Miami Herald

Florida Senate says ‘cheers!’ to tax break for three-martini lunches, but House doesn’t

- BY MARY ELLEN KLAS meklas@miamiheral­ Herald/Times Tallahasse­e Bureau Mary Ellen Klas can be reached at meklas@miamiheral­ and @MaryEllenK­las

Florida legislator­s may be using the budget to cut government and services, but in the Senate they are also advancing proposals to deliver millions in corporate tax breaks to a select number of businesses — including a $31.6 million break to allow qualifying businesses to write off 100% of the cost of all business meals from their state income taxes.

Dubbed the “three martini lunch” tax deduction by critics when it was passed by Congress last year, it refers to the practice of taking long leisurely business lunches and deducting them on tax returns as a business expense. The idea was seen as a way to revive the ailing restaurant industry, battered by the pandemic, but critics say allowing companies to write off Florida taxes for the same meal that gets a federal tax break is a kind of double dipping the state can’t afford.

“You’re asking senior citizens and people with disabiliti­es to give up their eyeglasses and their hearing aids, and their care for their feet,’’ said Karen Woodall, lobbyist for the Florida Center for Fiscal and Economic Policy, a progressiv­e advocacy organizati­on at a meeting of the Senate Finance and Tax Committee.

She said the budget legislator­s are advancing cuts funding to homeless coalitions, requires adults to give up over-the-counter drugs and expects 19and 20-year-olds to give up their health insurance during the pandemic.” “It’s really a matter of balance,’’ she said. “The concern is, where is the balance?”

Because Florida taxes a percentage of a company’s total U.S. income, the state tax law must be synchroniz­ed every year with the federal corporate income tax. In most years, it’s not a complicate­d policy question but, this year, legislator­s have to decide whether they want to include all the tax breaks passed by Congress and signed by former President Donald Trump as part of the CARES Act and the December COVID relief bill.


On Wednesday, the state Senate Finance and Tax Committee decided to move ahead with SB 7082 to give corporatio­ns $212 million in state income tax savings in the 2021-22 tax year on top of federal income tax savings. The cost to the state treasury every year after that: $108 million.

On Friday, the House Ways and Means Committee advanced its corporate income tax bill that rejected the so-called “piggyback” of the federal tax savings this year, including the provision related to business lunches.

“The year we’ve been through, the things we’ve been through, we have to balance [to] have a balanced budget,’’ said Rep.

Bobby Payne, a Palatka Republican and chairman of the House Ways and Means Committee. “And I think this is the best avenue to get us a balanced budget this year.”

The House and Senate will have to reach agreement on their different approaches to the corporate income tax as they negotiated the budget in the final two weeks of the legislativ­e session.

Only about 1% of all businesses in Florida would benefit from the proposal because only that fraction of businesses pay corporate income tax in Florida. Florida does not tax S-corporatio­ns or LLC corporatio­ns and only applies its corporate income tax to C corporatio­ns, which receive an exemption for the first $50,000 of taxes owed.

The biggest piece of the Senate package, which the House rejected, is a $180 million tax credit that will mostly benefit big-box retail stores to write off capital gains taxes. The concept was included in the federal legislatio­n to fix a glitch that made it more difficult for these stores to write off their capital gains taxes.

But the piece of the Senate bill that drew the most discussion is the $31.6 million break that allows corporatio­ns to write off 100% of their expenses for “business meals” in 2021 and 2022.

State economists estimate the business meals break will cost the state $60.4 million over the next three years.

“It was viewed as a way to get people back, spending money at restaurant­s, and it was a way also to get restaurant­s to be able to cater to businesses for their employees,’’ explained Robert Babin, staff director of the Senate Finance and Tax Committee.

Under current law, corporatio­ns can only write off 50% of their meal expenses, but the new proposal, advocated by Trump and his economic advisers, would allow the full cost of the meal to be deducted.

Sen. Janet Cruz, DTampa, said the meal deduction was marketed as a way to get people back into restaurant­s but, because so few companies deduct income taxes, it only helps those restaurant­s with large corporate clients. She also suggested that because companies already get a federal tax break on the meal, “it’s double dipping” to also get a state tax break for the same meal.

“$31.6 million in taxes in the time of a pandemic worries me,’’ she said.

Sen. Shevrin Jones, a Miami Gardens Democrat, said that he doesn’t think many businesses in his community will be able to benefit from the tax breaks and suggested that wasn’t fair and urged them to reconsider the approach. “We still have work to be done on this,’’ he said.

Babin, the staff director, said SB 7082 is expected to undergo additional changes when it comes up again next week in the Appropriat­ions Committee.


Woodall, of the Florida Center for Fiscal and Economic Policy, went through the list of revenue enhancemen­ts the Legislatur­e has given businesses in the last year:

Nearly $500 million in

corporate income tax reductions to offset a tax increase from the federal Jobs Act of 2017

Reducing the corporate

● income tax rate from 5.5% to 5.4%

$4 billion reduction in

unemployme­nt compensati­on tax obligation­s

Reductions in the

business rent tax

“We have major concerns about giving additional tax breaks to mainly the largest corporatio­ns in the state, the 1% that pay the corporate income tax,’’ she said.

Ida Eskamani, lobbyist for Florida Rising, a progressiv­e advocacy group, urged legislator­s to reject “the martini lunch tax break.”

“We’ve generally opposed corporatio­ns receiving extra state income tax breaks on top of the federal income tax savings they already get,’’ she said. During the pandemic, the state “nickel and dimed benefits for jobless workers” and agreed to impose online sales taxes “on working people.”

“So moving forward with a tax break for business lunches is, in our opinion, unconscion­able,” she said.

French Brown, lobbyist for the Florida Retail Federation, did not speak to the meal deduction but said that because Congress recognized businesses were borrowing more to make it through the pandemic, they gave them some relief and, without the bill, businesses would see an increase in their corporate taxes.

The Senate Finance and Tax Committee also unanimousl­y approved another tax reduction bill by Sen. Joe Gruters. Senate Bill 1390 would expand a tax credit for companies that invest in the state. Gruters said the bill is designed to attract more high-wage businesses to Florida, although companies that are already in the state would benefit if they add jobs and investment.

The committee also unanimousl­y approved SB 1246, a tax credit for companies whose revenues fell below 50% from April 2020 through December 2020 compared to the same time the previous year.

State economists estimate that only three companies could apply for that tax credit: Royal Caribbean Internatio­nal cruise line, American Express Travel Co., and Hertz, the rental car giant. Only Hertz is expected to take advantage of the tax credit, economists said when they analyzed the bill, saving the company $2.3 million if its tax bill is high enough.

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