Florida Senate eyes corporate tax cuts
Plan follows reduced funding for hospitals and universities
TALLAHASSEE — A week after passing a budget that would reduce funding for hospitals and universities, the Florida Senate is moving forward with a slew of bills to cut taxes for large corporations totaling hundreds of millions of dollars.
The Senate Finance and Tax Committee on Wednesday is set to vote on bills to reduce state corporate income taxes, give a property tax cut to those reselling timeshares and offer tax credits to Hertz and Electronic Arts, costing the state more than $400 million. Another would allow corporations to deduct 100% of the cost of business meals, also known as the “three-martini lunch tax break.”
The budget passed by the Senate included $251.2 million in cuts to hospital inpatient and outpatient Medicaid rates and a $400 million cut to universities and colleges. That spending plan isn’t final, though, and didn’t include the $10.2 billion in federal COVID-19 aid to the state.
With the federal money added, those cuts could turn into increased spending for hospitals and colleges in the final budget after negotia
tions with the House.
Some Democrats have bashed the move by the GOP-led Legislature to slash tax bills for corporations while attempting to cut other programs.
Sen. Joe Gruters, who is sponsoring two of the bills up for a vote, said he couldn’t comment on the budget cuts, noting the spending plan is still subject to negotiations and the addition of the federal money.
The federal money, along with a rosier revenue forecast from state economists, could help prevent the cuts in the original budget, giving lawmakers more breathing room to include the tax cuts for corporations without slashing social safety net spending.
However, the $10.2 billion in federal aid isn’t supposed to be used to cut taxes, as part of the federal law. And although the tax cut bills are likely to advance Wednesday, it’s not certain they’ll make it into law.
“It’s too early to tell what’s going to happen with these bills, so I don’t want to get out in front of ourselves and say these bills are going to be law and they’re coming from a specific pot because we’re a long ways away,” said Gruters, R-Sarasota, who is also chairman of the Republican Party of Florida.
There are 16 days left in the legislative session that is set to end April 30.
The GOP-led Legislature typically puts tax carve-outs for specific industries inside a large “tax package” that includes sales tax holidays for back-to-school items and hurricane supplies, making it politically unpopular to vote against. What gets included in the tax package is largely dependent on how much tax revenue is available, and provisions are often added at the last minute.
Last year, as the COVID19 pandemic was setting in just as the Legislature was finishing budget talks, lawmakers scrapped all tax cuts except for the school and hurricane sales tax holidays as they braced for severe revenue losses.
Now, with revenues on the rebound and the state looking to get its economy revved up again, tax cuts are back on the table.
“For me, it’s all about building long-term growth, high wages and the climate here in Florida that allows providers to be basically strong for their families,” Gruters said.
One bill, SB 7082, would tie Florida’s corporate tax structure to the federal one, incorporating federal tax breaks included in the CARES Act in March, signed by President Joe Biden, and the previous COVID19 relief package passed in December and signed into law by former President Donald Trump. One of those breaks allows corporations to deduct 100% of the cost of “business meals” — also known as the “three martini lunch tax break.”
State economists estimate the business meals break will cost the state $60.4 million the next three years, and adopting all of the federal changes will save businesses $361.9 million next fiscal year, and more than $100 million in future years.
What’s more, SB 7082 also includes a another corporate tax break allowing businesses to write off more of the interest payments they incur when they take on corporate debt. That would save businesses roughly $50 million a year.
The tax savings would go mostly to very large companies, because only about 1 percent of Florida businesses pay any state corporate income tax at all.
SB 1358, sponsored by Gruters, allows timeshare owners to appeal the valuations of property appraisers, requiring them to use a method based on resales of existing timeshares, rather than of direct sales from timeshare companies to consumers as property appraisers currently do. The Osceola Property Appraiser’s office won a court case against Wyndham timeshare, allowing it to use the current method.
The bill would cost local governments $170 million, starting in the 2022-23 fiscal year, with much of the savings potentially going to Travel + Leisure Co. (formerly known as Wyndham Destinations) , Marriot Vacations Worldwide Corp., Hilton Grand Vacations Inc. and Walt Disney Co.’s Disney Vacation Club.
But Gruters said the bill is intended to help timeshare owners who face higher taxes from overvalued properties.
“I’m going to bat for these people who buy these timeshares because the fees and taxes are too high,” Gruters said.
Another bill sponsored by Gruters, SB 1390, would expand a tax credit for companies that invest in Florida.
Gruters said the bill is designed to attract more high-wage businesses to Florida, but acknowledged companies that are already in the state would benefit if they add jobs and investment. Last year he told the Orlando Sentinel the idea for a similar bill came from the Entertainment Software Association, which counts Electronic Arts, a video game maker with a studio in Maitland, as a member.
Last year’s proposal, which failed to pass, was estimated to save Electronic Arts $30 million over three years. This year’s version “will reduce state revenues by a significant but indeterminate amount,” according to state economists, but a more specific estimate hasn’t been determined.
Another measure, SB 1246, could apply to three companies, state economists said when they analyzed the bill. But only rental car company Hertz is likely to take advantage of the tax credit created in the bill, and it would save $2.3 million. Hertz is eligible for tax credits under an existing program, but partly due to the economic downturn caused by the coronavirus last year, can’t draw down the credit because its tax bill from isn’t high enough to receive a credit.
Cruise giant Royal Caribbean and American Express Travel Co. may also be able to qualify for the new tax break, if their revenues fell below 50% from April 2020 through December 2020 compared to the same time the previous year.