Universal Regulatory Tax Credits Act Exposed

The Universal Regulatory Tax Credits Act was considered by ALEC's Tax and Fiscal Policy Task Force at the 2011 States and Nation Policy Summit on December 2, 2011. This bill was part of the ALEC task force agenda between 2010 and 2012, but due to incomplete information, it is not known if the bill passed in a vote by legislators and lobbyists at ALEC task force meetings, if ALEC sought to distance itself from the bill as the public increased scrutiny of its pay-to-play activities, or if key operative language from the bill has been introduced by an ALEC legislator in a state legislature in the ensuing period or became binding law.

ALEC Draft Bill Text

Summary

This bill creates a Universal Regulatory Tax Credit which taxpayers may claim if they have incurred costs and expenses as a result of excessive regulations imposed by the state, state agencies, or political subdivisions. It also requires that the Office of the Treasurer adopt rules and procedures by which taxing authorities may recoup these lost revenues from the entity that imposed the excessive regulation.

Model Legislation

{Title, enacting clause, etc.}

Section 1 {Title}

This act may be cited as the Universal Regulatory Tax Credits Act.

Section 2 {Definitions.}

(A) In this section, unless the context otherwise requires:

(1) “Regulation” means any legislation, administrative rule, or executive action by the state, its agencies or political subdivisions, which is governmental in nature and not proprietary, that has the force of law and a) requires individuals or private organizations to act in one or more ways, b) restricts or prohibits individuals or private organizations from acting in one or more ways, or c) restricts or prohibits one or more property conditions.

(2) “Excessive regulation” means: a) any regulation that does not protect individuals from verifiable and substantial damage to their health and safety; b) any regulation that primarily serves esthetic or cultural purposes; c) any regulation that restricts or prohibits ordinarily harmless property conditions; d) any regulation that restricts or prohibits ordinarily harmless action by individuals or organizations; e) any regulation that restricts or prohibits the ordinarily harmless exercise or enjoyment of an individual or organization’s legal right(s); and f) any regulation that mandates individuals or organizations take action that is i) unlikely to promote public health or safety, and ii) likely to cause substantially more economic costs than benefits.

(3) “Creditable cost” means the loss of the fair market value of property incurred as a direct result of an excessive regulation.

(4) “Creditable expense” means any actual expense that is incurred as a direct result of an excessive regulation; including, but not limited to, the fair market value of time spent fulfilling regulatory requirements.

(5) “Taxpayer” means the individual or entity upon which any tax authorized by Titles _________________ is imposed or assessed.

Section 3 {Universal Regulatory Tax Credit.}

(A) A credit is allowed against the taxes imposed, levied, assessed or authorized by Titles ______ for the creditable costs and creditable expenses of excessive regulation incurred by a taxpayer after December 31, 2011.

(B) The credit allowed under this section is the total amount of creditable costs and creditable expenses incurred by a taxpayer in the corresponding taxable year.

(C) Subject to the following limitations, the taxpayer may claim a credit under Title ______ in the corresponding taxable year and the taxpayer may carry forward for up to ten consecutive taxable years the unclaimed amount of the credit. The following limitations apply to the amount of a credit that may be claimed:

(1) The taxpayer may claim a credit in an amount that is up to 10 percent of that taxpayer’s aggregate tax liability under any of Titles _____ in the taxable year in which the creditable costs and expenses are incurred.

(2) If any portion of the credit is carried forward into a consecutive taxable year, then the taxpayer may claim a credit in an amount that is up to 100 percent of that taxpayer’s aggregate tax liability under any of Titles ______ in that taxable year ratably to the extent that any excessive regulation giving rise to any portion of the carried-over credit had not been previously repealed or rescinded.

Section 4 {Filing Requirements.}

(A) For each applicable taxable year, the taxpayer shall claim the credit on a singular form prescribed by the Office of the Treasurer, tendered to the relevant taxing authority under Titles _______ when the related tax liability is due, in which the taxpayer shall identify:

(1) Each excessive regulation giving rise to any portion of the credit and the corresponding amount of creditable costs and creditable expenses attributable to each such excessive regulation;

(2) The state agency and/or political subdivision directly responsible for enacting, promulgating and/or enforcing each such excessive regulation;

(3) The nature, source, and amount of any tax liability to which the claimed credit is applied;

(4) The taxpayer’s aggregate tax liability under Titles __________;

(5) The total amount of any portion of the credit that will be applied in the current taxable year; and

(6) The total amount of any portion of the credit that will be carried over into consecutive taxable years.

(7) In the case of any failure to comply with this subsection, the taxing authority shall disallow the credit until the taxpayer is in full compliance.

(B) All or part of any unclaimed amount of any credit allowed under this section may be assigned under the following conditions:

(1) A single assignment may involve one or more assignees; but an assignee may not again assign the credit.

(2) Both the assignor and assignee must submit together a single written notice of the assignment to the Office of the Treasurer within thirty (30) days after the assignment. The notice shall include a processing fee equal to two hundred dollars. The notice shall include: a) the name of the assignor and assignee; b) the date of the assignment; c) the amount of the assignment; d) the assignor’s tax credit balance before the assignment and the remaining balance after the assignment; and e) all tax identification numbers for both assignor and assignee.

(3) In submitting any claim for a credit, the assignee must furnish the relevant taxing authority with a genuine copy of the foregoing notice.

(4) In the case of any failure to comply with this subsection, the taxing authority shall disallow the tax credit until the assignor and assignee are in full compliance.

Section 5 {Rules for Recouping Revenues.}

(A) The Office of the Treasurer shall adopt rules and publish and prescribe forms and procedures as necessary to allow taxing authorities under Titles _______ to recoup revenues attributable to any claimed credit under this section from any distinct state agency or political subdivision that is directly or jointly responsible for enacting, promulgating and/or enforcing each excessive regulation giving rise to any portion of the credit in a corresponding amount. The rules promulgated hereunder shall provide:

(1) The Office of the Treasurer shall have authority to establish a secure electronic clearinghouse whereby demands for recoupment may be claimed and paid through electronic debits and credits to the accounts of the respective taxing authority, state agency, or political subdivision.

(2) The taxing authority shall promptly make demand for recoupment upon each responsible state agency or political subdivision in a form that communicates all relevant information supplied by the taxpayer.

(3) Each responsible state agency or political subdivision receiving said demand shall be liable for the same and promptly pay the amount demanded ratably.

(4) If the state agency or political subdivision receiving said demand does not have sufficient funds to pay the amount demanded, and will not have sufficient funds to pay the amount demanded without engaging in new borrowing or imposing new or increased taxes or fees, then each underlying excessive regulation identified by the taxpayer, and all related enforcement proceedings or penalties, shall be immediately deemed void ab initio and without lawful effect, and not replaced with any substantially equivalent regulation, for each tax year in which the tax credit has been or could have been claimed, whereupon the demand shall be deemed paid in full.

(B) The Office of the Treasurer shall maintain annual data on the total amount of monies credited pursuant to this section, and shall provide those data, both aggregated and disaggregated, categorized according to excessive regulation, taxing authority and responsible state agency and/or political subdivision, without the personal identifying information of any taxpayer, to the public electronically on demand.

(C) Neither a taxing authority nor a state agency or political subdivision that is responsible for excessive regulation may engage in new borrowing or impose new or increased taxes or fees to offset the fiscal impact of any credit allowed under this section. Accordingly, if the fiscal impact of any credit allowed by this section threatens public health and safety by requiring the discontinuation of essential governmental services, then the underlying excessive regulation identified by the taxpayer, and all related enforcement proceedings or penalties, shall be immediately deemed void ab initio and without lawful effect, and not replaced with any substantially equivalent regulation, for each tax year in which the tax credit has been or could have been claimed, whereupon the tax credit shall be disallowed upon corresponding notice given to the taxpayer.

(D) The Office of the Treasurer shall adopt rules and publish and prescribe forms and procedures as necessary to effectuate this section and its purposes of furnishing taxpayers with compensation for excessive regulation and encouraging responsible state agencies and political subdivisions to repeal or rescind excessive regulation.

Section 6 {Construction and Severability.}

(A) If a provision of this section or its application to any person or circumstance is held invalid for any reason, the invalidity does not affect other provisions or applications of this section that can be reasonably be given effect without the invalid provision or application, and to this end the provisions of this section are severable. In any court challenge to the validity of this section, taxpayers shall have standing to intervene.