Tax Relief – The Legislature passed a $658 million tax relief package (HB 7071) that features four sales tax holidays and focuses on non-recurring tax cuts that help individual taxpayers, with relatively little relief targeted to businesses. In conference, the Senate agreed to the House tax relief package, making some changes and additions. The Senate changes were relatively minor, with the exception of a one-month, $200 million gas tax holiday in October. Summary of the tax package.
New Homestead Exemption - Another bill (HJR 1) will bring a proposed constitutional amendment to the ballot in November, asking voters to approve a new $50,000 homestead exemption for teachers, law enforcement and correctional officers, firefighters, emergency medical technicians, paramedics, child welfare professionals, active duty military and National Guard members. The amendment would exempt the value of a home between $100,000 and $150,000 and would not apply to school levies. With the two homestead exemptions currently available, homeowners would still be taxed on the value between $25,000 and $50,000, between $75,000 and $100,000, and anything over $150,000. The new exemption would save those that qualify a total of $86 million annually. See Florida TaxWatch testimony on the proposed constitutional amendment.
DOR Tax Administration - SB 1382 is the Department of Revenue (DOR) legislative package, making many changes, dealing mostly with the audit process. Florida TaxWatch found that while the original bill contained some good provisions, it had others that could put taxpayers at serious risk and should be changed or eliminated. The bill was amended, making significant improvements and addressing most of the concerns. In the House, a work group was added to review the DOR’s compliance enforcement process and recommend ways to further improve it. Florida TaxWatch was selected to chair the workgroup. However, the final bill did not contain the workgroup, based on DOR's assurance to keep listening to stakeholders’ input. The bill, which now better balances tax enforcement and the rights of taxpayers, does have some provisions that may need future refinement. Thanks to DOR for being so receptive to the input of Florida TaxWatch and others.
Sales Tax Holidays – The new tax package contains four holidays: expanded Back to School and Disaster Preparedness holidays, a Freedom Week holiday, and a new one for tools and equipment needed in skilled trades. For more information, see this summary. Read why Florida TaxWatch supports tax holidays.
Doc Stamps Exemption for Emergency Loans – A recommendations of the Florida TaxWatch COVID-19 Taxpayer Task Force, future federal loans made during emergencies will be exempt from documentary stamp taxes, similar to when Governor DeSantis issued an Executive Order suspending doc stamp taxation on the CARES Act’s Paycheck Protection Loans. This removes an additional cost to business recovery and response efforts and removes a potential disincentive to small business participation in such programs. This was included in the tax relief package (HB 7071).
Local Tax Referenda Requirements – HB 777 requires local tax referenda to approve local option taxes be held a general election. Florida TaxWatch did not make a recommendation on this bill, but our research shows that tax referenda at a general election have a lower success rate than at special, primary, or presidential preference primary elections.
DID NOT PASS
Corporate Income Tax – Prior to the session Florida TaxWatch warned that, unless the Legislature acted, Florida corporations would facing a $1 billion tax increase. In response to the tax base expansion measures contained in the federal Tax Cuts and Jobs Act, the Florida CIT tax rate has been reduced twice and is now at 3.535 percent for tax years before 2022. However, the rate is scheduled to return to its original 5.5 percent beginning in 2022 tax years and will now apply to a larger tax base. The 2018 Legislature enacted the CIT refunds and automatic rate reductions in an attempt to make the impact of federal tax reform as revenue neutral for Florida corporations as possible. It helped, but state taxes for corporations still went up significantly. Even after the refunds and rate reductions, corporate taxpayers will have paid $1.9 billion more from Fiscal Year 2018-2019 through Fiscal Year 2022-23 than was forecasted before federal tax reform was implemented. Now, with the tax rate returning to the original 5.5%, and applying it to the larger tax base, CIT taxes in Florida will rise even more. It is now estimated that collections will be $4.5 billion in FY2025-26, the first year with no remaining effects of the automatic refunds and rate reductions. Gross collections were never more than $2.4 billion in any year before the TCJA.
Florida TaxWatch encouraged legislators to act to prevent the scheduled tax increase and fix two additional provisions of the TCJA adopted by Florida--the Qualified Improvement Property “glitch” and the elimination of the “like-kind” exchange provision. SB 1090 did not address the rate increase, but it attempted to mitigate it by adopting the federal provisions for bonus depreciation and the increased limitation on business interest deductions. The bonus depreciation would provide $1.4 billion tax savings in FY 2024-25 but then that revenue would begin to be recouped by the state since bonus depreciation simply speeds up the deduction. The interest expense change would save Florida corporations over $300 million annually. The bill also adopted the new IRS code which includes new treatment of research and experimental expenditure deductions, which will cost Florida taxpayers even more. The change will increase CIT collections by nearly $800 million in the first five years. While it would have helped, SB 1090 would not have reduced the coming tax increase by very much in the long run. SB 1090 did not pass, but this last provision was included in the tax package, meaning instead of addressing increasing corporate income taxes, the 2022 Legislature made it worse.
Qualified Target Industry (QTI) Tax Refund Program - As reported in Florida TaxWatch’s September 2021 analysis, QTI, a proven economic development tool which expired on June 30, 2020, should be reauthorized by lawmakers. This will enable the state to directly compete with Texas, Georgia, North Carolina, and others to attract companies in high value-added industries that are considering settling or expanding their operations. Applicants must have the support—including a shared financial commitment—of the local community where the business is located. And most importantly, the program provides taxpayers with a significant return-on investment of more than 5 to 1—producing more than $5 of additional state revenue for each dollar the state pays out in refunds. SB 800, which would reauthorize a revised QTI program for rural areas only, stalled in its last committee. Florida TaxWatch will urge the 2023 Legislature to reauthorize the full QTI program.
Government Leaseholds – Leaseholds are when government leases tax exempt property to a private lessee. A recent Florida TaxWatch report concluded that the current system of taxation raises numerous questions/issues that need to be addressed, including unequal application, what should be exempt/taxable, and which tax should apply (real or intangible property.) Further, a reading of the statute does not give taxpayers a clear understanding of the law, and perhaps most importantly, the evolving legal interpretation does not appear to match legislative intent. The report recommended the Legislature undertake a comprehensive overhaul of the law governing the taxation of governmental leaseholds with a special focus on what should be exempt, making sure the law clearly represents its intent (whatever that may be). HB 1387 would have been a good start. The bill clarified what constitutes an exempt governmental purpose at a public airport, a spaceport, or a deepwater port. It also provided that when an exemption for leasehold interest is granted, unless the lessee changes the use of the property, that exemption must remain valid for the term of the lease, including extensions that were contemplated in the original lease. This is important for the stability of the operations of the taxpayer providing the aviation, airport, aerospace, maritime, or port purpose. This is a complex issue and will likely resurface next session.
R&D Tax Credit – SB 952 contained two recommendations of the Florida TaxWatch COVID-19 Taxpayer Task Force. One provision was included in the tax package (see Doc Stamp Exemption for Federal Loans above) but another provisions that would have increased the cap on total research and development tax credits from $9 million to $50 million annually died with this bill.
Other tax legislation that moved but did not pass
These bills saw some movement but did not make it through both chambers. Do not be surprised to see many of these again next session.
Taxation of Investigative Services – While most services are not subject to sales taxation in Florida, a few, including detective, burglar protection, and other protection services, are taxed. SB 1146 and HB 763 would exempt small private investigative agencies, defined as an agency that employs three or fewer employees that each received less than $50,000 in compensation. The House passed its bill and the Senate bill made it to its last committee.
Construction Equipment - Currently, inventory is exempt from the ad valorem taxation of tangible personal property. Property held for lease to customers, rather than sale, is considered inventory until it is first leased. HB 751, which made it to the House floor, would have expanded the definition of the term “inventory,” for all property tax levies other than school district levies, to include construction equipment owned by a heavy equipment rental dealer that is for sale or short-term rental. Prior short-term rental would not disqualify such property from being considered inventory. This exemption would be worth more than $20 million annually. This bill made it through all its committees and died on the House calendar.
Property Appraiser Appeals - Currently, property appraisers may challenge Value Adjustment Board (VAB) decisions only when the variation from the property appraiser’s assessed value exceeds established percentages (depending on value of property). The minimum variance for challenges is 15 percent for assessments up to $50,000, 10 percent for assessments up to $500,000, 7.5 percent for assessments up to $1.0 million, and five percent for assessment of more than $1.0 million. HB 417 wanted to increase those thresholds to 25 percent, 10 percent, 17.5 percent, and 15 percent, respectively, making it more difficult for a VAB decisions to be challenged. This made it to its last committee.
Aircraft Sales and Lease Tax – SB 786 would exempt all aircraft sales and leases from the sales tax. Currently, only aircraft with a takeoff weight of over 15,000 pounds and certain planes offered for use in a Florida university’s flight training and research program. This made it to its last committee.
Florida Main Street Program and Historic Preservation Tax Credits – SB 1310 and HB 247 provide a tax credit against corporate income or insurance premium taxes for expenses incurred in the rehabilitation of a historic structure. Both bills died in their last committee.
Apprenticeship Tax Credit – HB 1447 allows a taxpayer who employs an apprentice to receive a tax credit against the corporate income tax of up to $2,000 for each apprentice. The credit is equal dollar for dollar to the total number of hours the apprentice worked in the previous tax year, up to 2,000 hours. Passed one committee.
Capital Investment Tax Credit – SB 1878 expands the Capital Tax Credit to include certain projects for the development or creation of intellectual property and creates an additional tax credit under the CITC relating to intellectual property projects. Passed one committee.