HB4 By Representative Holmes RFD Fiscal Responsibility Rd 1 04-FEB-20

SYNOPSIS: This bill would repeal various state taxes and levy instead a comprehensive consumption tax.

A BILL TO BE ENTITLED AN ACT

To repeal the following provisions of the Code of Alabama 1975: Chapter 18 of Title 40, Sections 40-27-1.1, and 40-31-1-through 40-31-4, regarding the income tax; Chapter 9F of Title 40, regarding the tax credits for rehabilitation of historic structures; Chapter 16 of Title 40, regarding the financial institutions excise tax; Chapter 14 of Title 40, regarding the corporation tax; Sections 40-14A-1 through 40-14A-2, 40-14A-21 through 40-14A-29, and 40-14A-41 through 40-14A-43, regarding the business privilege tax; Chapter 23 of Title 40, regarding the sales and use and contractor’s gross receipts taxes; Sections 40-15-1 through 40-15-19, regarding estate and gift tax; Sections 40-15A-1 through 40-15A-14, regarding the generation-skipping transfer tax; Chapter 22 of Title 40, regarding recording taxes; Sections 40-12-220 through 40-12-227, regarding the leasing and rental tax; Chapter 31 of Title 40, regarding the facilitating business rapid response to declared disasters act; Sections 40-21-80 through 40-21-107, regarding the utilities gross receipts tax and utility service use tax; Sections 40-21-50 through 40-21-64, regarding the public utility license tax and hydroelectric tax; Chapter 26 of Title 40, regarding transient occupancy tax; and Chapter 4A, of Title 27, regarding insurance premium taxes; Chapter 14 of Title 40, regarding certified capital company insurance premium tax credits; to repeal Section 40-2A-17, regarding the Alabama Taxpayer’s Bill of Rights; Section 40-2-25, regarding audits and examinations; and to replace them with a broad-based consumption tax; to also amend Sections 40-2A-4 and 40-2A-18, Code of Alabama 1975, regarding the Taxpayer’s Bill of Rights.

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:

Section 1. Short Title. This act shall be known and may be cited as the "Alabama Economic Freedom Act."

Section 2. Findings of the Alabama Legislature

(a) Findings Relating to Alabama Income Tax. The Alabama Legislature finds that the Alabama income tax:

(1) retards economic growth and has reduced the standard of living of the Alabama public;

(2) impedes the competitiveness of Alabama’s industry;

(3) reduces savings and investment in Alabama by taxing income multiple times;

(4) slows the capital formation necessary for real wages to steadily increase;

(5) impedes innovation and lowers productivity;

(6) imposes unacceptable and unnecessary administrative and compliance costs on individual and business taxpayers;

(7) is unfair and inequitable;

(8) unnecessarily intrudes upon the privacy and civil rights of Alabama’s citizens;

(9) hides the true cost of government by embedding taxes in the costs of everything Alabamians buy;

(10) is not being complied with at satisfactory levels and therefore raises the tax burden on law abiding citizens; and

(11) impedes upward social mobility.

(b) Findings Relating to Existing Sales and Use Tax. The Alabama Legislature finds that the Alabama sales and use tax:

(1) has too many exceptions which are unfair, increase complexity and distort the economy;

(2) taxes business inputs which results in a hidden tax and reduces investment in Alabama; and

(3) has a disproportionately adverse impact on lower income Alabama.

(c) Findings Relating to the Estate and Inheritance Tax. The Alabama Legislature finds that the Alabama estate and inheritance tax;

(1) forces family businesses and farms to be sold by the family to pay such taxes;

(2) discourages capital formation and entrepreneurship;

(3) fosters the continued dominance of large enterprises over small family-owned companies and farms; and

(4) imposes unacceptably high tax planning costs on small businesses and farms.

(d) Findings Relating to the Consumption Tax. The Alabama Legislature finds further that a broad-based single rate consumption tax on goods and services purchased for final consumption:

(1) is simpler and more fair than the sales and use tax in place;

(2) will promote savings and investment;

(3) will promote fairness;

(4) will promote economic growth;

(5) will raise the standard of living;

(6) will increase investment;

(7) will enhance productivity and competitiveness;

(8) will reduce administrative burdens on the Alabama taxpayer;

(9) will improve upward social mobility;

(10) will exempt the poor from tax; and

(11) will respect the privacy interests and civil rights of taxpayers.

Section 3. Effective January 1, 2020, the following provisions of the Code of Alabama 1975 are hereby expressly repealed:

Chapter 18 of Title 40, Sections 40-27-1.1, and 40-31-1 through 40-31-4, regarding the income tax; Chapter 9F of Title 40, regarding the tax credits for rehabilitation of historic structures; Chapter 16 of Title 40, regarding the financial institutions excise tax; Chapter 14 of Title 40, regarding the corporation tax; Sections 40-14A-1 through 40-14A-2, 40-14A-21 through 40-14A-29, and 40-14A-41 through 40-14A-43, regarding the business privilege tax; Sections 40-15-1 through 40-15-19, regarding estate and gift tax; Sections 40-15A-1 through 40-15A-14, regarding the generation-skipping transfer tax; Chapter 22 of Title 40, regarding recording taxes; Sections 40-12-220 through 40-12-227, regarding the leasing and rental tax; Chapter 31 of Title 40, regarding the facilitating business rapid response to declared disasters act; Sections 40-21-80 through 40-21-107, regarding the utilities gross receipts tax and utility service use tax; Sections 40-21-50 through 40-21-64, regarding the public utility license tax and hydroelectric tax; Chapter 26 of Title 40, regarding transient occupancy tax; and Chapter 4A, of Title 27, regarding insurance premium taxes; Chapter 15B of Title 40, regarding certified capital company insurance premium tax credits; Section 40-2A-17, regarding the Taxpayer’s Bill of Rights; and 40-2-25, regarding audits and examinations.

Section 4. Chapter 23 of Title 40, Code of Alabama 1975, regarding sales and use taxes, is repealed.

Section 5. Chapter 23A of Title 40, is added to the Code of Alabama 1975, to read as follows:

§40-23A-1 Principles of interpretation

(a) In General. Any court, the Commissioner of Revenue and his delegates, and any other authority shall consider the purposes of this chapter (as set forth in subsection (b)) as the primary aid in statutory construction.

(b) Purposes. The purposes of this chapter are as follows:

(1) To raise revenue needed by the State of Alabama in a manner consistent with the other purposes of this chapter.

(2) To tax all consumption of goods and services in Alabama once, without exception, but only once.

(3) To prevent double, multiple, or cascading taxation.

(4) To simplify the tax law and reduce the administration costs of, and the costs of compliance with, the tax law.

(5) To provide for the administration of the tax law in a manner that respects privacy, due process, individual rights when interacting with the government, the presumption of innocence in criminal proceedings, and the presumption of lawful behavior in civil proceedings.

(c) Secondary Aids to Statutory Construction. As a secondary aid in statutory construction, any court, the commissioner and his delegates, and any other authority shall consider;

(1) the common law canons of statutory construction;

(2) the meaning and construction of concepts and terms used in Title 40 as in effect before the effective date of this Act; and

(3) construe any ambiguities in this Act in favor of reserving powers to the people.

(d) Resolution of Conflicts. Whenever Chapter 23A is inconsistent with any other chapter of this title, Chapter 23A shall govern with respect to the administration and collection of the taxes imposed by Chapter 23A.

§40-23A-2 Definitions

(a) The following terms shall have the following meanings for purposes of this chapter:

(1) AFFILIATED FIRMS. A firm is affiliated with another if 1 firm owns 50 percent or more of;

a. the voting shares in a corporation, or

b. the capital interests of a business firm that is not a corporation.

(2) COMMISSIONER. The individual appointed by the Governor as state Commissioner of Revenue pursuant to section 40-2-40 and his or her delegates.

(3) DESIGNATED COMMERCIAL PRIVATE COURIER SERVICE. A firm designated as such by the commissioner, upon application of the firm, if the firm;

a. provides its services to the general public,

b. records electronically to its data base kept in the regular course of its business the date on which an item was given to such firm for delivery, and

c. has been operating for at least 1 year.

(4) EDUCATION AND TRAINING. Tuition for primary, secondary, or postsecondary level education, and job-related training courses. Such term does not include room, board, sports activities, recreational activities, hobbies, games, arts or crafts or cultural activities.

(5) GROSS PAYMENTS. Payments for taxable property or services including taxes imposed by this chapter.

(6) INTANGIBLE PROPERTY.

a. IN GENERAL. Copyrights, trademarks, patents, goodwill, financial instruments, securities, commercial paper, debts, notes and bonds, and other property deemed intangible at common law.

b. CERTAIN TYPES OF PROPERTY. Does not include tangible personal property (or rents or leaseholds of any term thereon), real property (or rents or leaseholds of any term thereon) and computer software.

(7) PERSON. The definition contained in section 40-1-1(8).

(8) PRODUCE, PROVIDE, RENDER, OR SELL TAXABLE PROPERTY OR SERVICES.

a. A taxable property or service is used to produce, provide, render, or sell a taxable property or service if such property or service is purchased by a person engaged in a trade or business for the purpose of employing or using such taxable property or service in the production, provision, rendering, or sale of other taxable property or services in the ordinary course of that trade or business.

b. Taxable property or services used in a trade or business for the purpose of research, experimentation, testing, and development shall be treated as used to produce, provide, render, or sell taxable property or services.

c. Taxable property or services purchased by an insurer on behalf of an insured shall be treated as used to produce, provide, render, or sell taxable property or services if the premium for the insurance contract giving rise to the insurer’s obligation was subject to tax pursuant to section 40-23A-71 (relating to financial intermediation services).

d. Education and training shall be treated as services used to produce, provide, render, or sell taxable property or services.

(9) REGISTERED SELLER. The term registered seller means a person registered pursuant to section 40-23A-43.

(10) RESPONSIBLE OFFICERS AND PARTNERS. For purposes of section 40-23A-45 (m), the term responsible officers and partners means:

a. in the case of a corporation, any officer who is the President, the Chief Executive Officer, a Vice-President, the Secretary, the Treasurer, the Chief Financial Officer or serves a similar function for the corporation;

b. in the case of a partnership, any partner other than limited partners;

c. in the case of a limited liability company, any officer serving the function of a corporate President or Chief Executive Officer, Treasurer or Chief Financial Officer or Secretary and any member actively engaged in the management of the company.

(11) TAXABLE EMPLOYER.

a. The term taxable employer includes:

1. any household employing domestic servants, and

2. any government except for government enterprises (as defined in §40-23A-64).

b. The term taxable employer does not include any employer which is:

1. engaged in a trade or business,

2. a not-for-profit organization (as defined in section 40-23A-66), or

c. a government enterprise (as defined in section 40-23A-64).

(12) CROSS REFERENCE. For rules relating to collection and remittance of tax on wages by taxable employers, see section 40-23A-15(b)(2).

(13) TAX INCLUSIVE FAIR MARKET VALUE. The fair market value of taxable property or services plus the tax imposed by this chapter.

(14) TAXABLE PROPERTY OR SERVICE.

a. GENERAL RULE. The term taxable property or service means:

1. any property (including leaseholds of any term or rents with respect to such property) but excluding

2. intangible property, and

3. used property, and

4. any service (including any financial intermediation services as determined by section 40-23A-71).

b. SERVICE. For purposes of subparagraph (A), the term service:

1. shall include any service performed by an employee for which the employee is paid wages or a salary by a taxable employer, and

2. shall not include any service performed by an employee for which the employee is paid wages or a salary—

(i) by an employer in the regular course of the employer’s trade or business,

(ii) by an employer that is a not-for-profit organization (as defined in section 40-23A-66),

(iii) by an employer that is a government enterprise (as defined in section 40-23A-64), and

(iv) by taxable employers to employees directly providing education and training.

(15) USED PROPERTY.

a. property on which the tax imposed by this chapter has been collected and for which no credit has been allowed under section 40-23A-22, 40-23A-23, or 40-23A-26, or

b. property that was held other than for a business purpose (as defined in section 40-23A-4) on December 31, 2020.

(16) WAGES AND SALARY. The terms wages and salary mean all compensation paid for employment service including cash compensation, employee benefits, disability insurance, or wage replacement insurance payments, unemployment compensation insurance, workers’ compensation insurance, and the fair market value of any other consideration paid by an employer to an employee in consideration for employment services rendered.

(b) Cross References.

(1) For the definition of business purposes, see section 40-23A-4.

(2) For the definition of insurance contract, see section 40-23A-26(e).

(3) For the definition of qualified family, see section 40-23A-32.

(4) For the definition of monthly poverty level, see section 40-23A-33.

(5) For the definition of large seller, see section 40-23A-42(e)(3).

(6) For the definition of hobby activities, see section 40-23A-61.

(7) For the definition of gaming sponsor, section 40-23A-62(a).

(8) For the definition of a chance, see section 40-23A-62(b).

(9) For the definition of government enterprise, see section 40-23A-64(b).

(10) For the definition of mixed use property, see section 40-23A-65.

(11) For the definition of qualified not-for-profit organization, see section 40-23A-66.

(12) For the definition of financial intermediation services, see section §40-23A-71.

§40-23A-3 Imposition of consumption tax.

(a) In General. There is hereby imposed a tax on the use or consumption in the State of Alabama of taxable property or services.

(b) Rate. The rate of tax is eight and three one hundredths percent of the gross payments for the taxable property or service.

(c) Liability for Tax.

(1) IN GENERAL. The person using or consuming taxable property or services in the State of Alabama is liable for the tax imposed by this section, except as provided in paragraph (2) of this subsection.

(2) EXCEPTION WHERE TAX PAID TO SELLER. A person using or consuming a taxable property or service in the State of Alabama is not liable for the tax imposed by this section if the person pays the tax to a person selling the taxable property or service and receives from such person a purchaser’s receipt within the meaning of section 40-23A-49.

§40-23A-4 Intermediate and out-of-state sales.

(a) In General. For purposes of this chapter

(1) BUSINESS PURPOSES. No tax shall be imposed under section 40-23A-3 on any taxable property or service purchased for a business purpose in a trade or business.

(2) INVESTMENT PURPOSE. No tax shall be imposed under section 40-23A-3 on any taxable property or service purchased for an investment purpose and held exclusively for an investment purpose.

(b) Business Purposes. For purposes of this section, the term purchased for a business purpose in a trade or business means purchased by a person engaged in a trade or business and used in that trade or business

(1) for resale,

(2) to produce, provide, render, or sell taxable property or services, or

(3) in furtherance of other bona fide business purposes.

(c) Investment Purposes. For purposes of this section, the term purchased for an investment purpose means property purchased exclusively for purposes of appreciation or the production of income but not entailing more than minor personal efforts.

§40-23A-5 Rules relating to collection and remittance of tax.

(a) Liability for Collection and Remittance of the Tax. Except as provided otherwise by this section, any tax imposed by this chapter shall be collected and remitted by the seller of taxable property or services (including financial intermediation services).

(b) Tax To Be Remitted by Purchaser in Certain Circumstances.

(1) IN GENERAL. In the case of taxable property or services purchased outside of the State of Alabama and brought into the State of Alabama for use or consumption in the State of Alabama, the purchaser shall remit the tax imposed by section 40-23A-3.

(2) CERTAIN WAGES OR SALARY. In the case of wages or salary paid by a taxable employer which are taxable services, the employer shall remit the tax imposed by section 40-23A-3.

(c) Conversion of Business or Out-of-State Property or Services. Property or services purchased for a business purpose in a trade or business, for an investment purpose or for sale outside of the State of Alabama and sold untaxed pursuant to section 40-23A-3 that is subsequently converted to personal use in the State of Alabama shall be deemed purchased at the time of conversion and shall be subject to the tax imposed by section 40-23A-3 at the fair market value of the converted property as of the date of conversion. The tax shall be due as if the property had been sold at the fair market value during the month of conversion. The person using or consuming the converted property is liable for and shall remit the tax.

(d) Barter Transactions. If gross payment for taxable property or services is made in other than money, then the person responsible for collecting and remitting the tax shall remit the tax in money as if gross payment had been made in money at the tax inclusive fair market value of the taxable property or services purchased.

§40-23A-21 Credits and refunds.

(a) In General. Each person shall be allowed a credit with respect to the taxes imposed by section 40-23A-13 for each month in an amount equal to the sum of:

(1) such person’s business use conversion credit pursuant to section 40-23A-22 for such month,

(2) such person’s intermediate and out-of-state sales credit pursuant to section 40-23A-23 for such month,

(3) the administration credit pursuant to section 40-23A-24 for such month,

(4) the bad debt credit pursuant to section 40-23A-25 for such month,

(5) the insurance proceeds credit pursuant to section 40-23A-26 for such month,

(6) the transitional inventory credit pursuant to section 40-23A-82, and

(7) any amount paid in excess of the amount due.

(b) Credits Not Additive. Only one credit may be taken with respect to any particular gross payment.

§40-23A-22 Business use conversion credit.

(a) In General. For purposes of section 40-23A-21, a person’s business use conversion credit for any month is the aggregate of the amounts determined under subsection (b) with respect to taxable property and services

(1) on which tax was imposed by this chapter (and actually paid), and

(2) which commenced to be 95 percent or more used during such month for business purposes (within the meaning of section 40-23A-4).

(b) Amount of Credit. The amount determined under this paragraph with respect to any taxable property or service is the lesser of

(1) the product of

a. the rate imposed by section 40-23A-3, and

b. the quotient that is

1. the fair market value of the property or service when its use is converted, divided by

2. the quantity that is one minus the tax rate imposed by section 40-23A-3, or

(2) the amount of tax paid with respect to such taxable property or service, including the amount, if any, determined in accordance with section 40-23A-65 (relating to mixed use property).

§40-23A-23 Intermediate and out-of-state sales credit.

For purposes of section 40-23A-21, a person’s intermediate and out-of-state sales credit is the amount of consumption tax paid on the purchase of any taxable property or service purchased for

(1) a business purpose in a trade or business (as defined in section 40-23A-4), or

(2) for use or consumption outside the State of Alabama.

§40-23A-24 Administration credit.

(a) In General. Every person filing a timely monthly report (with regard to extensions) in compliance with section 40-23A-42 shall be entitled to a taxpayer administrative credit equal to the greater of

(1) $200, or

(2) one-quarter of 1 percent of the tax remitted.

(b) Limitation. The credit allowed under this section shall not exceed 20 percent of the tax due to be remitted prior to the application of any credit or credits permitted by section 40-23A-21.

§40-23A-25 Bad debt credit.

(a) Financial Intermediation Services. Any person who has experienced a bad debt (other than unpaid invoices within the meaning of subsection (b)) shall be entitled to a credit equal to the product of

(1) the rate imposed by section 40-23A-3, and

(2) the quotient that is

a. the amount of the bad debt (as defined in section 40-23A-72), divided by

b. the quantity that is one minus the rate imposed by section 40-23A-3.

(b) Unpaid Invoices. Any person electing the accrual method pursuant to section 40-23A-44 that has with respect to a transaction

(1) invoiced the tax imposed by section 40-23A-3,

(2) remitted the invoiced tax,

(3) actually delivered the taxable property or performed the taxable services invoiced, and

(4) not been paid 180 days after date the invoice was due to be paid, shall be entitled to a credit equal to the amount of tax remitted and unpaid by the purchaser.

(c) Subsequent Payment. Any payment made with respect to a transaction subsequent to a section 40-23A-25 credit being taken with respect to that transaction shall be subject to tax in the month the payment was received as if a tax inclusive sale of taxable property and services in the amount of the payment had been made.

(d) Partial Payments. Partial payments shall be treated as pro rata payments of the underlying obligation and shall be allocated proportionately

(1) for fully taxable payments, between payment for the taxable property and service and tax, and

(2) for partially taxable payments, among payment for the taxable property and service, tax and other payment.

(e) Related Parties. The credit provided by this section shall not be available with respect to sales made to related parties. For purposes of this section, related party means affiliated firms (as defined in section 40-23A-2(a)(1)) and family members.

§40-23A-26 Insurance proceeds credit.

(a) In General. A person receiving a payment from an insurer by virtue of an insurance contract shall be entitled to a credit in an amount determined by subsection (b), less any amount paid to the insured by the insurer pursuant to subsection (c), if the entire premium (except that portion allocable to the investment account of the underlying policy) for the insurance contract giving rise to the insurer’s obligation to make a payment to the insured was subject to the tax imposed by this chapter and said tax was paid.

(b) Credit Amount. The amount of the credit shall be the product of

(1) the rate imposed by section 40-23A-3, and

(2) the quotient that is

a. the amount of the payment made by the insurer to the insured, divided by

b. the quantity that is one minus the rate imposed by section 40-23A-3.

(c) Administrative Option. The credit determined in accordance with subsection (b) shall be paid by the insurer to the insured and the insurer shall be entitled to the credit in lieu of the insured, except that the insurer may elect, in a form prescribed by the commissioner, to not pay the credit and require the insured to make application for the credit. In the event of such election, the insurer shall provide to the commissioner and the insured the name and tax identification number of the insurer and of the insured and indicate the proper amount of the credit.

(d) Coordination With Respect to Exemption. If taxable property or services purchased by an insurer on behalf of an insured are purchased free of tax by virtue of section 40-23A-2(a)(8)(C), then the credit provided by this section shall not be available with respect to that purchase.

(e) Insurance Contract. For purposes of subsection (a), the term insurance contract shall include a life insurance contract, a health insurance contract, a property and casualty loss insurance contract, a general liability insurance contract, a marine insurance contract, a fire insurance contract, an accident insurance contract, a disability insurance contract, a long-term care insurance contract, and an insurance contract that provides a combination of these types of insurance.

§40-23A-27 Refunds.

(a) Registered Sellers. If a registered seller files a monthly tax report with an overpayment, then, upon application by the registered seller in a form prescribed by the commissioner, the overpayment shown on the report shall be refunded to the registered seller within 60 days of receipt of said application. In the absence of such application, the overpayment may be carried forward, without interest, by the person entitled to the credit.

(b) Other Persons. If a person other than a registered seller has an overpayment for any month, then, upon application by the person in a form prescribed by the commissioner, the credit balance due shall be refunded to the person within 60 days of receipt of said application.

(c) Interest. No interest shall be paid on any balance due from the commissioner under this subsection for any month if such balance due is paid within 60 days after the application for refund is received. Balances due not paid within 60 days after the application for refund is received shall bear interest from the date of application. Interest shall be paid at the Federal short-term rate (as defined in section 40-23A-50).

§40-23A-31 Family consumption allowance.

Each qualified family shall be eligible to receive a consumption tax rebate each month. The consumption tax rebate shall be in an amount equal to the product of:

(1) the rate of tax imposed by section 40-23A-3, and

(2) the monthly poverty level.

§40-23A-32 qualified family.

(a) General Rule. For purposes of this chapter, the term qualified family shall mean one or more family members sharing a common residence. All family members sharing a common residence shall be considered as part of 1 qualified family.

(b) Family Size Determination.

(1) IN GENERAL. To determine the size of a qualified family for purposes of this chapter, family members shall mean

a. an individual,

b. the individual’s spouse,

c. all lineal ancestors and descendants of said individual (and such individual’s spouse),

d. all legally adopted children of such individual (and such individual’s spouse), and

e. all children under legal guardianship of such individual (or such individual’s spouse).

(2) IDENTIFICATION REQUIREMENTS. In order for a person to be counted as a member of the family for purposes of determining the size of the qualified family, such person must

a. have a bona fide Social Security number; and

b. be a lawful resident of both

1. the United States, and

2. the State of Alabama.

(c) Children Living Away From Home.

(1) STUDENTS LIVING AWAY FROM HOME. Any person who was a registered student during not fewer than 5 months in a calendar year while living away from the common residence of a qualified family but who receives over 50 percent of such person’s support during a calendar year from members of the qualified family shall be included as part of the family unit whose members provided said support for purposes of this chapter.

(2) CHILDREN OF DIVORCED OR SEPARATED PARENTS. If a child’s parents are divorced or legally separated, a child for purposes of this chapter shall be treated as part of the qualified family of the custodial parent. In cases of joint custody, the custodial parent for purposes of this chapter shall be the parent that has custody of the child for more than one-half of the time during a given calendar year. A parent entitled to be treated as the custodial parent pursuant to this paragraph may release this claim to the other parent if said release is in writing.

(d) Annual Registration. In order to receive the family consumption allowance provided by section 40-23A-31, a qualified family must register with the commissioner in a form prescribed by the commissioner. The annual registration form shall provide:

(1) the name of each family member who shared the qualified family’s residence on the family determination date,

(2) the Social Security number of each family member on the family determination date who shared the qualified family’s residence on the family determination date,

(3) the family member or family members to whom the family consumption allowance should be paid,

(4) a certification that all listed family members are lawful residents of the United States,

(5) a certification that all listed family members are lawful residents of Alabama,

(6) a certification that all family members sharing the common residence are listed,

(7) a certification that no family members were incarcerated on the family determination date (within the meaning of subsection (l)), and

(8) the address of the qualified family. Said registration shall be signed by all members of the qualified family that have attained the age of 21 years as of the date of filing.

(e) Registration Not Mandatory. Registration is not mandatory for any qualified family.

(f) Effect of Failure To Provide Annual Registration. Any qualified family that fails to register in accordance with this section within 30 days of the family determination date, shall cease receiving the monthly family consumption allowance in the month beginning 90 days after the family determination date.

(g) Effect of Curing Failure To Provide Annual Registration. Any qualified family that failed to timely make its annual registration in accordance with this section but subsequently cures its failure to register, shall be entitled to up to 6 months of lapsed consumption tax rebate payments. No interest on lapsed payment amount shall be paid.

(h) Effective Date of Annual Registrations. Annual registrations shall take effect for the month beginning 90 days after the family registration date.

(i) Effective Date of Revised Registrations. A revised registration made pursuant to section 40-23A-35 shall take effect for the first month beginning 60 days after the revised registration was filed. The existing registration shall remain in effect until the effective date of the revised registration.

(j) Determination of Registration Filing Date. An annual or revised registration shall be deemed filed when

(1) deposited in the United States mail, postage prepaid, to the designated address of the Department of Revenue;

(2) delivered and accepted at the designated offices of the Department of Revenue; or

(3) provided to a designated commercial private courier service for delivery within 2 days to the commissioner at the designated address of the Department of Revenue.

(k) Proposed Registration To Be Provided. Thirty or more days before the family registration date, the commissioner shall mail to the address shown on the most recent rebate registration or change of address notice filed pursuant to section 40-23A-35(d) a proposed registration that may be simply signed by the appropriate family members if family circumstances have not changed.

(l) Incarcerated Individuals. An individual shall not be eligible under this chapter to be included as a member of any qualified family if that individual

(1) is incarcerated in a local, State, or Federal jail, prison, mental hospital, or other institution on the family determination date, and

(2) is scheduled to be incarcerated for 6 months or more in the 12-month period following the effective date of the annual registration or the revised registration of said qualified family.

(m) Family Determination Date. The family determination date is a date assigned to each family by the commissioner for purposes of determining qualified family size and other information necessary for the administration of this chapter. The commissioner shall promulgate regulations regarding the issuance of family determination dates. In the absence of any regulations, the family determination date for all families shall be October 1. The commissioner may assign family determination dates for administrative convenience. Permissible means of assigning family determination dates include a method based on the birth dates of family members.

(n) Cross Reference. For penalty for filing false rebate claim, see section 40-23A-45(i).

§40-23A-33 Monthly poverty level.

(a) In General. The monthly poverty level for any particular month shall be one-twelfth of the annual poverty level. For purposes of this section the annual poverty level shall be the sum of:

(1) the annual level determined by the Department of Health and Human Services poverty guidelines required by sections 652 and 673(2) of the Omnibus Reconciliation Act of 1981 for a particular family size, and

(2) in case of families that include a married couple, the annual marriage penalty elimination amount.

(b) Annual Marriage Penalty Elimination Amount. The annual marriage penalty elimination amount shall be the amount that is:

(1) the amount that is two times the annual level determined by the Department of Health and Human Services poverty guidelines required by sections 652 and 673(2) of the Omnibus Reconciliation Act of 1981 for a family of one, less

(2) the annual level determined by the Department of Health and Human Services poverty guidelines required by sections 652 and 673(2) of the Omnibus Reconciliation Act of 1981 for a family of two.

§40-23A-34 Rebate mechanism.

(a) General Rule. The Department of Revenue shall provide a monthly consumption tax rebate to duly registered qualified families in an amount determined in accordance with Section 40-23A-31.

(b) Persons Receiving Rebate. The payments shall be made to the persons designated by the qualifying family in the annual or revised registration for each qualified family in effect with respect to the month for which payment is being made. Payments may only be made to persons 18 years or older. If more than 1 person is designated in a registration to receive the rebate, then the rebate payment shall be divided evenly between or among those persons designated.

(c) When Rebates Mailed. Rebates shall be mailed on or before the first business day of the month for which the rebate is being provided.

(d) Smartcards and Direct Electronic Deposit Permissible. The commissioner may provide rebates in the form of smartcards that carry cash balances in their memory for use in making purchases at retail establishments or by direct electronic deposit.

§40-23A-35 Change in family circumstances.

(a) General Rule. In the absence of the filing of a revised registration in accordance with this chapter, the common residence of the qualified family, marital status and number of persons in a qualified family on the family registration date shall govern determinations required to be made under this chapter for purposes of the following calendar year.

(b) No Double Counting. In no event shall any person be considered part of more than 1 qualified family.

(c) Revised Registration Permissible. A qualified family may file a revised registration for purposes of section 40-23A-32(d) to reflect a change in family circumstances. A revised registration form shall provide

(1) the name of each family member who shared the qualified family’s residence on the filing date of the revised registration,

(2) the Social Security number of each family member who shared the qualified family’s residence on the filing date of the revised registration,

(3) the family member or family members to whom the family consumption allowance should be paid,

(4) a certification that all listed family members are lawful residents of the United States,

(5) a certification that all listed family members are lawful residents of the State of Alabama,

(6) a certification that all family members sharing the common residence are listed,

(7) a certification that no family members were incarcerated on the family determination date (within the meaning of section 40-23A-32(M)), and

(8) the address of the qualified family. Said revised registration shall be signed by all members of the qualified family that have attained the age of 21 years as of the filing date of the revised registration.

(d) Change of Address. A change of address for a qualified family may be filed with the commissioner at any time and shall not constitute a revised registration.

(e) Revised Registration Not Mandatory. Revised registrations reflecting changes in family status are not mandatory.

§40-23A-41 Destination determination.

Destination Generally. The tax imposed by this chapter is a destination principle tax. This section shall govern for purposes of determining whether the destination of taxable property and services is within or without of the State of Alabama.

(a) Tangible Personal Property. Except as provided in subsection (g)(relating to certain leases), the destination of tangible personal property shall be the State or territory in which the property was first delivered to the purchaser (including agents and authorized representatives).

(b) Real Property. The destination of real property, or rents or leaseholds on real property, shall be the State or territory in which the real property is located.

(c) Other Property. The destination of any other taxable property shall be the residence of the purchaser.

(d) Services.

(1) GENERAL RULE. The destination of services shall be the State or territory in which the use or consumption of the services occurred. Allocation of service invoices relating to more than one jurisdiction shall be on the basis of time or another method determined by regulation.

(2) TELECOMMUNICATIONS SERVICES. The destination of telecommunications services shall be the residence of the purchaser. Telecommunications services include telephone, telegraph, beeper, radio, cable television, satellite, and computer on-line or network services.

(3) TRANSPORTATION SERVICES. For transportation services where all of the final destinations are within the State of Alabama, the destination of transportation services shall be the State of Alabama. For transportation services where the final destination or origin of the trip is without the State of Alabama, the service amount shall be deemed 50 percent attributable to the Alabama destination or origin.

(4) ELECTRICAL SERVICE. The destination of electrical services shall be the residence of the purchaser.

(f) Financial Intermediation Services. The destination of financial intermediation services shall be the residence of the purchaser.

(g) Rents Paid for the Lease of Tangible Property.

(1) GENERAL RULE. Except as provided in paragraph (2), the destination of rents paid for the lease of tangible property and leaseholds on such property shall be where the property is located while in use.

(2) LAND VEHICLES; AIRCRAFT, WATER CRAFT. The destination of rental and lease payments on land vehicles, aircraft and water craft shall be:

a. in the case of rentals and leases of a term of 1 month or less, the location where the land vehicle, aircraft, or water craft was originally delivered to the renter or lessee; and

b. in the case of rentals and leases of a term greater than 1 month, the residence of the renter or lessee.

§40-23A-42 Monthly reports and payments.

(a) Tax Reports and Filing Dates.

(1) IN GENERAL. On or before the 15th day of each month, each person who is:

a. liable to collect and remit the tax imposed by this chapter by reason of section 40-23A-5(a), or

b. liable to pay tax imposed by this chapter which is not collected pursuant to section 40-23A-5(a), shall submit to the commissioner (in a form prescribed by the commissioner) a report relating to the previous calendar month.

(2) CONTENTS OF REPORT. The report required under paragraph (1) shall set forth

a. the gross payments (as defined in section 40-23A-2(a)(5)),

b. the tax collected under section 40-23A-3 in connection with such payments,

c. the amount and type of any credit claimed, and

d. other information reasonably required by the commissioner for the administration, collection, and remittance of the tax imposed by this chapter.

(b) Tax Payments Date.

(1) GENERAL RULE. The tax imposed by this chapter during any calendar month is due and shall be paid to the Department of Revenue on or before the 15th day of the succeeding month.

(2) CROSS REFERENCE. See subsection (e) relating to remitting of separate segregated funds for sellers that are not small sellers.

(c) Extensions for Filing Reports.

(1) AUTOMATIC EXTENSIONS FOR NOT MORE THAN 30 DAYS. On application, an extension of not more than 30 days to file reports under subsection (a) shall be automatically granted.

(2) OTHER EXTENSIONS. On application, extensions of 30 to 60 days to file such reports shall be liberally granted by the commissioner for reasonable cause. Extensions greater than 60 days may be granted by the commissioner to avoid hardship.

(3) NO EXTENSION FOR PAYMENT OF TAXES. Notwithstanding paragraphs (1) and (2), no extension shall be granted with respect to the time for paying or remitting the taxes under this chapter.

(d) Telephone Reporting of Violations. The commissioner shall establish a system under which a violation of this chapter can be brought to the attention of the commissioner for investigation through the use of a toll-free telephone number and otherwise.

(e) Separate Segregated Accounts.

(1) IN GENERAL. Any registered seller that is not a small seller shall deposit all sales taxes collected pursuant to this chapter in a particular week in a separate segregated account maintained at a bank or other financial institution within 3 business days of the end of such week. Said registered seller shall also maintain in that account sufficient funds to meet the bank or financial institution minimum balance requirements, if any, and to pay account fees and costs.

(2) SMALL SELLER. For purposes of this subsection, a small seller is any person that has not collected $5,000 or more of the taxes imposed by this chapter in any of the previous 12 months.

(3) LARGE SELLERS. Any seller that has collected $50,000 or more of the taxes imposed by this chapter in any of the previous 12 months is a large seller. A large seller shall remit to the commissioner the entire balance of deposited taxes in its separate segregated account on the first business day following the end of the calendar week. The commissioner may by regulation require the electronic transfer of funds due from large sellers.

(4) WEEK. For purposes of this subsection, the term week shall mean the seven-day period ending on a Friday.

(f) Determination of Report Filing Date. A report filed pursuant to subsection (a) shall be deemed filed when

(1) deposited in the United States mail, postage prepaid, addressed to the designated office of the Department of Revenue,

(2) delivered and accepted at the designated office of the Department of Revenue,

(3) provided to a designated commercial private courier service for delivery within two days to the designated office of the Department of Revenue, or

(4) by other means permitted by the commissioner.

(g) Security Requirements. A large seller (within the meaning of subsection (e)(3)) shall be required to provide security in an amount equal to the greater of $100,000 or one and one-half times the seller’s average monthly tax liability during the previous 6 calendar months. Security may be a cash bond, a bond from a surety company approved by the commissioner, a certificate of deposit, or a State or United States Treasury bond. A bond qualifying under this subsection must be a continuing instrument for each calendar year (or portion thereof) that the bond is in effect. The bond must remain in effect until the surety or sureties are released and discharged. Failure to provide security in accordance with this section shall result in revocation of the seller’s section 40-23A-43 registration. If a person who has provided security pursuant to this subsection

(1) fails to pay an amount indicated in a final notice (within the meaning of section 40-23A-56(d)) of an amount due under this chapter,

(2) no Taxpayer Assistance Order is in effect relating to the amount due,

(3) either the time for filing an appeal pursuant to section 40-23A-54 has passed or the appeal was denied, and

(4) the amount due is not being litigated in any judicial forum, then the security or part of the security, as the case may be, may be forfeited in favor of the commissioner to the extent of such tax due (plus interest if any).

(h) Rewards Program. The commissioner is authorized to maintain a program of awards wherein individuals that assist the commissioner in discovering or prosecuting tax fraud may be remunerated.

§40-23A-43 Registration.

(a) In General. Any person liable to collect and remit taxes pursuant to section 40-23A-5 (a) who is engaged in a trade or business shall register as a seller with the commissioner.

(b) Affiliated Firms. Affiliated firms shall be treated as 1 person for purposes of this section. Affiliated firms may elect, upon giving notice to the commissioner in a form prescribed by the commissioner, to treat separate firms as separate persons for purposes of this chapter.

(c) Designation of Tax Matters Person. Every person registered pursuant to subsection (a) shall designate a tax matters person who shall be an individual whom the commissioner may contact regarding tax matters. Each person registered must provide notice of a change in the identity of the tax matters person within 30 days of said change.

(d) Effect of Failure To Register. Any person that is required to register and who fails to do so is prohibited from selling taxable property or services. The commissioner may bring an action seeking a temporary restraining order, an injunction, or such other order as may be appropriate to enforce this section.

§40-23A-44 Accounting.

(a) Cash Method To Be Used Generally. Registered sellers and other persons shall report transactions using the cash method of accounting unless an election to use the accrual method of accounting is made pursuant to subsection (b).

(b) Election To Use Accrual Method. A person may elect with respect to a calendar year to remit taxes and report transactions with respect to the month where a sale was invoiced and accrued.

(c) Cross Reference. See section 40-23A-25 for rules relating to bad debts for sellers electing the accrual method.

§40-23A-45 Penalties.

(a) Failure To Register. Each person who is required to register pursuant to section 40-23A-43 but fails to do so prior to notification by the commissioner shall be liable for a penalty of $500.

(b) Reckless or Willful Failure To Collect Tax.

(1) CIVIL PENALTY; FRAUD. Each person who is required to and recklessly or willfully fails to collect taxes imposed by this chapter shall be liable for a penalty equal to the greater of $500 or 20 percent of tax not collected.

(2) CRIMINAL PENALTY. Each person who is required to and willfully fails as part of a trade or business to collect taxes imposed by this chapter may be fined an amount up to the amount determined in accordance with paragraph (1) or imprisoned for a period of not more than one year or both.

(c) Reckless or Willful Assertion of Invalid Exemption.

(1) CIVIL PENALTY; FRAUD. Each person who recklessly or willfully asserts an invalid intermediate or out-of-state sales exemption from the taxes imposed by this chapter shall be liable for a penalty equal to the greater of $500 or 20 percent of the tax not collected or remitted.

(2) CRIMINAL PENALTY. Each person who willfully asserts an invalid intermediate or out-of-state sales exemption from the taxes imposed by this chapter may be fined an amount up to the amount determined in accordance with paragraph (1) or imprisoned for a period of not more than one year or both.

(d) Reckless or Willful Failure To Remit Tax Collected.

(1) CIVIL PENALTY; FRAUD. Each person who is required to and recklessly or willfully fails to remit taxes imposed by this chapter and collected from purchasers shall be liable for a penalty equal to the greater of $1,000 or 50 percent of the tax not remitted.

(2) CRIMINAL PENALTY. Each person who willfully fails to remit taxes imposed by this chapter and collected from purchasers may be fined an amount up to the amount determined in accordance with paragraph (1) or imprisoned for a period of not more than two years or both.

(e) Reckless or Willful Failure To Pay Tax. Each person who is required to and recklessly or willfully fails to pay taxes imposed by this chapter shall be liable for a penalty equal to the greater of $500 or 20 percent of the tax not paid.

(f) Penalty for Late Filing.

(1) IN GENERAL. In the case of a failure by any person who is required to and fails to file a report required by section 40-23A-42 on or before the due date (determined with regard to any extension) for such report, such person shall pay a penalty for each month or fraction thereof that said report is late equal to the greater of

a. $50, or

b. 0.5 percent of the gross payments required to be shown on the report.

(2) INCREASED PENALTY ON RETURNS FILED AFTER WRITTEN INQUIRY. The amount of the penalty under paragraph (1) shall be doubled with respect to any report filed after a written inquiry with respect to such report is received by the taxpayer from commissioner.

(3) LIMITATION. The penalty imposed under this subsection shall not exceed 12 percent.

(4) EXCEPTIONS.

a. REASONABLE CAUSE. No penalty shall be imposed under this subsection with respect to any failure if it is shown that such failure is due to reasonable cause.

b. OTHER WAIVER AUTHORITY. In addition to penalties not imposed by reason of subparagraph (i), the commissioner, on application, shall waive the penalty imposed by paragraph (1) once per registered person per 24-month period. The preceding sentence shall not apply to a penalty determined under paragraph (2).

(g) Penalty for Willfully or Recklessly Accepting a False Intermediate or Export Sales Certificate. A person who willingly or recklessly accepts a false intermediate or out-of-state sales certificate shall pay a penalty equal to 20 percent of the tax not collected by reason of said acceptance.

(h) Penalty for Late Remittance of Taxes.

(1) IN GENERAL. A person who is required to timely remit taxes imposed by this chapter and remits taxes more than 1 month after such taxes are due shall pay a penalty equal to 1 percent per month (or fraction thereof) from the due date.

(2) LIMITATION. The penalty imposed under this subsection shall not exceed 24 percent.

(3) REDUCTION FOR REASONABLE CAUSE. The penalty imposed under paragraph (1) with respect to any late remittance shall be reduced by half if it is shown that such late remittance is due to reasonable cause.

(i) Penalty for Filing False Rebate Claim.

(1) CIVIL PENALTY; FRAUD. A person who willingly or recklessly files a false claim for a family consumption allowance rebate (within the meaning of 40-23A-31) shall

a. pay a penalty equal to the greater of $500 or 50 percent of the claimed annual rebate amount not actually due, and

b. repay any rebates received as a result of the false rebate claim (together with interest).

(2) CRIMINAL PENALTY. A person who willingly files a false claim for a family consumption allowance rebate (within the meaning of 40-23A-31) may be fined an amount up to the amount determined in accordance with paragraph (1) or imprisoned for a period not more than one year or both.

(j) Penalty for Bad Check. If any check or money order in payment of any amount receivable under this chapter is not duly paid, in addition to other penalties provided by law, the person who tendered such check shall pay a penalty equal to the greater of:

(1) $25, or

(2) two percent of the amount of such check.

(k) Penalty for Failure To Maintain a Separate Segregated Account. Any person required to maintain a separate segregated account pursuant to section 40-23A-42(e) that fails to maintain such a separate segregated account shall pay a penalty of $500.

(l) Penalty for Failure To Deposit Collected Taxes in a Separate Segregated Account. Any person required to deposit collected taxes into a separate segregated account maintained pursuant to section 40-23A-42(e) that fails to timely deposit said taxes into the separate segregated account shall pay a penalty equal to one percent of the amount required to be deposited. The penalty imposed by the previous sentence shall be tripled unless said taxes have been deposited in the separate segregated account or remitted to the commissioner within 16 days of the date said deposit was due.

(m) Joint and Several Liability for Tax Matters Person and Responsible Officers or Partners. The tax matters person (designated pursuant to section 40-23A-43(c)) and responsible officers or partners of a firm shall be jointly and severally liable for the tax imposed by this chapter and penalties imposed by this chapter.

(n) Right of Contribution. If more than 1 person is liable with respect to any tax or penalty imposed by this chapter, each person who paid such tax or penalty shall be entitled to recover from other persons who are liable for such tax or penalty an amount equal to the excess of the amount paid by such person over such person’s proportionate share of the tax or penalty in accordance with regulations promulgated by the commissioner. Said regulations may take culpability into account when allocating liability for tax or penalty among responsible officers or partners.

(o) Civil Penalties and Criminal Fines Not Exclusive.

(1) CIVIL PENALTY. The fact that a civil penalty has been imposed shall not prevent the imposition of a criminal fine.

(2) CRIMINAL FINE. The fact that a criminal fine has been imposed shall not prevent the imposition of a civil penalty.

(p) Confidentiality. Any person who violates the requirements relating to confidentiality of tax information (as provided in section 40-23-56) may be fined up to $10,000 or imprisoned for a period of not more than 1 year, or both.

§40-23A-46 Burden of persuasion and burden of production.

In all disputes concerning taxes imposed by this chapter, the person engaged in a dispute with the commissioner shall have the burden of production of documents and records but the commissioner shall have the burden of persuasion. In all disputes concerning an exemption claimed by a purchaser, if the seller has on file an intermediate sale or out-of-state sale certificate from the purchaser and did not have reasonable cause to believe that the certificate was improperly provided by the purchaser with respect to such purchase, then the burden of production of documents and records relating to that exemption shall rest with the purchaser and not with the seller.

§40-23A-47 Summons, examinations, audits, etc.

(a) Summons. Persons are subject to administrative summons by the commissioner for records, documents, and testimony required by the commissioner to accurately determine liability for tax under this chapter. A summons shall be served by the commissioner by an attested copy delivered in hand to the person to whom it is directed or left at his last known address. The summons shall describe with reasonable certainty what is sought.

(b) Examinations and Audits. The commissioner has the authority to conduct at a reasonable time and place examinations and audits of persons who are or may be liable to collect and remit tax imposed by this chapter and to examine the books, papers, records, or other data of such persons which may be relevant or material to the determination of tax due.

(c) Limitation on Authority in Case of Referral. No administrative summons may be issued by the commissioner and no action be commenced to enforce an administrative summons with respect to any person if a referral to the Attorney General’s Office is in effect with respect to such person relating to a tax imposed by this chapter. Such referral is in effect with respect to any person if the commissioner has recommended to the Attorney General’s Office that a grand jury investigation of such person or a criminal prosecution of such person that contemplates criminal sanctions under this chapter. A referral shall be terminated when

(1) Attorney General’s Office notifies commissioner that he will not

a. prosecute such person for any offense connected with the tax laws,

b. authorize a grand jury investigation of such person with respect to such offense, or

c. continue such a grand jury investigation, or

(2) a final disposition has been made of any criminal proceeding connected with tax laws against such person.

§40-23A-48 Records.

Any person liable to remit taxes pursuant to this chapter shall keep records (including a record of all section 40-23A-49 receipts provided, complete records of intermediate and out-of-state sales, including purchaser’s intermediate and out-of-state sales certificates and tax number and the net of tax amount of purchase) sufficient to determine the amounts reported, collected, and remitted for a period of 6 years after the latter of the filing of the report for which the records formed the basis or when the report was due to be filed. Any purchaser who purchased taxable property or services but did not pay tax by reason of asserting an intermediate and out-of-state sales exemption shall keep records sufficient to determine whether said exemption was valid for a period of seven years after the purchase of taxable property or services.

§40-23A-49 Tax to be separately stated and charged.

(a) In General. For each purchase of taxable property or services for which a tax is imposed by section 40-23A-3, the seller shall charge the tax imposed by section 40-23A-3 separately from the purchase price. For purchase of taxable property or services for which a tax is imposed by section 40-23A-3, the seller shall provide to the purchaser a receipt for each transaction that includes:

(1) the property or services price exclusive of tax;

(2) the amount of tax paid;

(3) the property or service price inclusive of tax;

(4) the tax rate (the amount of tax paid (per paragraph (2)) divided by the property or service price inclusive of tax (per paragraph (3));

(5) the date that the good or service was sold;

(6) the name of the vendor; and

(7) the vendor registration number.

(b) Vending Machine Exception. The requirements of subsection (a) shall be inapplicable in the case of sales by vending machines. Vending machines for purposes of this subsection are machines

(1) that dispense taxable property in exchange for coins or currency; and

(2) that sell no single item exceeding $10 per unit in price.

(c) Financial Intermediation Services Exception. The requirements of subsection (a) shall be inapplicable in the case of sales financial intermediation service. Receipts shall be issued when the tax is imposed (in accordance with section 40-23-73 (relating to timing of tax on financial intermediation services)).

§40-23A-50 Applicable interest rate.

(a) In General.

(1) FEDERAL SHORT-TERM RATE. In the case of a debt instrument, investment, financing lease, or account with a term of not over 3 years, the applicable interest rate is the Federal short-term rate as determined by the United States Secretary of the Treasury.

(2) FEDERAL MID-TERM RATE. In the case of a debt instrument, investment, financing lease, or account with a term of over three years but not over nine years, the applicable interest rate is the Federal mid-term rate as determined by the United States Secretary of the Treasury.

(3) FEDERAL LONG-TERM RATE. In the case of a debt instrument, investment, financing lease, or account with a term of over 9 years, the applicable interest rate is the Federal long-term rate as determined by the United States Secretary of the Treasury.

(b) Determination of Rates. The commissioner shall publish the applicable rate monthly. Should the United States Secretary of the Treasury cease to determine or to publish the relevant federal interest rates, then the commissioner shall determine and publish the applicable rate using the same methodology used by the Secretary, as nearly as is practical, prior to the Secretary discontinuing said determination or publication.

(c) Interest on Past Due Taxes. The amount of interest due to be paid by the taxpayer with respect to past due taxes imposed by this chapter shall be determined by the rate determined in accordance with section 40-23A-41.

§40-23A-51 Collections.

The proceeds of the tax paid pursuant to section 40-23A-3, shall be collected by the Department, which shall retain the amount necessary to fund the administrative costs of collecting and implementing the tax. The balance of the proceeds shall be distributed as follows:

(1) Eighty percent to the State Treasury and allocated:

a. Seventy-nine percent to the Education Trust Fund;

b. Eleven and one-half percent to the State General Fund; and

c. Nine and one-half percent to be allocated and apportioned among the entities and funds that receive proceeds from any of the taxes being repealed under the provisions of this act. The Department of Finance shall determine the appropriate percentage of the proceeds to be allocated to each of the entities and funds based on the amounts distributed to the entities and funds from the taxes being repealed by this act in the fiscal year concluding immediately prior to January 1, 2020.

(2) Twenty percent to the State Treasury and allocated:

a. Forty percent to each county in the state on a prorated basis according to population as determined in the most recent federal census prior to distribution; and

b. Sixty percent to each municipality in the state on a prorated basis according to population as determined in the most recent federal census prior to distribution.

§40-23A-52 Power to levy, etc.

(a) In General. The commissioner may levy and seize property, garnish wages or salary and file liens to collect amounts due under this chapter, pursuant to enforcement of:

(1) a judgment duly rendered by a court of law;

(2) an amount due if the taxpayer has failed to exercise his appeals rights under section 40-23A-54; or

(3) an amount due if the appeals process determined that an amount remained due and the taxpayer has failed to timely petition a court for relief.

(b) Exemption From Levy, Seizure, and Garnishments. There shall be exempt from levy, seizure, and garnishment or penalty in connection with any tax imposed by this chapter:

(1) wearing apparel, school books, fuel, provisions, furniture, personal effects, tools of a trade or profession, livestock in a household up to an aggregate value of $15,000; and

(2) monthly money income equal to 150 percent of the monthly poverty level (as defined in section 40-23A-33).

(c) Liens To Be Timely Released. Subject to such reasonable regulations as the commissioner may provide, any lien imposed with respect to a tax imposed by this chapter shall be released not later than 30 days after:

(1) the liability was satisfied or became unenforceable; or

(2) a bond was accepted as security.

§40-23A-53 Taxpayer Advocate.

Cross Reference. See section 40-2A-4.

§40-23A-54 Appeals.

Cross Reference. See section 40-2B-2.

§40-23A-55 Attorneys’ and accountancy fees.

In all disputes concerning taxes imposed by this chapter, the person engaged in a dispute with the commissioner shall be entitled to reasonable attorneys’ fees, accountancy fees, and other reasonable professional fees incurred in direct relation to the dispute unless the commissioner establishes that its position was substantially justified.

§40-23A-56 Taxpayer rights.

Cross Reference. See section 40-2A-4.

§40-23A-57 Installment agreements; compromises.

Cross Reference. See section 40-2A-4.

§40-23A-58 Bankruptcy.

No addition to tax shall be made under section 40-23A-45 with respect to a period during which a case is pending under Title 11, United States Code (1) if such tax was incurred by the estate and the failure occurred pursuant to an order of the court finding probable insufficiency of funds of the estate to pay administrative expenses; or (2) if (a) such tax was incurred by the debtor before the earlier of the order for relief or (in the involuntary case) the appointment of a trustee; and (b) the petition was filed before the due date prescribed by law (including extensions) for filing a return of such tax, or the date for making the addition to tax occurs on or after the date the petition was filed.

§40-23A-61 Hobby activities.

(a) Hobby Activities. Neither the exemption afforded by section 40-23A-4 for neither intermediate sales nor the credits available pursuant to section 40-23A-22 or section 40-23A-23 shall be available for any taxable property or service purchased for use in an activity if that activity is not engaged in for-profit.

(b) Status Deemed. If the activity has received gross payments for the sale of taxable property or services that exceed the sum of:

(1) taxable property and services purchased;

(2) wages and salary paid; and

(3) taxes (of any type) paid,

in two or more of the most recent 3 calendar years during which it operated then the business activity shall be conclusively deemed to be engaged in for profit.

§40-23A-62 Gaming activities.

(a) Registration. Any person selling one or more chances is a gaming sponsor and shall register, in a form prescribed by the commissioner, with the commissioner as a gaming sponsor provided that a not-for-profit organization (with the meaning of section 40-23A-66) that has gross receipts from the sale of chances of less than $5,000 during any calendar year shall not be required to register.

(b) Chance Defined. For purposes of this section, the term chance means a lottery ticket, a raffle ticket, chips, other tokens, a bet or bets placed, a wager or wagers placed, or any similar device where the purchase of the right gives rise to an obligation by the gaming sponsor to pay upon the occurrence of:

(1) a random or unpredictable event; or

(2) an event over which neither the gaming sponsor nor the person purchasing the chance has control over the outcome.

(c) Chances Not Taxable Property or Service. Notwithstanding any other provision in this chapter, a chance is not taxable property or services for purposes of section 40-23A-3.

(d) Tax on Gaming Services Imposed. A tax is hereby imposed on the taxable gaming services of a gaming sponsor at the same rate as the tax imposed by section 40-23A-3. This tax shall be paid and remitted by the gaming sponsor. The tax shall be remitted by the 15th day of each month with respect to taxable gaming services during the previous calendar month. A not-for-profit organization (with the meaning of section 40-23A-66) that has gross receipts from the sale of chances of less than $5,000 during any calendar year shall not be required to remit the tax imposed by this section.

(e) Taxable Gaming Services Defined. For purposes of this section, the term taxable gaming services means:

(1) gross receipts of the gaming sponsor from the sale of chances, minus

(2) the sum of:

a. total gaming payoffs to chance purchasers (or their designees); and

b. gaming specific taxes (other than the tax imposed by this section) imposed by the Federal, State, or local government.

§40-23A-63 Government Purchases.

(a) Government Purchases.

(1) PURCHASES BY THE FEDERAL GOVERNMENT. Purchases by the Federal Government of taxable property and services shall be subject to the tax imposed by §40-23A-3.

(2) PURCHASE BY STATE GOVERNMENTS AND THEIR POLITICAL SUBDIVISIONS. Purchase by State governments and their political subdivisions of taxable property and services shall be subject to the tax imposed by §40-23A-3.

(b) Cross References. For purchases by government enterprises see §40-23A-64.

§40-23A-64 Government Enterprises.

(a) Government Enterprises To Collect and Remit Taxes on Sales. Nothing in this chapter shall be construed to exempt any Federal, State, or local governmental unit or political subdivision operating a government enterprise from collecting and remitting tax imposed by this chapter on any sale of taxable property or services. Government enterprises shall comply with all duties imposed by this chapter and shall be liable for penalties and subject to enforcement action in the same manner as private persons that are not government enterprises.

(b) Government Enterprise. Any entity owned or operated by a Federal, State, or local governmental unit or political subdivision that receives gross payments from private persons is a government enterprise, except that a government-owned entity shall not become a government enterprise for purposes of this section unless in any quarter it has revenues from selling taxable property or services that exceed $2,500.

(c) Government Enterprises Intermediate Sales.

(1) IN GENERAL. Government enterprises shall not be subject to tax on purchases that would not be subject to tax pursuant to section 40-23A-4 if the government enterprise were a private enterprise.

(2) EXCEPTION. Government enterprises may not use the exemption afforded to serve as a conduit for tax-free purchases by government units that would otherwise be subject to taxation on purchases pursuant to section 40-23A-63. Transfers of taxable property or services purchased exempt from tax from a government enterprise to such government unit shall be taxable.

(d) Separate Books of Account. Any government enterprise must maintain books of account, separate from the nonenterprise government accounts, maintained in accordance with generally accepted accounting principles.

(e) Trade or Business. A government enterprise shall be treated as a trade or business for purposes of this chapter.

(f) Enterprise Subsidies Constitute Taxable Purchase. A transfer of funds to a government enterprise by a government entity without full consideration shall constitute a taxable government purchase with the meaning of section 40-23A-63 to the extent that the transfer of funds exceeds the fair market value of the consideration.

§40-23A-65 Mixed use property.

(a) Mixed Use Property or Service.

(1) MIXED USE PROPERTY OR SERVICE DEFINED. For purposes of this section, the term mixed use property or service is a taxable property or taxable service used for both taxable use or consumption and for a purpose that would not be subject to tax pursuant to section 40-23A-4(a)(1).

(2) TAXABLE THRESHOLD. Mixed use property or service shall be subject to tax notwithstanding section 40-23A-4(a)(1) unless such property or service is used more than 95 percent for purposes that would give rise to an exemption pursuant to section 40-23A-4(a)(1) during each calendar year (or portions thereof) it is owned.

(3) MIXED USE PROPERTY OR SERVICES CREDIT. A person registered pursuant to section 40-23A-43 is entitled to a business use conversion credit (pursuant to section 40-23A-22) equal to the product of

a. the mixed use property amount;

b. the business use ratio; and

c. the rate of tax imposed by section 40-23A-3.

(4) MIXED USE PROPERTY AMOUNT. The mixed use property amount for each month (or fraction thereof) in which the property was owned shall be:

a. one-three-hundred-sixtieth of the gross payments for real property for 360 months or until the property is sold;

b. one-eighty-fourth of the gross payments for tangible personal property for 84 months or until the property is sold;

c. one-sixtieth of the gross payments for vehicles for 60 months or until the property is sold; or

d. for other types of taxable property or services, a reasonable amount or in accordance with regulations prescribed by the commissioner.

(5) BUSINESS USE RATIO. For purposes of this section, the term business use ratio means the ratio of business use to total use for a particular calendar month (or portion thereof if the property was owned for only part of said calendar month). For vehicles, the business use ratio will be the ratio of business purpose miles to total miles in a particular calendar month. For real property, the business use ratio is the ratio of floor space used primarily for business purposes to total floor space in a particular calendar month. For tangible personal property (except for vehicles), the business use ratio is the ratio of total time used for business purposes to total time used in a particular calendar year. For other property or services, the business ratio shall be calculated using a reasonable method. Reasonable records must be maintained to support a person’s business use of the mixed use property or service.

(b) Timing of Business Use Conversion Credit Arising Out of Ownership of Mixed Use Property. A person entitled to a credit pursuant to subsection (a) (3) arising out of the ownership of mixed use property must account for the mixed use on a calendar year basis, and may file for the credit with respect to mixed use property in any month following the calendar year giving rise to the credit.

(c) Cross Reference. For business use conversion credit, see section 40-23A-22.

§40-23A-66 Not-for-Profit organizations.

(a) Not-for-Profit Organizations. Dues, contributions, and similar payments to qualified not-for-profit organizations shall not be considered gross payments for taxable property or services for purposes of this chapter.

(b) Definition. For purposes of this section, the term qualified not-for-profit organization means a not-for-profit organization organized and operated exclusively

(1) for religious, charitable, scientific, testing for public safety, literary, or educational purposes;

(2) as civic leagues or social welfare organizations;

(3) as labor, agricultural, or horticultural organizations;

(4) as chambers of commerce, business leagues, or trade associations; or

(5) as fraternal beneficiary societies, orders, or associations; no part of the net earnings of which inures to the benefit of any private shareholder or individual.

(c) Qualification Certificates. Upon application in a form prescribed by the commissioner, the commissioner shall provide qualification certificates to qualified not-for-profit organizations.

(d) Taxable Transactions. If a qualified not-for-profit organization provides taxable property or services in connection with contributions, dues, or similar payments to the organization, then it shall be required to treat the provision of said taxable property or services as a purchase taxable pursuant to this chapter at the fair market value of said taxable property or services.

(e) Exemptions. Taxable property and services purchased by a qualified not-for-profit organization shall be eligible for exemption if purchased for resale or in connection with a trade or business operated by the qualified not-for-profit organization.

§40-23A-71 Determination of financial intermediation services amount.

(a) Financial Intermediation Services. For purposes of this chapter

(1) IN GENERAL. The term financial intermediation services means the sum of

a. explicitly charged fees for financial intermediation services, and

b. implicitly charged fees for financial intermediation services.

(2) EXPLICITLY CHARGED FEES FOR FINANCIAL INTERMEDIATION SERVICES. The term explicitly charged fees for financial intermediation services includes

a. brokerage fees;

b. explicitly stated banking, loan origination, processing, documentation, credit check fees, or other similar fees;

c. safe-deposit box fees;

d. insurance premiums, to the extent such premiums are not allocable to the investment account of the underlying insurance policy;

e. trustees’ fees; and

f. other financial services fees (including mutual fund management, sales, and exit fees).

(3) IMPLICITLY CHARGED FEES FOR FINANCIAL INTERMEDIATION SERVICES.

a. IN GENERAL. The term implicitly charged fees for financial intermediation services includes the gross imputed amount in relation to any underlying interest-bearing investment, account, or debt.

b. GROSS IMPUTED AMOUNT. For purposes of subparagraph (ii), the term gross imputed amount means

1. with respect to any underlying interest-bearing investment or account, the product of

(i) the excess (if any) of the basic interest rate (as defined in section 40-23A-75) over the rate paid on such investment; and

(ii) the amount of the investment or account; and

2. with respect to any underlying interest-bearing debt, the product of

(i) the excess (if any) of the rate paid on such debt over the basic interest rate (as defined in section 40-23A-75); and

(ii) the amount of the debt.

(b) Seller of Financial Intermediation Services. For purposes of section 40-23A-5, the seller of financial intermediation services shall be:

(1) in the case of explicitly charged fees for financial intermediation services, the person who receives the gross payments for the charged financial intermediation services;

(2) in the case of implicitly charged fees for financial intermediation services with respect to any underlying interest-bearing investment or account, the person making the interest payments on the interest-bearing investment or account; and

(3) in the case of implicitly charged fees for financial intermediation services with respect to any interest-bearing debt, the person receiving the interest payments on the interest-bearing debt.

§40-23A-72 Bad debts.

(a) In General. For purposes of section 40-23A-25, a bad debt shall be a business debt that becomes wholly or partially worthless to the payee.

(b) Business Loan. For purposes of subsection (a), a business loan or debt is a bona fide loan or debt made for a business purpose that both parties intended be repaid.

(c) Determination of Worthlessness.

(1) IN GENERAL. No loan or debt shall be considered wholly or partially worthless unless it has been in arrears for 180 days or more, except that if a debt is discharged wholly or partially in bankruptcy before 180 days has elapsed, then it shall be deemed wholly or partially worthless on the date of discharge.

(2) DETERMINATION BY HOLDER. A loan or debt that has been in arrears for 180 days or more may be deemed wholly or partially worthless by the holder unless a payment schedule has been entered into between the debtor and the lender.

(d) Cross Reference. See section 40-23A-25 for tax on subsequent payments.

§40-23A-73 Timing of tax on financial intermediation services.

The tax on financial intermediation services provided by section 40-23A-71 with respect to an underlying investment account or debt shall be imposed and collected with the same frequency that statements are rendered by the financial institution in connection with the investment account or debt but not less frequently than quarterly.

§40-23A-74 Financing leases.

(a) Definition. For purposes of this section, the term financing lease means any lease under which the lessee has the right to acquire the property for 50 percent or less of its fair market value at the end of the lease term.

(b) General Rule. Financing leases shall be taxed in the method set forth in this section.

(c) Determination of Principal and Interest Components of Financing Lease. The Commissioner shall promulgate rules for disaggregating the principal and interest components of a financing lease. The principal amount shall be determined to the extent possible by examination of the contemporaneous sales price or prices of property the same or similar as the leased property.

(d) Alternative Method. In the event that contemporaneous sales prices or property the same or similar as the leased property are not available, the principal and interest components of a financing lease shall be disaggregated using the applicable interest rate (as defined in section 40-23A-50) plus 4 percent.

(e) Principal Component. The principal component of the financing lease shall be subject to tax as if a purchase in the amount of the principal component had been made on the day on which said lease was executed.

(f) Interest Component. The financial intermediation services amount with respect to the interest component of the financing lease shall be subject to tax under this chapter.

(g) Coordination. If the principal component and financial intermediation services amount with respect to the interest component of a lease have been taxed pursuant to this section, then the gross lease or rental payments shall not be subject to additional tax.

§40-23A-75 Basic interest rate.

For purposes of this chapter, the basic interest rate with respect to a debt instrument, investment, financing lease, or account shall be the applicable interest rate (as determined in section 40-23A-50). For debt instruments, investments, or accounts of contractually fixed interest, the applicable interest rate of the month of issuance shall apply. For debt instruments, investments, or accounts of variable interest rates and which have no reference interest rate, the applicable interest shall be the Federal short-term interest rate for each month. For debt instruments, investments, or accounts of variable interest rates and which have a reference interest rate, the applicable interest shall be the applicable interest rate for the reference interest rate for each month.

§40-23A-76 Out-of-state financial intermediation services.

(a) Special Rules Relating to Out-of-State Financial Intermediation Services. Financial intermediation services shall be deemed as used or consumed within the State of Alabama if the person purchasing the services is a resident of the State of Alabama.

(b) Designation of Tax Representative. Any person that provides financial intermediation services to Alabama residents must, as a condition of lawfully providing such services, designate, in a form prescribed by the commissioner, a tax representative for purposes of this chapter. The tax representative shall be responsible for ensuring that the taxes imposed by this chapter are collected and remitted and shall be jointly and severally liable for collecting and remitting these taxes. The commissioner may require reasonable bond of the tax representative. The commissioner may bring an action seeking a temporary restraining order, an injunction, or such other order as may be appropriate to enforce this section.

§40-23A-81 Additional matters.

(a) Intangible Property Antiavoidance Rule. Notwithstanding section 40-23A-2, the sale of a copyright or trademark shall be treated as the sale of taxable services (within the meaning of section 40-23A-3) if the substance of the sales of copyright or trademark constituted the sale of the services that produced the copyrighted material or the trademark.

(b) De Minimis Payments. Up to $1,000 of gross payments per calendar year shall be exempt from the tax imposed by this chapter if:

(1) made by a person not in connection with a trade or business at any time during such calendar year prior to making said gross payments, and

(2) made to purchase any taxable property or service which is brought into Alabama by such person for use or consumption by such person in Alabama.

(c) De Minimis Sales. Up to $5,000 per calendar year of gross payments shall be exempt from the tax imposed by this chapter if received

(1) by a person not in connection with a trade or business during such calendar year prior to the receipt of said gross payments; and

(2) in connection with a casual or isolated sale.

(d) De Minimis Sale of Financial Intermediation Services. Up to $10,000 per calendar year of gross payments received by a person from the sale of financial intermediation services (as determined in accordance with section 40-23A-71) shall be exempt from the tax imposed by this chapter. The exemption provided by this subsection is in addition to other exemptions afforded by this chapter. The exemption provided by this subsection shall not be available to large sellers (as defined in section 40-23A-42(e)(3)).

(e) Proxy Buying Taxable. If a registered person provides taxable property or services to a person either as a gift, prize, reward, or as remuneration for employment, and such taxable property or services were not previously subject to tax then the provision of such taxable property or services by the registered person shall be deemed the conversion of such taxable property or services to personal use subject to tax pursuant to section 40-23A-5(c) at the tax inclusive fair market value of such taxable property or services.

(f) Substance Over Form. The substance of a transaction will prevail over its form if:

(1) the transaction has no bona fide economic purpose; and

(2) is designed to evade tax imposed by this chapter.

(g) Certain Employee Discounts Taxable.

(1) EMPLOYEE DISCOUNT. For purposes of this subsection, the term employee discount means an employer’s offer of taxable property or services for sale to its employees or their families (within the meaning of section 40-23A-32) for less than the offer of such taxable property or services to the general public.

(2) EMPLOYEE DISCOUNT AMOUNT. For purposes of this subsection, the employee discount amount is the amount by which taxable property or services are sold pursuant to an employee discount below the amount for which such taxable property or services would have been sold to the general public.

(3) TAXABLE AMOUNT. If the employee discount amount exceeds 20 percent of the price that the taxable property or services would have been sold to the general public, then the sale of such taxable property or services by the employer shall be deemed the conversion of such taxable property or services to personal use and tax shall be imposed on the taxable employee discount amount. The taxable employee discount amount shall be:

a. the employee discount amount, minus

b. 20 percent of the amount for which said taxable property or services would have been sold to the general public.

(h) Saturday, Sunday, or Legal Holiday. When the last day prescribed for performing any act required by this chapter falls on a Saturday, Sunday, or legal holiday, the performance of such act shall be considered timely if it is performed on the next day which is not a Saturday, Sunday, or legal holiday.

§40-23A-82 Transition matters.

(a) Inventory.

(1) QUALIFIED INVENTORY. Inventory held by a trade or business on the close of business on December 31, 2019, shall be qualified inventory if it is sold:

a. before December 31, 2020;

b. by a registered person; and

c. subject to the tax imposed by this chapter.

(2) COSTS. For purposes of this section, qualified inventory shall have the cost that it had for Federal income tax purposes for the trade or business as of December 31, 2019 (including any amounts capitalized by reason of section 263A of the Internal Revenue Code of 1986 as in effect on December 31, 2019).

(3) TRANSITIONAL INVENTORY CREDIT. The trade or business which held the qualified inventory on the close of business on December 31, 2019, shall be entitled to a transitional inventory credit equal to the cost of the qualified inventory (determined in accordance with paragraph (2)) times the rate of tax imposed by section 40-23A-3.

(4) TIMING OF CREDIT. The credit provided under paragraph (3) shall be allowed with respect to the month when the inventory is sold subject to the tax imposed by this chapter. Said credit shall be reported as an intermediate and out-of-state sales credit and the person claiming said credit shall attach supporting schedules in the form that the Commissioner may prescribe.

(b) Work-in-Process. For purposes of this section, inventory shall include work-in-process.

(c) Qualified Inventory Held by Businesses Not Selling Said Qualified Inventory at Retail.

(1) IN GENERAL. Qualified inventory held by businesses that sells said qualified inventory not subject to tax pursuant to section 40-23A-4 (a) shall be eligible for the transitional inventory credit only if that business (or a business that has successor rights pursuant to paragraph (2)) receives certification in a form satisfactory to the Commissioner that the qualified inventory was subsequently sold subject to the tax imposed by this chapter.

(2) TRANSITIONAL INVENTORY CREDIT RIGHT MAY BE SOLD. The business entitled to the transitional inventory credit may sell the right to receive said transitional inventory credit to the purchaser of the qualified inventory that gave rise to the credit entitlement. Any purchaser of such qualified inventory (or property or services into which the qualified inventory has been incorporated) may sell the right to said transitional inventory credit to a subsequent purchaser of said qualified inventory (or property or services into which the qualified inventory has been incorporated).

§40-23A-83 Phase-out of administration of repealed taxes.

(a) Appropriations. Appropriations for any expenses of the Department of Revenue including processing tax returns with respect to the taxes repealed by this Act, revenue accounting, and management for years after fiscal year 2022 are not authorized.

(b) Records. Records related to the administration of taxes repealed by this Act shall be destroyed by the end of fiscal year 2022, except that any records necessary to support ongoing litigation with respect to taxes owed or refunds due shall be retained until final disposition of such litigation.Section 6. 40-2A-4 and 40-2A-18, Code of Alabama 1975, are hereby amended as follows:

§40-2A-4.

"(a) Rights of the taxpayer.

"(1) For purposes of this subsection and subsections (c) and (d), the term "department" shall include the Department of Revenue, a self-administered county or municipality, or a private examining or collecting firm, depending on whether the Department of Revenue, a self-administered county or municipality, or private examining or collecting firm is conducting the examination of the taxpayer.

"(2) At or before the commencement of an examination of the books and records of a taxpayer, the department shall provide to the taxpayer the current version of Publication 1A. Publication 1A shall provide, in simple and non-technical terms, a statement of the taxpayer's rights. Those rights include the right to be represented during an examination, an explanation of their appeal rights, and the right to know the criteria and procedures used to select taxpayers for an examination.

"(3) At or before the issuance of a preliminary assessment, the department shall provide to the taxpayer in simple and non-technical terms:

"a. A written description of the basis for the assessment and any penalty asserted with respect to the assessment.

"b. A written description of the method by which the taxpayer may request an administrative review of the preliminary assessment.

"(4) At or before the issuance of a final assessment, the department shall inform the taxpayer by a written statement of his or her right to appeal to the Alabama Tax Tribunal or to circuit court.

"(5) Except in cases involving suspected criminal violations of the tax law or other criminal activity, the department shall conduct an examination of a taxpayer during regular business hours after providing reasonable notice to the taxpayer. A taxpayer who refuses a proposed time for an examination on the grounds that the proposed examination would cause inconvenience or hardship must offer reasonable alternative times and dates for the examination.

"(6) At all stages of an examination or the administrative review of the examination, and in any appeal to the Alabama Tax Tribunal, a taxpayer is entitled to be assisted or represented, at his own expense, by an authorized representative. The department shall prescribe a form by which the taxpayer may designate a person to represent him or her in the conduct of any proceedings, including collection proceedings, resulting from actions of the department. In the absence of this form, the department or the Alabama Tax Tribunal may accept such other evidence that a person is the authorized representative of a taxpayer as it considers appropriate. This provision shall not be construed as authorizing the practice of law before the department, Alabama Tax Tribunal, or any court in this state by a person who is not a licensed attorney.

"(7) A taxpayer shall be allowed to make an audio recording of any in-person interview with any officer or employee of the department relating to any examination or investigation by the department, provided, however, the taxpayer must give reasonable advance notice to the department of his or her intent to record and the recording shall be at the taxpayer's own expense and with the taxpayer's own equipment. The department shall also be allowed to record any interview if the taxpayer is recording the interview, or if the department gives the taxpayer reasonable advance notice of its intent to record the interview. The department shall provide the taxpayer with a copy of the recording, but only if the taxpayer provides reimbursement for the cost of the transcript and reproduction of the copy. The cost shall be reasonable as prescribed by regulations issued by the department.

"(8) This section shall not apply to criminal investigations or investigations relating to the integrity of any officer or employee of the department.

"(b) Department responsibilities generally.

"(1) The commissioner shall appoint a Taxpayer Advocate from among the employees of the department. This officer shall receive and review inquiries or complaints concerning matters that have been pending before the department for an unreasonable length of time, or matters where the taxpayer has been unable to obtain a reasonable response after several attempts to communicate with the department employee assigned to the taxpayer's case, or his or her immediate superiors. In addition, this officer shall review and have the authority to waive a penalty for reasonable cause as provided in subsection (h) of Section 40-2A-11, shall promptly review inquiries concerning release of property levied upon, the erroneous filing of liens, the failure to release a lien for good cause, or other matters complained of by a taxpayer or other affected party. The Taxpayer Advocate shall have no authority nor issue any ruling with regard to any taxes collected by or on behalf of a self-administered county or municipality. The Taxpayer Advocate or his designee shall have the authority to issue taxpayer assistance orders in the form and manner prescribed herein and by department regulations. The Taxpayer Advocate or his designee shall not be disciplined or adversely affected for the issuance of taxpayer assistance orders unless a pattern of issuing taxpayer assistance orders that are manifestly unreasonable is proven by clear and convincing evidence in an administrative hearing by a preponderance of the evidence. A finding against taxpayer advocate or his designee shall be subject to de novo review by a court of competent jurisdiction. A taxpayer assistance order may only be rescinded or modified by the taxpayer advocate or his designee, by the commissioner (without delegation) or by the general counsel of the Department of Revenue (without delegation) upon a finding that the collection activity is justified by clear and convincing evidence.

"a. The Taxpayer Advocate shall, subject to the approval of the commissioner or the assistant commissioner, issue taxpayer assistance orders in the form and manner prescribed herein and by department regulations.

"b. Notwithstanding any statute of limitation or other provision in this title, a taxpayer assistance order may declare that any tax, including a final assessment, was erroneously assessed or reported and is not a liability due the state, or that a petition for refund was erroneously denied by the department.

"c. A taxpayer assistance order shall grant relief as deemed appropriate, including the voiding of any erroneously issued final assessment for a tax which was not a debt due the state, granting of any refund due the taxpayer, or abating an assessment of interest that has accrued because of undue delay by department personnel.

"d. At the request of the Alabama Tax Tribunal, the taxpayer advocate shall review a final order issued by the Alabama Tax Tribunal that was not appealed pursuant to Section 40-2B-2, if there is newly discovered evidence which by due diligence could not have been discovered in time to file an application for rehearing pursuant to Section 40-2B-2, and may propose relief as the taxpayer advocate deems appropriate and approved by the commissioner or the assistant commissioner.

"e. All taxpayer assistance orders shall be dated and signed by the Taxpayer Advocate and approved either by the commissioner or the assistant commissioner, and shall state the underlying facts, the reasons for granting relief, and the relief granted. Any taxpayer assistance order may, for good cause, be modified or rescinded in writing by the Taxpayer Advocate and either the commissioner or the assistant commissioner.

"f. The Taxpayer Advocate shall have full access to department personnel, books, and records subject, however, to the confidentiality restrictions imposed by this chapter.

"g. Taxpayer assistance orders shall not be subject to the confidentiality provisions of this title, and shall be maintained by the secretary of the department and shall be open to review upon written request. The Taxpayer Advocate shall have no authority nor issue any ruling with regard to any taxes collected by or on behalf of a self-administered county or municipality.

"h. The commissioner shall make an annual report to the Legislature of all taxpayer assistance orders approved in accordance with the provisions of this section and Sections 40-2A-2 and 40-2A-3. Such report shall contain the total amount of relief granted and the types of taxes for which relief was granted.

"(2) The department shall maintain a continuing education program to train employees of the department and to provide them with a current knowledge of state and applicable federal tax laws.

"(3) In addition to any other information provided by law, the commissioner shall include in the department's annual report information about the number or kind of audits or assessments conducted in the year covered by the report.

"(4) The department shall not use the amounts of taxes assessed by an employee of the department as:

"a. The basis of a production quota system for employees; or

"b. The basis for evaluating an employee's performance.

"(5) The department shall establish procedures for monitoring the performance of department employees which may include the use of evaluations obtained from taxpayers.

"(6) INSTALLMENT PAYMENTS.

"a. The commissioner is authorized to enter into written agreements to allow any taxpayer to pay any tax in installment payments if the commissioner determines that such agreement will facilitate collection of such tax. Notwithstanding the preceding sentence, such agreements shall be entered into only regarding a tax that has been finally assessed by the department and not appealed, and such agreements shall not extend for a period exceeding 12 months, provided, that any such agreement may be renewed at the discretion of the commissioner for succeeding periods not to exceed 12 months. The commissioner shall only be authorized to enter such an agreement with regard to a tax administered or collected by the department.

"b. The commissioner may terminate, alter, or modify any agreement entered into hereunder if:

"1. Information provided by the taxpayer to the commissioner prior to the date of such agreement was inaccurate or incomplete;

"2. The taxpayer fails to pay any installment at the time such installment payment is due under such agreement;

"3. The taxpayer fails to pay any other tax liability due the department at the time such liability is due, unless the taxpayer has appealed such other liability pursuant to the terms of this chapter;

"4. The financial condition of the taxpayer has significantly changed;

"5. The taxpayer fails to provide a financial condition update as requested by the commissioner; or

"6. The commissioner believes that collection of any tax to which an agreement under this provision relates is in jeopardy.

"c. The commissioner shall have sole authority or discretion to enter into or amend, modify, or terminate any installment payment agreement provided for herein. The commissioner shall promulgate regulations necessary for the implementation of this provision.

"d. Any self-administered county or municipality shall have the same authority as provided to the commissioner by this subdivision relating to installment payments with respect to taxes administered or collected by the self-administered county or municipality.

"(c) Department failure to comply with this section. The failure of the department to comply with any provision of this section shall not prohibit the department from assessing any tax as provided in this chapter, nor excuse the taxpayer from timely complying with any time limitations under this chapter. However, if the department fails to substantially comply with the provisions of this section, the commissioner shall, upon application by the taxpayer or other good cause shown, abate any penalties otherwise arising from the examination or assessment.

"(d) Abatement of penalty. The department shall abate any penalty attributable to erroneous written advice furnished to a taxpayer by an employee of the department. However, this section shall apply only if the department employee provided the written advice in good faith while acting in his or her official capacity, the written advice was reasonably relied on by the taxpayer and was in response to a specific written request of the taxpayer, and the penalty did not result from the taxpayer's failure to provide adequate or accurate information.

"(e) Confidentiality of Tax Information.

"(1) IN GENERAL. All reports and report information provided to the commissioner pursuant to this Title shall be confidential and except as authorized by this chapter

"a. no officer or employee (including former officers and employees) of the State of Alabama; and

"b. no other person who has had access to returns or return information shall disclose any report or report information obtained by him in any manner in connection with his service as such officer or employee or otherwise.

"(2) DESIGNEES. The commissioner may, subject to such requirements as the commissioner may impose, disclose the report and report information of a person to that person or persons as that person may designate to receive said information or return.

"(3) INCOMPETENCY. The commissioner may, subject to such requirements as the commissioner may impose, disclose the report and report information to the committee, trustee, or guardian of a person who is incompetent.

"(4) DECEASED PERSONS. The commissioner may disclose the report and report information to the decedent’s

"a. personal representative, administrator, executor, estate trustee, or

"b. heir at law, next of kin, or beneficiary under a will who has a material interest that will be affected by the information.

"(5) BANKRUPTCY. The commissioner may disclose the report and report information to a person’s trustee in bankruptcy.

"(6) COURT ORDER. The commissioner may disclose the report and report information in compliance with a court order.

"(7) LEGISLATURE. Upon written request from the Chairman of the Committee on Ways and Means (General Fund) of the House of Representatives or the Chairman of the Committee on Finance (General Fund) of the Senate , the commissioner shall disclose the report and report information, except that any report or report information that can be associated with or otherwise identify a particular person shall be furnished to such committee only when sitting in closed executive session unless such person otherwise consents in writing to such disclosure.

"(8) WAIVER OF PRIVACY RIGHTS. A person may waive confidentiality rights provided by this section. Such waiver must be in writing.

"(9) INTERNAL USE. Disclosure of the report or report information by officers or employees of Department of Revenue to other officers or employees of the Department of Revenue in the ordinary course of tax administration activities shall not constitute unlawful disclosure of the report or report information.

"(10) STATISTICAL USE. Upon request of the Governor, the Commissioner shall furnish such reports and report information to such officers and employees of the State of Alabama as the Governor may prescribe by regulation or executive order for the purposes of, and only to the extent necessary, statistical activities authorized by law.

§40-2A-18.

"Interest on any final assessment accrues from the date of entry of the final assessment on the total amount of its components including tax, interest, and any penalty, as one lump sum amount. The preceding sentence is a restatement of current law as it applies to interest accrual after final assessment. Notwithstanding any provision of Act 2001-1088, this section shall apply to all open tax years as of the effective date of Act 2001-1088 and for all subsequent tax years. Interest on amounts due to, or owed by, the Commissioner pursuant to Chapter 23 shall be governed by Chapter 23.

Section 7. A new Section 40-5-48 is hereby enacted as follows:

§40-5-48

Resolution of Conflicts.

Whenever Chapter 23 is inconsistent with this chapter, Chapter 23 shall govern with respect to the administration and collection of the taxes imposed by chapter 23."

Section 8. A new section 40-29-122 is hereby enacted as follows:

§40-29-122

Resolution of Conflicts.

Whenever Chapter 23 is inconsistent with this chapter, Chapter 23 shall govern with respect to the administration and collection of the taxes imposed by Chapter 23."