Users of free government cellphones to start paying state 911 tax

The state capitol in Montgomery, Ala. (Associated Press)

MONTGOMERY, Alabama --- An estimated 200,000 low-income Alabamians who receive free cellphone service through a federal program will have to pay a state tax that supports 911 services starting Aug. 1.

Groups opposing the change wrote a letter to Gov. Robert Bentley this week. The company that provides the free cellphone service under the federal Lifeline program has filed a lawsuit to block it.

The monthly tax, which applies to cellphones and landlines, will increase from $1.60 to $1.75 a month starting Aug. 1, in addition to being expanded to include Lifeline users.

The tax, expected to generate about $105 million this fiscal year, pays for personnel, infrastructure, equipment and other costs for 88 city and county 911 districts, said Jason Jackson, executive director of the Alabama 911 Board. Jackson said the tax provides the only state dollars for the 911 offices.

Jackson said the board had to increase the monthly tax and add Lifeline users to those paying the tax to meet its obligations to the local 911 offices. That's because of the steady decline in the number of landlines, he said.

"The only way we could continue to do what we're legislatively required to do was to go up on the rate," Jackson said.

A letter from seven organizations to the governor that was distributed as part of a press release this week called the tax on Lifeline users "punitive."

"Alabama's E-911 Board has gone where no other state has seen fit to go before: It has for no valid public policy reason imposed a punitive phone tax targeting the poorest of its poor residents who receive wireless Lifeline telephone service at no cost," the letter says.

The letter says some Lifeline users depend on the free phone service to get a job or keep a job.

The letter is signed by the Alliance for Generational Equity, the Consumer Action Partnership of Alabama, the Community Action Partnership, Consumer Action, National Consumers League, the National Grange and the North Alabama Patriots Tea Party.

Some of those groups have connections to TracFone Wireless Inc., which provides the Lifeline service in Alabama. They participated in the Keep America Connected to Opportunity Campaign, which has been supported by TracFone, said Will Harwood of The Hastings Group, who distributed the letter and news release.

"These groups all have real concerns about Lifeline Wireless state taxes and a number of them have spoken out separately in other states," Harwood said in an email.

TracFone, a Delaware corporation, filed a lawsuit in Montgomery County Circuit Court in January, seeking to block the 911 tax from applying to Lifeline users.

TracFone, which provides the Lifeline service through the brand name of SafeLink, uses a federal subsidy of $9.25 a month to provide 250 minutes of free cell  service a month to Lifeline customers, who also receive a free phone, according to the lawsuit.

The lawsuit says there are about 200,000 SafeLink customers in Alabama. It says that many of those customers would have to drop the service if they had to pay the tax.

The Federal Communications Commission started the Lifeline program in 1985 to help low-income families have access to telephone service. In 2005, the Lifeline discounts became available for wireless services.

There's an income cap, about $15,750 for an individual and $32,000 a year for a family of four, which is 135 percent of the federal poverty limit. Recipients of some other programs, including Medicaid, Supplemental Nutrition Assistance (food stamps) and Temporary Assistance to Needy Families, are eligible.

The letter to Bentley says that the $1.75 monthly 911 tax will be one of the highest in the country. It characterizes the tax as a 19 percent tax increase for Lifeline users (based on the $9.25 monthly benefit).

The 911 Board's Jackson said the comparisons with other states are "apples to oranges" because other states have local 911 fees, while Alabama does not.

Before 2012, Jackson said Alabama's 911 districts imposed local 911 taxes on landlines that varied from $1.10 to $5.50 a month, and there was a separate statewide tax on wireless phones of 70 cents a month.

Legislation passed that year eliminated the district taxes and made the statewide tax apply to both cellphones and landlines. That tax is now $1.60 a month and increases to $1.75 Aug. 1.

Legislation passed this year, Jackson said, authorized the board to apply the 911 tax to users of wireless Lifeline services. Jackson said Lifeline customers with landlines have paid the 911 tax for years.

The 911 Board initially proposed at $1.80 tax, but a legislative panel recommended the $1.75 instead.

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