award-winning pre-K program, investing in career and technical education, enhancing STEM opportunities, improving literacy, and offering more resources for high needs and special education.

The state’s community colleges would receive a $40 million increase, a more than 9% bump, much of which would be spent on operations and maintenance. Higher education would see a $86 million increase spread out among the state’s colleges and universities, which amounts to a 6% increase over the current fiscal year.

In the General Fund, one of the most significant increases Ivey seeks is a $27 million plus up for the Department of Corrections, most of which will be directed toward improving health care, including mental health care, in state prisons. The Department of Mental Health would see an $8 million increase in Ivey’s budget, much of which would go toward establishing another crisis diversion center. The state is in the process of opening three crisis diversion centers in Mobile, Montgomery and Huntsville. The Governor’s budget proposed opening a fourth crisis center in the Birmingham-Tuscaloosa region.

The budget proposals will likely change significantly throughout the legislative process.

Upcoming Legislative Schedule

The House of Representatives and Senate will reconvene on Tuesday, February 9, at 1:00 and 2:00 p.m. respectively.