|
The House Government Efficiency & Accountability Council defeated HB 1237 Relating to Corporate Income Tax by House Minority Leader Representative Dan Gelber (D-Miami). According to the sponsor this legislation would “close existing corporate tax loopholes” and could potentially bring approximately $365 million dollars a year in new revenues to the state. Essentially, the bill would mandate “combined” reporting, which would require all corporations that are members of a newly defined “water’s edge group” to file a tax return combining income from subsidiaries outside the state of Florida and then apportioning the combined income to Florida based upon a statutory formula.
Under current Florida law, corporations operating both in Florida and in other parts of the United States pay taxes depending on the portion of their total sales, payroll, and property located in Florida, as opposed to those portions located in all states. Corporations which are members of federally defined affiliated groups have the choice of filing as a separate entity or as a consolidated group. Florida exempts “foreign source income” from its corporate income tax. Income, such as dividends, paid to a corporation operating in Florida by subsidiaries located in foreign countries is not included in the calculation of Florida income.
This is not Florida’s first experience with this proposal. When the unitary tax was first enacted, Florida corporations were told it was a fairer share of state corporate income taxes. Instead, major multi-state companies left Florida including IBM and Sony. It was such a bad idea, Florida repealed it in 1984. Representative Gelber is once again touting this idea as a way to “level the playing field” for those Florida-based businesses that must compete with large corporations with a nation-wide footprint.
Debate among committee members was spirited and mostly along party lines. Democratic members voiced strong support for the proposal stating that “closing these tax loopholes” would help Florida-based businesses compete with their larger “chain” counterparts and bring about much needed revenue for the state at a time when dollars are scare. According to the bill, $100 million dollars from the “new” revenue that would be collected if this proposal passed would go to higher education funding. The rest would go to offset property taxes. T.K. Wetherell, current president of Florida State University and former Speaker of the House, testified in support of the proposal citing the tough economic times colleges and universities in Florida were facing.
A representative from the Council on State Taxation (COST), a national organization that advocates to preserve and promote equitable and nondiscriminatory state and local taxation of multi-jurisdictional business entities, testified in opposition to the bill citing several examples from states that either tried or considered implementing combined reporting – but ultimately abandoned the idea because of the unintended consequences.
Kurt Wenner, on behalf of Florida TaxWatch, urged caution from the committee members. He further explained that states that currently use combined reporting also have implemented other tax policy changes including reducing the corporate tax rate.
A number of representatives from the business community, including AIF, where on hand to speak in opposition to this bad bill, but because of time restraints and upon the Chair’s direction no testimony was taken.
Representative Robert Schenck (R-Springhill) made an excellent point during debate, stating that the only winner in this deal would be government and “their insatiable appetite for more tax dollars” and that the consumer would be the ultimate looser. Representative Julio Robaina (R-Miami) shared that as a union member his concern was the potential loss of jobs that could take place if Florida were to adopt this change in tax policy. Representative Michael Grant (R-Port Charlotte) pointed out that only a very small number of companies actually pay corporate income taxes, since most small businesses are incorporated as S-Corporations or Limited Liability Companies and are thus exempt from corporate income tax.
Ultimately, the bill died in committee and will no longer be considered in the House this session. Its Senate companion, SB 2766 by Senator Ted Deutch (R-Delray Beach) has not been heard in committee.
AIF opposes any legislation that would bring about “combined reporting” or establish a “unitary tax” in Florida. Taxing our way out of a recession is not feasible and this type of legislation sends a terrible message to companies and investors looking to invest in our state. Florida tried this approach once before and it was a disaster, costing the state thousands of jobs.
|
