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Senate Bill Takes Aim at Tax Exempt Groups

By Brandon Moseley
Alabama Politcal Reporter

Wednesday, April 22, 2015, the Senate Finance and Taxation Education Committee gave favorable report to a bill, SB256, which would require tax exempt groups to file a return on sales taxes they do not currently pay.  SB256 is sponsored by Senator Bill Holtzclaw (R-Madison). This version is a substitute for the original bill.

Sen. Holtzclaw said that the bill would require tax exempt groups to file annual reports. If they fail to file the report they would owe all of the sales taxes they did not pay plus a $2000 fine.

Chairman Trip Pittman (R-Montrose) said, “We are in a budget crisis.”  We do not know the magnitude of tax credits given by past legislatures. Some of these are 40 years old. I do not doubt that these entities are doing great work. Nobody however has gone back to check on these groups to see if they are still doing great work.

Chairman Pitman said that the want the Department of revenue to allow the groups to file their returns electronically.

Sen. Slade Blackwell (R-Mountain Brook) said, “I like the concept I like the idea.”

Sen. Holtzclaw said that this bill covers lodging taxes as well. Some groups have been giving exemptions on paying the state lodging tax.

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Sen. Jimmy Holley (R) said, “Give me 5 examples of entities that would need an exemption.

Sen. Holtzclaw replied Alabama Diabetes Foundation, Chilton County Rescue Squad, State Fair Authority, etc. 

Holtzclaw said that this is part of the process of learning more about the situation. Some may be doing a $100 a year some may be doing thousands of dollars a year. This just formalizes the process regarding the certificate.

Sen. Gerald Dial (R-Lineville) asked if this bill was a merging with SB245 (sponsored by Sen. Arthur Orr (R-Decatur).

SB245 was before the committee the previous week and would have revoked everyone’s tax exempt status and they would have to file a return to get that money back at the end of the year.

Chairman Pittman said “This is a lot lighter version than Sen. Orr’s bill.  All the old tax exemption certificates would be voided. A lot of house cleaning needs to go on in this bill. Not all entities that have been given tax exempt status are 501c(3).

Sen. Dial said, “Now my county hospital is going to have to file all this paperwork. They are going to apply more paperwork to my county hospital that is already struggling to survive.  This is a massive amount of paperwork.”

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Sen. Pittman said that the 990 form applies only to income taxes and would not apply to sales taxes, which is why there is a need for a new form.

Sen. Dial asked if the income tax rules are going to come back to the Legislative Council for Review?

Sen. Holtzclaw replied, “It can.”

Sen. Vivian Figures (D-Mobile) said that non profits are exempt from income taxes have to come back to the state to get exemption on sales taxes. Figures said that she wants to make this exemption apply to the state only and not also to county and municipal sales taxes.

Sen. Holtzclaw said, “Every time we do that (give a sales tax exemption) we create a burden on county and local government…We struggle to pass tax increases.  We should also struggle to give away tax exemptions…We have a responsibility to the people we may raise taxes on.”

Sen. Holley asked, “Does this apply to Mercedes?”  There are deep ramifications to what you are proposing.  There are a lot of implications.

Sen. Holtzclaw said, “I do not know.”

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Sen. Hank Sanders (D-Selma) said that a tax exemption is like a grant. If we granted the money we would say you have to make a report on how you use that money. Many of these entities may have gone out of business. I recognize that something has to be done. Thank you for beginning the process in this.

Sen. Dial said I would like to have the legislative council have the authority to look at any rules and regulations. A lot of these groups are run by volunteers. We are putting another burden on those people.

Sen. Pitman said that the legislature has been giving away tax exemption certificates to non-profit groups and that is what this applies to. Pittman said that businesses do not pay sales taxes on items that we buy for resale. Everybody who has not filed reports for years would get these new certificates. A sales tax emption is a different entities than a sales tax number. There are a lot of those little laminated cards still out there.

Sen. Dial said I want to carry this over. I am not ready to vote this out. This committee is not doing due diligence.

Sen. Pittman said, “I am not going to raise any taxes in this state until we get a handle on these exemptions.”  Pittman made a motion to table Dial’s carry over motion.

Sen. Holtzclaw said that he would work with other Senators on this bill before it gets to the floor of the Senate but is asking that you let it out of committee today.

An angry Sen. Dial said, “Maybe we should just do away with the committee system!”

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The Dial motion was tabled on a 9 to 4 vote.

The bill, SB256, received a favorable report from the committee on a 9 to 4 vote.

Written By

Brandon Moseley is a former reporter at the Alabama Political Reporter.

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