Just when you think you know what is coming…
Look out! That is a good way to describe the debate over House Bill 350. The House has run relatively smooth over the entire session avoiding some of the major controversies that have overwhelmed the Senate. Last week we finally found a land mine when we began the debate on this bill. House Bill 350 is an extremely complicated bill that in essence creates a retroactive tax for 44 businesses who are based out of state but do have locations in Alabama. Some of the more well known of these businesses include Home Depot and Lowes. In short, the bill says that these companies were supposed to be paying corporate income taxes under a 2001 law but found a legal loophole to avoid this tax and therefore they should be required to pay these supposed back taxes now. There is a lawsuit pending on whether or not these companies should pay for these last seven years or not. Sound confusing? Well that is just a scratch on the surface. There are multiple sides to this argument. The Governor, AEA, the business coalition, the House Republican Caucus and the House Black Caucus all have differing views of this bill and at any one time this past week were all working with or against each other to hammer out some middle ground.. After two days of intense debate it looks like we will pick up again on this issue Tuesday. Higher education now appears to be wading into this debate as well because of House Bill 350 does not pass then there will likely be a $27 million cut in the Education Trust Fund Budget with the bulk coming out of Higher Education.
Just when you think you know what is right around the corner some issue like this will always jump up and surprise you in the legislative process. Stay tuned because this bill could very well determine whether or not several agencies in the Education Budget survive to see another day or suffer major cuts.
Cam,
I sincerely respect your opinion on most issues, but I have serious reservations about your observation that this bill creates a retroactive tax. I believe the bottom line is that the 44 companies in question hired a lawyer you know to expose a loophole that he had basically himself written into the original 2001 Add-Back bill - see definition of “unreasonable”, or lack thereof. I’ll argue that paying a tax you were supposed to pay is not retroactive, but simply the right thing to do. $550/hour for that guy. I’m going to start writing tax bills soon.
Now you guys did a wonderful job bartering for a more attractive small-business insurance tax incentive, but where in the heck did the Black Caucus come from at 5:00 on Thursday, and in particular John Knight?
Comment by Downtown Mafia — April 28, 2008 @ 7:19 am
The retroactive argument can really be spun anyway and has for that matter. One side says it is retroactive because basically you are auditing back 7 years beyond the statute of limitations on any taxes owed to grab any money you can get. The other side argues that it is not retroactive because those companies should have been paying it to begin with. What really should happen is the case is being litigated in court right now and if those companies due owe taxes then the court will tell them to pay up and we need to fix any problems in the law going forward. Of course I say this as if a magic wand would make all of this that easy.
Comment by Cam Ward — April 28, 2008 @ 1:06 pm
Loophole is an interesting word, that by definition is a legitmate and legal way to deal with an issue. Since it was legal at the time of the filings, why is it suddenly not the right thing for those companies to do? If you had a legal means of diminishing your state or federal taxes, would you not take that path. And, if you did, would you expect to have the law changed some seven years hence to make you pay what you legally didn’t pay back then?
Yes, it is a retro-active tax. If it wasn’t a tax then, and it wasn’t a tax if there was a legal way to not pay it, and suddenly it’s a tax now, then it’s a retro-active tax.
Comment by Otis Cat — April 28, 2008 @ 1:23 pm
Otis you just explained one of my agruments but did it much better than I did.
Comment by Cam Ward — April 28, 2008 @ 1:25 pm
One other comment concerning this retroactive tax that seems like such a good idea to so many. If you were on the board of Volkwagen and trying to determine where to put you auto plant, wouldn’t it make you a little nervous that Alabama is legislating taxes that are retroactive seven years?
Case closed.
Comment by Otis Cat — April 28, 2008 @ 6:52 pm
Case open Otie, the undefined “unreasonable” created this quagmire, which was the intent of one side of the negotiations back during the initial 2001 Add-Back bill. And since an important player in those deliberations is now charging 550/hr to work on behalf of the poor ole 44 out-of-state companies exploitng a “loophole” that he inserted, I’d say that retroactive is only accurate if you disregard the intent of the initial bill, which I see that many are probably doing. Pay up, then the case is closed.
As for Volkswagon, I don’t personally care what they think of our state tax policies. They’re the fourteenth lowest in the nation and tied for second lowest in the region, so they can take it or leave it as long as they pay them. I love the fear tactics.
http://www.tuscaloosanews.com/article/20080427/NEWS/381863245/1007/TL02
Cam, I believe the intent here is also not to leave this decision to the courts because the legislature is already dealing with the after-effects of the Exxon Mobile decision — a fairly controversial decision that has turned much of the budgetary process upside down.
Comment by Downtown Mafia — April 29, 2008 @ 6:33 am
I am constantly amazed that people think the courts should consider whether a decision has budgetary implications instead of making judicial decisions based on the law. I think that’s why the judicial branch is a separate branch of government. Checks and balances are meant to be political.
Comment by Otis Cat — April 29, 2008 @ 10:28 pm
A mis-type on that last sentence. Checks and balances are NOT meant to be political.
Comment by Otis Cat — April 29, 2008 @ 10:29 pm
I wasn’t presuming that the courts should base their decisions on budget ramifications, only on the merits of the case.
In the case of Exxon-Mobile, the merits were not properly considered in my opinion.
I’m glad that you’re consistently amazed though, Otie.
Comment by Downtown Mafia — April 30, 2008 @ 7:45 am