The 2018 Regular Session of the Alabama Legislature is at least halfway over. The Legislature has now met for 16 of its permitted 30 session days, but hopes remain high in the State House that the session will conclude before all 30 days are used. With both budgets in uncharacteristically good health and a spirit of cooperation still alive—particularly in the Senate—the session seems on track to conclude as early as the end of this month. The House has continued to bog down occasionally, with a lengthy debate on Tuesday over a constitutional amendment to require the Forever Wild Land Trust to pay ad valorem taxes that failed to pass and another on Thursday over hardship drivers’ licenses that barely passed, but has so far avoided a complete shutdown.

Data Breach Legislation Passes Senate

On Thursday, the Senate unanimously passed a bill that would create penalties for failure to notify affected individuals that their personal data has been compromised. SB318, sponsored by Senator Arthur Orr (R–Decatur), and which is known as the Alabama Data Breach Notification Act, requires both public and private entities that hold sensitive information to establish reasonable security measures for protecting that information. Furthermore, the bill would require any entity that has been breached to conduct an investigation and, upon determining that any breached information is “reasonably likely to cause substantial harm” to notify the affected individuals as “expeditiously as possible,” but in no case later than 45 days after discovery. Under the proposed law, knowing or willful failure to notify could result in the imposition of significant penalties under Alabama’s Deceptive Trade Practices Act of up to $500,000. The current version of the bill would also largely exempt entities that are subject to federal regulations or requirements in the event of a breach from many of the law’s requirements. Alabama is one of only two of states that do not have some form of data breach law on its books. Proponents of the legislation, including Attorney General Steve Marshall, have worked with the business community and other branches of state government to craft a bill that is widely seen as fair and reasonable. The version of the bill passed by the Senate is actually the second substitute to the original bill that was introduced several weeks ago.

“Rest” of General Fund Budget Package Passes Senate

While the General Fund budget itself passed the Senate last week, two additional bills that were part of this year’s overall General Fund budget package passed the Senate this week. SB185, sponsored by Senator Clyde Chambliss (R–Prattville), which gives state employees and some county employees a 3 percent pay increase, passed the Senate on Tuesday by a vote of 28–1. This increase is the first cost-of-living adjustment for non-education state employees in 10 years. SB175, sponsored by Senator Trip Pittman (R–Daphne), which makes supplemental appropriations of the current fiscal year, passed the Senate on Thursday by a vote of 27–0. The bulk of funds—$30 million out of roughly $36 million appropriated in the bill—will go to the Department of Corrections to help fund the hiring of new personnel and improvements to mental healthcare for inmates. The Department is currently in the remedy phase—with liability already having been found—of a lawsuit in federal court over the quality of mental healthcare provided to inmates, and a Court Order is expected any day.

Fantasy Sports Bill Clears Senate Committee

A bill that would allow fantasy sports companies, such as DraftKings and FanDuel, to operate in Alabama passed out of the Senate Committee on Tourism and Marketing on Wednesday. SB325, sponsored by Senator Paul Sanford (R–Huntsville), would require fantasy sports operators to register with the Attorney General and pay a significant registration fee annually. Registered companies would be exempt from any gambling-related prohibitions. The bill would also create a basic framework for the regulation of fantasy sports operators, including requiring significant consumer protections. After a public hearing, the bill received a unanimous vote for a favorable report.

Income Tax Credit Clarification out of Committee

On Wednesday, the Senate Committee on Finance and Taxation Education voted to give a favorable report to a bill that would bring clarity to a law passed by the Legislature in 2012 relating to the taxation of multistate pass-through entities. SB342, sponsored by Senator Rodger Smitherman (D–Birmingham), would essentially codify an agreement between businesses and the Alabama Department of Revenue to refund taxes collected under a controversial regulation, but make essentially the same regulation law going forward. The 2012 law was intended to allow some multistate businesses to receive a credit against Alabama taxes for state taxes paid in other states. The regulation sought to limit the credit. The bill is supported by the Department of Revenue and many of the affected businesses.

“Dark Store” Bill Nears Final Passage

A bill that would address commercial property valuations is due to be considered by the House for final passage. SB182, sponsored by Senator Phil Williams (R–Rainbow City), is a response to some challenges brought to lower property taxes in various states, including Alabama. In so-called “dark store” challenges, property owners argue that the value of their property should be lowered to the value of the store if it were not an operating business, but rather a “dark store,” on the grounds that the custom built buildings are essentially valueless for any other application. The current version of the bill, which is the result of weeks of negotiations between businesses and counties, requires parties to disclose more information—including whether a property was occupied or if it had any deed restrictions—when they use comparable sales or leases as part of an argument to lower a tax valuation.

First-Time Homebuyers Account Nears Final Passage

On Wednesday, the Senate Committee on Finance and Taxation Education unanimously voted to favorably report a bill, sponsored by Representative Kyle South (R–Fayette), which would allow Alabamians to claim a tax deduction for saving money towards the purchase of either their first home or a so-called “second chance” home. As amended on the House floor several weeks ago, HB248 would allow an annual income tax deduction of up to $6,000 for individuals and $12,000 for couples for up to five years for deposits made into an account set aside for the purchase of a home. In order to qualify, purchasers must not have owned or purchased a home for the preceding five years. If the bill passes, Alabama would become the seventh state to offer first-time homebuyer accounts.

Direct Shipment of Wine Advances in Senate

On Wednesday, the Senate Committee on Fiscal Responsibility and Economic Development voted 7–5 to give a favorable report to a bill that would allow licensed wine manufacturers to ship wine directly to Alabama consumers. SB243, sponsored by Senator Bill Holtzclaw (R–Madison), would allow any Alabama-licensed wine producer, whether located in the state or not, to apply for a permit to ship wine directly to an individual for personal use. As introduced, the bill would limit the amount of wine that a producer could ship to any individual at 24 cases per year and would require that the purchaser be verified to be 21 years of age. The Committee had previously voted to carry the bill over, and several opponents spoke at a public hearing on the bill before the vote on Wednesday.

Conclusion

The Legislature has used 16 of its available 30 meeting days for the 2018 Regular Session. The House will reconvene on Tuesday, March 6th at 1:00 p.m. The Senate will reconvene on the same day at 2:00 p.m. Next week is anticipated to be a two legislative day week, with Wednesday reserved for committee meetings.

If you have any questions or would like to reach out for more information, please contact Edward A. "Ted" Hosp or Edward A. O'Neal. To read more about Maynard's Governmental and Regulatory Affairs Practice, please click here.

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