2016 Real Estate Legislative Update
Compiled by Andrew Sims, BAR Communications Director and Jessica Coates BAR Director of Government Affairs
– Additions by Alabama REALTORS®
It’s crucial to the success and future of real estate in Alabama that REALTORS® and consumers both know the issues going on statewide and nationally when it comes to real estate issues on the table with our law makers. The following is a report from the Government Affairs staff at the Alabama Association of REALTORS®.
2016 Legislative Session Begins, Looking Back at 2015 and 2016 Legislative Outlook
With the start of the 2016 legislative session on February 2, the Bill Read Committee and your lobbying team at Alabama REALTORS® have been busy sifting through over 200 legislative proposals to identify the bills affecting the real estate industry and property owners.
By law, the session consists of 30 days that must occur within a 105 calendar day period. Generally, the legislators convene on Tuesday and Thursday, reserving Wednesday for committee meetings.
Leadership may schedule three-day work weeks at various times during the session. The session is expected to conclude by May 17.
Looking back, the 2015 regular session and budget crisis were roller coasters that began last January and continued through the summer and two special sessions. Alabama REALTORS® successfully defended the real estate industry from harmful legislation that threatened it from all sides through the 10 month budget crisis. Many bills and proposals were defeated during the regular session, only to return during the first special session and again during the second special session. In the end, legislative leaders passed a budget through a combination of modest revenue measures such as an increase on the cigarette tax and further cuts to state agencies, state budgets and services.
2015 Legislative Accomplishments:
- Protected the mortgage interest deduction by defeating a “Flat Tax” bill that would have removed the MID in Alabama.
- Defeated legislative efforts to double the mortgage and deed recording fees and impose fees on the consumer.
- Defeated 16 other bills that threatened the real estate industry in Alabama.
- Passed the Right of Redemption Bill that cut the current redemption period in half, from one year to six months for residential property.
- Passed legislation to prevent harmful eminent domain practices from coming here to Alabama.
- Passed the HOA Management Reform Bill to increase transparency and disclosure of HOA governance.
- Passed the Wind Insurance Fortification Bill to encourage home and commercial property owners to build, rebuild and retrofit insurable property to resist hurricane and catastrophic windstorm damage.
The 2016 legislative session is expected to be similar to 2015. Many of the large budget issues remain unresolved and loom large for legislative leadership- such as adequately funding prisons, Medicaid funding and funding the court system. Legislative leaders have not shown an appetite to raise taxes or additional revenue. Many believe there is still fat to trim from state budgets before they consider additional revenue measures. There will be a lot at stake again this session for the real estate industry. The industry will be back playing defense on several proposals. Some will be similar to the ones proposed in 2015.
As always, some will be new and unexpected. Items expected to return are revenue measures that will affect real estate in Alabama for many years such as:
- Doubling the mortgage and deed recording fees- this bill is expected to return in 2016. These fees add to out of pocket expenses that prevent people from getting into homes. Last year’s bill would have raised the mortgage recording fee from 15 cents per $100 of indebtedness to 30 cents per $100 of indebtedness in order to provide revenue to the Alabama Housing Trust Fund. The added tax would bring in an estimated $24 million a year for the Fund and additional revenue would be distributed to counties, probate judges and the State General Fund. The mortgage tax increase is estimated to bring in an additional $45 million overall.
- Removal of the Mortgage Interest Deduction would cost the average Alabama homeowner approximately $400 annually.
- “Flat tax” or some variation of it — this bill had great momentum in the senate last year with 20 cosponsors and is expected to return in 2016. Last year’s “Flat Tax” proposal would have lowered the tax rates for individuals and corporations across the board. For individuals, the rate would be reduced from 5 percent to 2.75 percent. For corporations, the rate would be reduced from current 6.5 percent to 4.59 percent. The reduction in individual and corporate tax rates would require the elimination of all tax credits, exemptions and deductions for every industry in Alabama- including the real estate industry. The state mortgage interest deduction is among the top ten most utilized tax deductions by individuals in Alabama at cost to the state of approximately $252 million annually.
- Consumption tax- this idea gained steam during the first special session. It would eliminate the state income tax code altogether- including the Mortgage Interest Deduction- and is replaced with a TAX ON SERVICES and increased sales tax.
Governor Robert Bentley’s Agenda
Governor Bentley introduced his legislative agenda on February 2 during his State of the State Address. The Governor’s agenda includes: investing in education, increasing the number of health professionals in rural areas, addressing the prison problem with long-term solutions and broadband development. Other issues the Governor addressed include: accessible affordable coastal insurance options, the Gulf State Park project, supporting Veterans, assessing water resources and supporting small businesses.
House Republican Caucus’ Agenda
The House Republican Caucus’ have branded their agenda “Right for Alabama.” Items on their agenda include budget and pension reforms, school and student safety, small business tax credits, taxpayer protections, protections against Syrian refugee threats, teacher pay raises, classroom technology upgrades, a constitutional amendment to solidify the state’s ‘right to work’ status and protections for gun owners and unborn children.
House Democrat Caucus’ Agenda
The House Democrats have included the following items on their agenda: funding to make prekindergarten available statewide, automatic voter registration with driver’s license renewals, a required warning on advertisements for e-cigarettes, a lottery to fund education via a constitutional amendment, pay equality for women, a minimum wage increase and legislative redistricting. The House Democrat Caucus has requested a 5% raise for educators and a 2% cost of living adjustment for retired educators.
Senate Republican Caucus’ Agenda
Senate Republicans have revolved their agenda around spurring economic growth; including making incentives more flexible; encouraging education excellence, which includes a pay raise for education staff; and protecting children and families, which includes further restrictions on child abuse.
Senate Democratic Caucus’ Agenda
The Alabama Senate Democrats’ agenda, “Empowering Alabama Families,” includes a proposed constitutional amendment to allow casinos and lottery proposals with proceeds to benefit both the Education Trust Fund and the General Fund, an increase in the state minimum wage, an increase in property taxes, a bill to repeal the photo voter ID law and the expansion of Medicaid under the Affordable Care Act.