Corporate Income Taxes Promise to be a Major Discussion Point in Florida
September 10th, 2020
Update from NASL Member Lisa Hurley:
In 2018 and 2019, some of the world’s biggest corporations successfully lobbied the Florida Legislature for a roughly $2 billion package of corporate tax cuts that are scheduled to expire at the end of 2021. With the shuttering of many businesses as a result of local and state orders attempting to respond to the COVID-19 pandemic and a projected $5.4 billion reduction in revenues over the next two years, businesses will be lobbying to extend the tax cuts or make them permanent. These are among the recommendations made by the COVID-19 Taxpayer Task Force, a group assembled by a Florida nonprofit research institute to figure out ways state lawmakers can help Florida recover and alleviate the tax burdens that will be caused by the pandemic.
In response to the tax base-expansion measures included in the federal Tax Cuts and Jobs Act of 2017, the Florida Legislature adopted a refund and rate reduction mechanism in an attempt to avoid a significant state corporate income tax increase for Florida corporations. As a result, refunds of $543 million were issued this year and the tax rate was reduced from 5.5 percent to 4.458 percent but the rate will return to 5.5 percent if the Legislature does not act. The reduced rate is estimated to save corporations around $1.5 billion. If the rate is allowed to return to 5.5 percent, businesses see it as a tax increase at a time they can least afford it.
Businesses will also be pushing lawmakers to allow them to take larger tax deductions than the federal Tax Cuts and Jobs Act currently provides. The federal tax package in 2017 limited the amount of interest expense a taxpayer can deduct to generally no more than 30 percent of adjusted taxable income. By allowing for larger deductions Florida employers’ cost of borrowing for expenses related to COVID-19 response and recovery will be lower.
Heading into the COVID -19 shut down, Florida’s economy was booming with year over year increases in tourism, low unemployment and the state sitting on $6.3 billion in reserves, more than 6 percent of the total budget for 2020-2021. While the Governor vetoed a record $1 billion from the state budget before signing it into law, the Florida Legislature has not yet had to act on further reductions to the budget due to healthy reserves and the influx of the CARES Act funding. If revenue projections hold the Legislature may not have to do anything before the start of the regular 60- day legislative session beginning in March 2021 but it is still too early to tell. However, when they do ultimately convene you can expect corporate income taxes to be at the top of the list for the business community.
Source: Florida TaxWatch, COVID-19 Taxpayer Task Force
Author: Lisa Hurley, with Smith, Bryan & Myers, Inc., a premier governmental relations firm in Florida.