Tax Reform

New Model Policies from the Tax and Fiscal Policy Task Force

At the 47th ALEC Annual Meeting last month, the Tax and Fiscal Policy Task Force convened virtually to discuss everything from property tax reform and state budgets to Medicaid expansion and Wayfair. By the end of the meeting, our task force had voted unanimously to approve three new model policies:

Truth in Taxation Act

Summary: An Act concerning property taxation; relating to tax rates; truth in taxation; establishing notice and public hearing requirements prior to approval to exceed certified tax revenue neutral rate.

This model policy has similarities to Truth in Taxation laws in states like Utah and Tennessee. As explained by former Utah State Senator Howard Stephenson on the ALEC blog last year:

While Truth-in-Taxation does not technically limit property taxes, it makes local elected officials think twice about increasing property tax rates because they know all citizens will be notified of the increase and its potential impact on their property. They also know that they will have to hold a broadly advertised public hearing where citizens can sound off about the proposed tax hike.

The new model policy also builds on the Statement of Principles on Truth in Property Taxation, which was approved by the Tax and Fiscal Policy Task Force last year at the 46th Annual Meeting.

Property Tax Appraisal Reform Act

Summary: This Act amends current [INSERT STATE] law relating to the authority of the chief appraiser of an appraisal district to increase the appraised value of property in the tax year following the year in which the appraised value of the property is lowered as a result of a protest or appeal. This Act prohibits the chief appraiser from increasing the appraised value of the property unless the increase by the chief appraiser is reasonably supported by clear and convincing evidence.

Net Operating Loss Reform Act

Summary: Net operating loss provisions are a critical component of a business tax code to ensure that income taxes are levied upon the appropriate tax base. The Net Operating Loss Reform Act creates sound state tax policy and provides businesses with economic relief through expanded liquidity by adopting the federal government’s treatment of business net operating losses that took place in 2018, 2019 and 2020. Furthermore, it recognizes the importance of permanence in sound tax policy and provides states with better treatment of net operating losses going forward for tax years after 2020.

Due to COVID-19, many businesses will experience unusually high operating losses in 2020. A competitive, equitable, pro-growth tax code should allow businesses to claim the deductions associated with their net operating losses as soon as possible. This will allow businesses to quickly recognize their losses and retain critical liquidity during an economic downturn.

Following the task force meeting, these three new model policies were approved by the ALEC Board of Directors to become official ALEC model policy. We are proud to see members of the Tax and Fiscal Policy Task Force author and approve model policies that provide transparency and appraisal protection for property owners, as well at much-needed liquidity for business owners.


In Depth: Tax Reform

Mainstream economists, small business owners and taxpayers across the country understand that growth-oriented reforms mean increased opportunity for all. As demonstrated by the annual Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index, sound tax and fiscal policies are critical to economic health, allowing businesses and households to flourish. A …

+ Tax Reform In Depth