Alabama Taxpayers' Bill of Rights II Passes Easily In House; Other Important Tax Bills of Interest

by Bradley Arant Boult Cummings LLP
Contact

On April 4, Birmingham attorney and State Representative Paul DeMarco led the effort to pass the 2013 version of the Alabama Taxpayers’ Bill of Rights II, HB 264. The House of Representatives voted 96-2 in favor of the bill. It now goes to the Senate, whose Fiscal Responsibility & Accountability Committee has already passed a similar version of the bill sponsored by Prattville/Montgomery attorney and Senator Bryan Taylor. Readers may recall that a previous version of the bill was passed near unanimously during the 2012 legislative session but was pocket vetoed by Governor Robert Bentley due to last minute technical glitches in the bill that mistakenly deleted some of his requested amendments. The Governor’s office has indicated that he supports the revised version.

This landmark legislation reflects the work of members of the Alabama State Bar Tax Section in cooperation with the Alabama Society of CPAs (ASCPA) and the Alabama Department of Revenue (ADOR) over the past decade. To date, the Alabama State Bar, the 30-member Business Associations’ Tax Coalition, the Business Council of Alabama, the ASCPA, the Council On State Taxation (COST), the Tax Executives Institute, the American Bar Association, and, most recently, the American Institute of CPAs, have endorsed this bill.

  1. The bill creates the Alabama Tax Appeals Commission (ATAC) by abolishing the current Administrative Law Division of the ADOR and transferring both its personnel and equipment to a newly formed state agency under the executive branch. Alabama is now in the minority of states that lack an independent tax appeals tribunal, and it received a “D” on COST’s latest State Tax Due Process Scorecard primarily for this reason. The ATAC provisions essentially track the ABA’s Model State Administrative Tax Tribunal Act, except that appeals from the ATAC will continue to be filed with the circuit courts and tried on a de novo basis.

    In addition to handling all ADOR-administered taxes other than ad valorem property tax assessments, the bill would allow taxpayers to appeal final assessments of sales, use, rental, and lodgings taxes issued by self-administered cities and countries (and their private auditing firms) to the ATAC unless the governing body of the city or county opts out. This provision represents a major step toward addressing the frustration of the business community and tax advisers with the differing interpretations and appeals procedures of the many self-administered localities or their contract-auditing firms.

    Major changes were made to the ATAC judge selection process at the request of the Governor. Now, the nominating committee develops a list of five nominees and the governor must select one of them or reject all five and ask for a new slate. Once he or she selects a nominee, it is final. Unlike previous versions of the bill and the ABA Model Act, there is no requirement of Senate confirmation.

  2. Except in limited instances, the bill extends the period during which the taxpayer can appeal both a preliminary and final assessment from 30 days to 60 days after issuance of the assessment. The ADOR’s legal division is also given 60 days to file its answer with the ATAC, plus a 30-day extension if requested.

  3. HB 264 clarifies that the failure-to-pay penalty of 1 percent per month, which was included in the 2009 film incentives legislation, applies to the “correct” amount of tax required to be shown on a return, only begins to accrue 30 days after the first written notice and demand, and only applies to the “net” amount of underpaid tax. Additionally, the bill clarifies that neither failure-to-pay penalty will apply to estimated tax payments, consistent with federal law.

  4. The bill clarifies that taxpayers have the option to appeal to the ATAC any proposed adjustments by the ADOR to their net-operating-loss carryovers.

  5. At the request of the ADOR, HB 264 increases the penalty amounts for negligence, fraud, frivolous tax returns, and frivolous appeals to the ATAC to more closely conform to current federal law.

  6. At the request of the ADOR, the bill amends the revenue agent’s report (RAR) statute regarding assessments and refund claims resulting from IRS audit changes. The statute of limitations on assessments may not close until the taxpayer files an amended return and reports the IRS audit adjustment. Taxpayers would be required to file the amended return within 6 months after a final determination of their federal tax liability (they have one year under current law). However, taxpayers will continue to have one year after the grant of an IRS refund to file an equivalent refund claim with the ADOR. This provision is based on the Multistate Tax Commission’s model RAR act.

  7. The bill conforms to two intervening changes to the “innocent spouse” rules under the Internal Revenue Code to expand the scope of this defense for spouses who filed a joint return.

  8. The bill automatically nullifies any preliminary assessment that has been outstanding more than five years as of October 1, 2013 (i.e., issued prior to October 1, 2008), unless it is withdrawn before that date, a final assessment is issued thereon, or the parties agree to extend the time period. For any other preliminary assessment, the taxpayer has the option to appeal the preliminary assessment to the ATAC or appropriate circuit court if assessment has been dormant for three or more years.

  9. Finally, the bill requires the Taxpayer Advocate to contact the taxpayer or his/her representative before issuing a denial of their request for an interest abatement or waiver of penalties. It also grants authority to the Taxpayer Advocate to review and correct a final order of the ATAC if the judge so requests and if there is newly discovered evidence that indicates the taxpayer was incorrectly assessed.

House Bill 140 – Tax Credit for Preservation of Historic Structures Passes House 101-0: HB 140 would provide a tax credit against the tax liability of the taxpayer-owner for the rehabilitation, preservation, and development of historic structures. The credit for the taxable year in which the certified rehabilitation is placed in service would be equal to 25 percent of the qualified rehabilitation expenditures for certified historic structures, and shall be 10 percent of the qualified rehabilitation expenditures for qualified pre-1936 non-historic structures. The credit would apply to business privilege taxes, financial institution excise taxes, income taxes, insurance premium taxes, and utility taxes. This bill has passed out of the House and has been assigned to the Senate Ways and Means-Education Fund Committee. It is being championed by a coalition of chambers of commerce and downtown redevelopment groups around the state, including the Birmingham Business Alliance.

Government Contractor Sales and Use Tax Exemption Bill, HB 419, Passes House 89-6: On Tuesday, April 9, the House passed a bill sponsored by Representative Paul DeMarco (among others) and championed by the Associated Builders & Contractors. The proposed legislation covers construction projects involving governmental entities exempt from sales/use taxes. The bill would change existing law, which is itself the result of the 2004 repeal of the so-called Government Contractor Exemption Act, Ala. Code § 40-9-33. Current law requires that (1) the prime contractor and subcontractors be appointed in writing as the purchasing agents of the government entity and (2) only the government owner’s funds be used to purchase the construction materials subject to the exemption. Suffice to say, administrative nightmares and cash flow problems abound with the current process. So do financially devastating traps for the unwary contractor or subcontractor.

The bill would essentially be a return to the pre-2004 conditions, allowing the Alabama Department of Revenue to grant certificates of exemption from sales and use taxes to contractors and subcontractors licensed by the State Licensing Board for General Contractors for the purchase of building materials and construction materials to be used in the construction of most government projects (not including a highway, road, or bridge project). The bill would provide for the accounting for purchases and for strict enforcement of violations. We commend Commissioner of Revenue Julie Magee and her staff for working with the contractor community on this long-awaited legislation. 

Note: Members of our SALT Practice Team were involved in drafting and lobbying for TBOR II.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Bradley Arant Boult Cummings LLP | Attorney Advertising

Written by:

Bradley Arant Boult Cummings LLP
Contact
more
less

Bradley Arant Boult Cummings LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.