Educators rally over corporate loopholes
by Daniel Gaddy
Apr 01, 2011 | 3839 views | 0 0 comments | 13 13 recommendations | email to a friend | print
Local educators Saturday will hold a rally to inform residents of a dozen state bills aiming to close corporate tax loopholes and create $228 million in funds for education in Alabama.

“In this unprecedented financial crisis for education, after three years of proration and further cutbacks planned, it is time for the worst loopholes and shell games to be closed in the Alabama tax code. It is time to choose schools over major out-of-state corporations that pay no taxes,” said Butch Sargent, organizer of the rally and a local UniServ director for the Alabama Education Association.

The event will be held at 10:30 a.m. in the Community Health Systems Activities Center. Sargent said local legislators are invited to attend.

Rep. Bill Roberts (R-Jasper) said he plans to attend the rally and answer any questions he can from the attendants.

Roberts said that, as long as the bills closing the loopholes do not put Alabama at a significant disadvantage for attracting future business, he will support the measures.

A brochure on the AEA’s website, citing the Alabama Department of Revenue, says out-of-state corporations made $105 billion of income in Alabama yet paid no state taxes.

AEA Revenue Manager Susan Kennedy has worked to draft the loophole closing measures, according to a press release from the organization. Kennedy is the former chief counsel for the Alabama Department of Revenue.

Efforts by the Daily Mountain Eagle to reach Kennedy were unsuccessful Thursday.

A common tax-dodging loophole occurs when multi-state corporations take advantage of the federal income tax deduction in Alabama by deducting taxes paid on 100 percent of the company’s income, regardless of how much of that income they report as being taxable in Alabama. In other words, national companies use the amount of federal taxes paid against Alabama taxes due. Alabama is the only state to allow this, and the regulation allows many companies to pay no state taxes.

“We want people to understand that corporations are not paying their fair share of taxes and it’s predominantly out-of-state corporations,” Sargent said.

Gov. Robert Bentley announced Wednesday that he has begun the administrative process of closing the loophole. According to a statement released by his office, the Department of Revenue expects the change will generate $30 million for the 2012 Education Trust Fund and $17 million every year after.

“This is an issue of tax fairness,” Bentley said in the statement. “The loophole that we are closing is only available to certain types of multi-state companies, and these companies ought to pay their fair share of taxes just like everyone else in Alabama. The revenues generated by closing these loopholes will allow the Legislature to increase funds to local school systems to help replace some of the lost federal stimulus dollars.”

Sargent said that, if the legislature does not close the loopholes, Alabama residents will continue to see larger class sizes, more personnel cuts in schools and less money for libraries, technology equipment and textbooks.

“Kids are ultimately being hurt by this,” he said.