VOLUME 24 NUMBER 11 – JUNE 2, 2023

The Alabama Legislature reconvened its regular session on Wednesday, May 31st for the 28th and 29th legislative days. 

Anti-ESG bill Passes the House with Ease

On Wednesday, the House passed the anti-ESG bill that  prohibits governmental entities from entering into certain contracts with companies that boycott businesses because the business engages in certain sectors or fails to meet or commit to certain environmental or corporate governance standards or facilitate certain activities. As originally written, the bill was opposed by the business community which resulted in a negotiated substitute that passed the Senate last week. SB 261, by Sen. Dan Roberts (R-Mountain Brook), quickly passed the House of Representatives this week without any significant debate by a margin of 74-27 along party lines.

Governor Ivey Signs Both State Budgets and Supplemental Appropriation Bills

Both state budgets including the $8.8 billion Education Trust Fund (ETF) and $3 billion General Fund budgets were signed by Governor Kay Ivey on Thursday. The ETF makes considerable investments in Alabama’s children, teachers, and schools through funding efforts to find and keep qualified teachers as well as helping the Literacy and Numeracy Acts go into effect. Key items that were in the agreed upon General Fund in the budget include a 2% cost of living adjustment for state employees, increased spending for prisons, Medicaid, public and mental health, and law enforcement.

Governor Ivey also signed the corresponding supplemental appropriation bills for both budgets. 

Historic Grocery Tax Bill Receives Final Passage

On Thursday, lawmakers adopted a historic bill that will begin to decrease and eventually remove the state grocery tax. HB 479, by Rep. Danny Garret (R-Trussville) would gradually decrease the grocery tax by 1% each year starting on Sept 1, 2023 provided that the Education Trust Fund tax revenue increases by at least 3.5% in order to offset the losses. The bill would also remove half of the state’s 4% sales tax on food by Sept. 1, 2024, provided there is enough revenue growth to offset the loss. 

Changes adopted by the Senate on a 31-0 vote Thursday include speeding up the pace of the tax removal and increasing the required revenue growth from 2% to 3.5%. The House later accepted the changes with a 103-0 vote. The legislation now heads to the Governor’s desk for her signature. 

Overtime Pay Tax Exemption Passes Legislature

On Thursday, lawmakers approved another historic measure to exempt at least a portion of a worker’s overtime pay from state income taxes for the first time. HB 217, as introduced by Minority Leader Anthony Daniels (D-Huntsville), would eliminate state income taxes on all overtime pay for Alabama hourly workers by excluding overtime, or any hours worked above 40 hours per week, from the state definition of “gross pay.”

In the Senate Finance and Taxation Education committee on Wednesday, Chairman Arthur Orr (R-Decatur) offered an amendment that would cap the tax break at $2,000.00 per year per taxpayer. On Thursday, Sen. Sam Givhan (R-Huntsville) made a motion to table the committee amendment and offered up a floor amendment instead, which was seen as a compromise. Sen. Givhan’s floor amendment would cap the program at $25 million overall with no per-worker tax-free overtime wage cap. The addition of the tax cap created questions about how it will be administered and what will happen if the $25 million is not enough to exempt all overtime worked in the state that year. The legislation directs the Alabama Department of Revenue to create rules for the implementation.

The Senate ultimately approved the amended bill with a 34-0 vote. The House accepted the changes with a 103-0 vote later that afternoon. The bill now heads to the Governor’s desk for her signature. 

Bill to Further Clarify Economic Incentive Sunset Dates Passes

On Wednesday, the Senate Finance & Taxation Education committee took up HB 445, sponsored by Rep. Danny Garrett (R-Trussville), that would “clarify the tax rebates for certain businesses for certified tourism destination projects are only available for projects placed into service after the effective date of the act.” Chairman Arthur Orr (R-Decatur) offered a substitute that increased a population range for “targeted counties” to match an existing definition in the Jobs Act and removed the carry forward language for the tax rebates. Sen. Orr on Thursday also offered a floor amendment that added legislative representation to the tourism advisory board mentioned in the legislation that will review the selected projects that qualify for the rebates.

Both amendments were approved and the engrossed version passed the Senate with a 32-0 vote. The House later concurred with the changes by a vote of 103-0 and the bill now heads to the Governor’s desk review.

Film and Music Incentive Act Amended in Committee

Last week, the House passed an amended bill that would increase incentives through tax rebates for the entertainment industry. After lengthy discussion on the House floor, an amendment was added to HB 429, sponsored by Rep. Jamie Kiel (R-Russellville), to increase the original $20 million annual cap to $50 million annually. 

On Wednesday, the Senate Finance and Taxation Education committee gave a favorable report to the bill with a committee amendment. The committee amendment, offered by Chairman Arthur Orr (R-Decatur), decreased the annual cap back to the original $20 million. The bill has not yet been voted on by the Senate, and it is unclear whether the House would accept the change to the annual cap if passed by the Senate. 

Port Incentives Bill Receives Final Passage

A notable bill pertaining to port credits received final passage on Thursday in the Senate. HB 293, sponsored by Rep. Chip Brown (R-Hollingers Island), would modify existing tax incentives for companies who ship goods out of Alabama’s ports, incentives that lawmakers say are currently underutilized. The reason for the port tax credit underutilization is due to nearby states offering more competitive tax credits resulting in most Alabama manufactured vehicles being transported out of South Carolina and Georgia’s ports. 

Under HB 293, port tax credits would increase for companies as their cargo volume increases which legislators hope will incentify new business and increased demand at the Port of Alabama in Mobile and throughout our inland port system. Governor Ivey signed the bill Thursday afternoon when it officially became law.

The Legislature will reconvene next Tuesday, June 6th, for its final legislative day.