Ivey uses emergency proclamation to extend incentives, clear up tax issue

Ivey uses emergency proclamation to extend incentives, clear up tax issue

By MARY SELL, Alabama Daily News

Gov. Kay Ivey on Friday extended the 2020 expirations of some major economic incentives used by the state to attract businesses and clarified that Alabamians won’t have to pay taxes on certain benefits they received under the CARES Act.

Through an emergency proclamation, Ivey took care, temporarily, of two of the major reasons some lawmakers and lobbying groups wanted the Legislature to meet for a special session this year. This month, it became clear a special session, which would have to be called by Ivey, wouldn’t happen.

“In coordination with the Alabama Legislature, we are pleased to address items that were delayed due to COVID-19,” Ivey said in a written statement. “This action is a short-term solution until these items can be considered by the full legislative body during the 2021 Regular Session. In the meantime, the people of Alabama need clear guidance prior to filing their 2020 taxes. Therefore, the state will not be collecting taxes from individuals or businesses who received benefits from the CARES Act because these benefits were designed to help our citizens survive the pandemic’s strain on the economy. It is both my intent, and the will of the Legislature, to ensure CARES Act payments extend their full value to the people who need it the most.”

Several lawmakers plan legislation to clear up the tax issue, Alabama Daily News previously reported. The Legislature adjourned in May without passing a bill to clarify that federal relief funds are not to be considered taxable income. 

Ivey’s proclamation directs the state revenue commissioner to alter the tax return forms and instructions to ensure that citizens and businesses will not have to pay state taxes on CARES Act benefits such as tax credits, advance refunds and loan forgiveness. The benefits are already exempt from federal taxes.

“Gov. Ivey consulted with the legislative leadership before issuing the executive order and included our input in the final draft,” Speaker of the House Mac McCutcheon told Alabama Daily News. “The power of codifying the tax exemption remains with the Legislature, but issuing the order now allows families to plan their spending and finances, which is especially important during the Christmas gift-giving season.  I anticipate the Legislature will devote much of its coming work toward building the state’s economy and continuing to provide Alabama families with needed jobs and opportunities.”

State Sen. Greg Reed, R-Jasper, who was recently selected by the Republican majority to serve as Senate President Pro Tem, said the unique nature of the circumstances warranted extraordinary actions on the governor’s part.

“The governor has expressed to members of the Legislature that she understands these topics are a legislative prerogative. However, we can all agree that we are in unprecedented times that require unprecedented solutions,” Reed said. “These issues will be a top priority for the Senate as we begin the next legislative session.”

Meanwhile, the Alabama Jobs Credit and Investment Credit, which expire at the end of the year, and the lesser-known but also used Growing Alabama Credit that ended Sept. 30, have been a major concern of state leaders and economic developers.

“The Alabama Jobs Act and Growing Alabama tax credits are essential to the success of Alabama’s economy, and we’ve seen a great return on investment across our state,” Ivey said. “The state is currently negotiating potential economic projects that hinge on the availability of these tax-credit programs, and without today’s extension, we risk losing nearly $3 billion in direct capital investment and over 7,000 new direct jobs.”

But some have questioned whether Ivey alone could extend the tax credits, essentially making a change to state law alone, or the potential precedent the action would set. Ivey has used emergency powers to alter other state laws during the pandemic, including open meeting requirements. The incentive situation is slightly different though, because businesses could enter agreements under the Ivey-issued extension, but not collect on the incentives for years, after the pandemic emergency is over. And in the case of the Growing Alabama Credit, Ivey is reviving a law that expired two months ago.

“I’m going to leave it to the governor to defend the constitutionality of her actions,” said Sen. Chris Elliott, R-Daphne, said Friday. Elliott had advocated for a special session. He said he supports the goals behind Ivey’s actions, but said lawmakers will have to act in February to ensure the constitutionality of the laws moving forward.

Ivey Press Secretary Gina Maiola said that the authority comes from the Emergency Management Act gives the governor, during the existence of a declared state of emergency, the power to perform and exercise “such…functions, powers and duties as are necessary to promote and secure the safety and protection of the civilian population.”

“Extending the economic development incentives is a valid exercise of this power for at least two reasons,” Maiola wrote in an email.  “First, it helps promote jobs and other investment in Alabama at a time when, as a result of the pandemic, they are most needed. Second, the pandemic prevented the Legislature from fully and safely considering extension of the sunset dates during its regular session. This temporary measure will restore to the Legislature the opportunity to fully and safely consider these economically beneficial programs during the 2021 Regular Session.”

Sen. Greg Albritton, R-Range, said lawmakers will need to address these issues early in the next session.

“I appreciate the governor’s effort in trying to protect the state and citizens, but I am not willing to bequeath power to any of the executive department,” Albritton, chairman of the Senate General Fund budget committee, said.

Lawmakers’ 2021 legislative session begins Feb. 2.