Jefferson County Occupational Tax

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The Jefferson County Occupational Tax is a 0.45% tax on wages for all workers in Jefferson County, signed into law by Governor Bob Riley on August 14, 2009. The new law replaced a controversial 0.5% tax that was collected from non-licensed wage earners from 1987 to 2009. The 1967 law enabling the county to levy the tax was repealed in 2000, leaving the status of revenues collected after that date in doubt as the courts reviewed the constitutionality of the original statute and the repeal. A 2009 court ruling against the tax deepened a financial crisis for the County government, provoking massive layoffs and reductions in services. The Jefferson County Legislative Delegation, spurred on by Governor Riley, eventually reached consensus on a replacement tax which is subject to a popular referendum in 2012 and to diminish to non-existence by 2017 if not renewed.

Uncertainty about the County's ability to collect the tax, and the threat of having to refund previously-collected funds have been at the forefront of the fiscal policies of County Commission, especially following the 2006 general election when a Republican majority was installed and Bettye Fine Collins assumed the presidency. The county has withdrawn pledges of financial support for a domed stadium and negotiated smaller contributions than were pledged to other projects, such as the Red Mountain Park.


The first county-wide occupational tax of 0.5% was created on September 29, 1987 by the Jefferson County Commission to fund construction of the Jefferson County Jail in Birmingham and took effect on January 1, 1988.

The text of the tax law (Jefferson County Ordinance No. 1120) states, in part: "It shall be unlawful for any person to engage in or follow any vocation within the county without paying license fees to the County for the privilege of engaging in or following such vocation, which license fees shall be measured by one-half percent of the gross receipts of each such person."

The levy was enabled by a 1967 law passed by the Alabama State Legislature (Acts of Alabama No. 67-406) giving the county the power to impose taxes on wages and business licenses. Currently it is the third-largest source of revenue for the county, raising approximately $67 million per year.

A provision in the 1967 enabling legislation, stipulated that licensed professionals (including physicians, lawyers, architects, private detectives and fortune tellers who paid a licensing fee to the state) were exempt from any tax levied under that law. The perceived inequity has been a point of contention since the occupational tax was created. Several lawsuits have been filed challenging the legality of the tax.

1998 Circuit Court decision

On November 12, 1998 Circuit Court Judge John Rochester ruled that the tax was constitutionally unfair and gave the county two months to submit a revision for legislative approval which would include all workers. The county prepared a version removing the exemptions to tax all workers at the same rate. Meanwhile the state legislature argued that the overall rate should be adjusted to keep revenues flat.

In 1999 the legislature rejected the County's proposal and passed a law sponsored by Arthur Payne of Trussville which earmarked $29 million from the tax for 144 special projects chosen by legislators (Act of Alabama No. 99-406). The county challenged the new tax in court (and eventually prevailed in a January 12, 2000 ruling). Meanwhile, in special session in November 1999 Payne authored a bill to repeal the 1967 enabling law with plans to create a new law in the 2000 regular session. According to Payne "the repeal was never intended to do away with the tax. It was another way to get [the commision's] attention. Period."1.

On March 8, 2000 the repeal of the enabling legislation was also struck down. On April 6 a second rewrite (Act of Alabama No. 2000-215) was passed in the legislature, lowering the overall rate while including all workers, but also containing $31 million of pork for legislator's programs, as well as funds requested by Don Siegelman for state offices in the county. The Jefferson County Commission refused to collect the new tax while its legal challenge to the repeal proceeded. That same month the repeal was deemed unconstitutional in Circuit Court. The new enabling law was also found to be unconstitutional on September 7, 2000. That decision was upheld on appeal in June, with the last lawsuit being settled in November. By the end of 2001 the original occupational tax seemed to be constitutionally secure, if still unfair.

2005 Supreme Court decision

In May 2005 an unrelated case regarding the means by which a law can be struck down was decided by the Alabama Supreme Court, threatening the status of the Circuit Court ruling against the first legislative rewrite. In effect the court ruled that the judicial branch cannot instruct the legislature on its own rules.

2009 Supreme Court decision

On August 25, 2009 the Alabama Supreme Court upheld the constitutionality of the 1999 repeal of the original enabling legislation in the case of Jessica Edwards v. Jefferson County Commission. The result of the ruling is that revenues collected over the 10 years between passage of the repeal and passage of the replacement law in early August 2009 may have to be refunded to taxpayers. $17.5 million of the revenues in question have been held in escrow by order of Circuit Court judge David Rains, whose ruling the Supreme Court upheld. The court did not address any question regarding the 2009 replacement law.

2009 replacement

During the 2009 session of the Alabama legislature an effort was made by the Jefferson County legislative delegation to pass a replacement occupational tax that would withstand constitutional review. No agreement was reached before the end of the session.

The legislature's delays in passing a replacement for the revenues lost to the occupational tax only deepened an already enormous debt crisis, making the possibility of history's largest governmental bankruptcy nearly inevitable. When the 2009 legislative session ended without a replacement tax the County responded by shuttering satellite courthouses, deepening departmental budget cuts and laying off hundreds of employees. Jefferson County Sheriff Mike Hale and tax assessor Dan Weinrib filed suits claiming that the county is required by law to fund certain services which would be impossible after the cuts. Hale broached the possibility of asking Governor Bob Riley to activate National Guard troops to maintain the peace.

During July the group, following Governor Bob Riley's lead, renewed efforts to reach a consensus. A special session called in August produced a new bill levying a 0.45% tax on all workers, set to taper down to nothing over five years unless renewed by county-wide referendum in June 2012. If voted down, the tax would expire completely in 2017. The House also approved a bill requiring the Commission to hire a County Manager and a Comptroller to help manage its finances. The tax bill was approved by the Senate. The county manager bill was modified in the Senate to eliminate the comptroller position. The new laws were signed by the Governor on August 14. Both have been subject to court challenges.

On March 16, 2011 the Alabama Supreme Court ruled that the notice published by bill sponsor John Rogers in advance of the 2009 law was not specific enough to meet the requirements of the state constitution. The chances of passing another replacement tax during the 2011 legislative session were reduced due to incoming Republican majority's campaign stances on taxation.

2011 session

During the legislature's 2011 session, bills granting the County "limited home rule", which would allow the County Commission to raise as much as $50 million in revenues through sales, excise, and rental taxes. The bill, which originally included a reinstatement of the occupational tax, was passed in the House of Representatives after that stipulation was removed. The final version passed over the objections of Arthur Payne, John Rogers and Mary Moore.

In the Senate, the bill was approved by the Finance Committee. Senator Scott Beason exercised his "local privilege", as one of eight senators in the Jefferson County Legistative Delegation, to block a vote on the bill in the full Senate. Beason admonished the county to "live within its means" and expressed a desire to "un-earmark" some portion of state revenues disbursed to the county during the 2012 session. After the bill failed, the County Commission began laying off hundreds of county workers.

2015 Jefferson County Community Service Fund Act

Act of Alabama 2015-226, sponsored by Oliver Robinson (D-District 58), levied a county-wide 1% sales and use tax which was used to address existing county obligations and afterwards directed to a Jefferson County Community Service Fund, to be allocated to community service organizations and projects by members of the Jefferson County Delegation in the Alabama State Legislature.


  • Hoyt Bedingfield v. Jefferson County, filed October 1987. The tax was ruled constitutionally unfair on November 12, 1998 by Circuit Court Judge John Rochester.
  • Richards v. Jefferson County, filed April 12, 1992 with judgment rendered by John Rochester on November 12, 1998. A petition that the case should be dismissed because of claims decided in Bedingfield v. Jefferson County was affirmed by the Alabama Supreme Court in 1995, but reversed by the US Supreme Court in 1996. Judge Rochester ruled that exemptions to the tax violated the 14th Amendment to the US Constitution and required a change to the law ending the exemption.
  • "Jefferson County v. Acker, William Jr & Clemon, U.W.". The county's small-claims case to force payment from federal judges Acker and Clemon also went before the US Supreme Court, which ruled that the judges were subject to the law.
  • Jefferson County, filed November 1998, combined with Richards
  • Carnesa T. Parker v. Jefferson County, filed June 23, 1999, dismissed October 2001
  • Jefferson County, filed June 1999, settled December 1999
  • Philip Triantos v. Jefferson County, filed August 20, 1999, arguing that professionals who paid licensing fees to the state were exempted in the enabling legislation. The case was combined with Richards v. Jefferson County with the County agreeing to hold proceeds collected from professionals for possible refund.
  • Jefferson County Employees Association v. Jefferson County, filed January 2000. On March 8, 2000 Judge William A. Jackson ruled that the 1999 legislation repealing the 1967 Act was unconstitutional.
  • Birmingham-Jefferson Civic Center Authority v. Richard Izzi et al., filed April 2000. The Alabama Supreme Court agreed that the legislation enacted in 2000 was unconstitutional because a local law (passed under different requirements) cannot repeal a general law.
  • Jessica Edwards v. Jefferson County Commission, filed May 2007, requested a review of Jackson's 2000 decision. The case went into mediation but no agreement was made. Circuit Court judge David Rains overruled the lower court decision and upheld the 1999 repeal law, saying that the legislation was clear as enacted and that the rules of the legislature were not subject to judicial review. He ordered that previously-collected taxes would not have to be refunded, but that current collections should be held in escrow pending appellate decisions.

See also


  1. Velasco-2008


  • Velasco, Eric (January 1, 2008) "20-year-old Jefferson County occupational tax faces court challenge." Birmingham News
  • Chandler, Kim (May 16, 2009) "Major cuts loom as Jefferson County, Alabama occupational tax fail in Alabama Legislature." Birmingham News
  • Cunningham, Russell IV (March 23, 2009) "Jefferson County Occupational Tax Invalid, But No Refunds for Prior Years". Birmingham Business Law Blog
  • Chandler, Kim (August 12, 2009) "Alabama House approves Jefferson County occupational tax." Birmingham News
  • Wright, Barnett (August 12, 2009) "Commission president calls occupational tax fix a "bad bill"." Birmingham News
  • Chandler, Kim (August 16, 2009) "Jefferson County occupational tax lawsuits expected." Birmingham News
  • Wright, Barnett (August 26, 2009) "Alabama Supreme Court deals blow to Jefferson County, says job tax was repealed in 1999 law." Birmingham News
  • Wright, Barnett (August 27, 2009) "Lawyers for Jefferson County, taxpayers debate next move." Birmingham News
  • Wright, Barnett (March 17, 2011) "Alabama Supreme Court rules Jefferson County's 2009 occupational tax illegal." Birmingham News
  • "Jefferson County should ask the governor for a special session after Sen. Scott Beason killed the limited home rule bill." editorial (June 13, 2011) Birmingham News