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By Chris Marr
Corporate income taxpayers in Florida could see an automatic rate cut beginning in 2019 if corporate tax revenue outstrips projections.
H.B. 7093, after a series of amendments, largely conforms Florida’s tax code starting in 2018 to the 2017 federal tax act ( Pub. L. No. 115-97), including corporate tax provisions related to foreign income and interest deduction limitations.
The bill sets up a trigger mechanism to automatically cut the state’s corporate income tax rate if collections for fiscal year 2018-19 exceed state projections by more than 7 percent. In that case, the rate would be cut for tax years 2019 and later. Corporate tax revenue collected in excess of the new 2019 rate would be refunded to taxpayers in 2020.
The rate cut trigger also would apply to the franchise tax for banks and savings associations. The current rate for both the corporate income and bank franchise taxes is 5.5 percent. Florida doesn’t have an individual income tax.
The bill is awaiting Gov. Rick Scott’s (R) signature after winning final passage in the Legislature March 9. The governor will review the bill once his office receives it from the Legislature, spokeswoman Kerri Wyland said March 12.
The Legislature’s 2018 session adjourned March 11.
The state kept with its tradition, however, of breaking from federal law on expensing of business capital investments and bonus depreciation, said Mark Holcomb, a tax attorney with Dean, Mead & Dunbar in Tallahassee. For Florida tax purposes, corporate taxpayers will have to spread out the deduction for capital investments over seven years.
The bill also calls for a study group inside the Florida Department of Revenue to further analyze the impacts of the corporate tax provisions of the new federal law and report back to the Legislature by February 2019.
“My understanding is that further, interim study is likely to assess the impact(s) of other provisions, including the foreign income aspects,” Holcomb previously told Bloomberg Tax in an email. “Recall, for example, that Florida has an expense add-back for Subpart F income, which could be significant in terms of the projected repatriation amounts.”
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Text of H.B. 7093 is at http://src.bna.com/wZ3.
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