Ballot Measure Could Save Local Alabama Taxes From Litigation

The Bloomberg BNA Tax Management Weekly State Tax Report filters through current state developments and analyzes those critical to multistate tax planning.

By Chris Marr

Nov. 3 — Hundreds of local Alabama tax measures, alcohol sales laws, bond financings and other acts could face litigation unless voters agree to fix a quirk of legislative procedure, according to supporters of a proposed constitutional amendment.

Amendment 14, up for a vote on the Nov. 8 ballot in Alabama, is designed to protect all previously approved local legislation from being overturned in court. A circuit court judge did exactly that in December 2015, overturning a Jefferson County sales tax measure on the grounds that the Legislature didn’t follow legal procedure to pass the bill.

“There’s an awful lot of local legislation that runs through the state Legislature,” said Will Sellers, a tax attorney with Balch & Bingham in Montgomery and chairman of the state’s Fair Ballot Commission.

“It’s anybody’s guess the potential impact this has,” Sellers told Bloomberg BNA on Nov. 2.

The problem with the Jefferson County sales tax measure stems from the way the state House passes budget isolation resolutions (BIRs), which it must pass alongside any bill that comes up before the state’s annual budget has passed. The House allows BIRs to pass with a three-fifths majority of the members voting—which is often only a handful of members on local bills—as opposed to the state constitution’s requirement of three-fifths of a quorum of representatives.

600 Acts Over 30 Years

“The amendment validates over 600 local acts, dealing with all sorts of subjects across the state, that were passed by the Alabama Legislature over the span of 30 or so years,” Bruce Ely, a tax attorney with Bradley Arant Boult Cummings LLP in Birmingham, told Bloomberg BNA on Nov. 2.

Sen. Cam Ward (R), who sponsored the legislation putting Amendment 14 on the ballot, said on his website the bills potentially at risk cover “sales taxes, gasoline taxes, property taxes, court costs, pistol permit fees, Sunday alcohol sales, annexations and dozens of other matters.”

Jefferson County has appealed the ruling in its sales tax case to the Alabama Supreme Court. Ely, who’s also a member of Bloomberg BNA’s State Tax Advisory Board, predicted the court “would love to dodge the bullet” of having to decide that case.

Opponent Disputes Broad Risk

An opponent of Amendment 14, state Rep. John Rogers (D), called it a conspiracy to combat the circuit court’s ruling. The underlying tax measure the court overturned was an “unconstitutional effort to take Jefferson County’s school tax money and use it for non-school purposes,” he said in a statement of opposition attached to the state’s ballot summary online.

Rogers’ district includes Birmingham, which is the seat of Jefferson County, and he is also a party to the lawsuit seeking to overturn the Jefferson County sales tax measure.

Alabama’s statute of limitations protects most previously passed local bills, leaving only two bills at risk of being overturned, Rogers said. One is the Jefferson County tax bill, and the other is a bill that authorized a referendum on a one-cent sales tax to build a hospital in Chilton County.

The Chilton County tax measure also faces pending litigation, although the hospital, St. Vincent’s Chilton, has already been built.

To contact the reporter on this story: Chris Marr in Atlanta at cMarr@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

For More Information

Alabama’s proposed amendments on the Nov. 8 ballot are at http://src.bna.com/jPD

The December 2015 ruling on Jefferson County’s sales tax is at http://src.bna.com/jPC

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