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Fla. Lawmakers Trim Tax Cut Bill Over COVID-19 Fears

By Daniel Tay · 2020-03-16 20:26:14 -0400

The Florida Legislature has approved a vastly streamlined tax cut package, stripping out cuts to state communications services taxes and commercial rent taxes and other breaks in response to fears that COVID-19 will slow the state's economy.

A stripped-down H.B. 7097 passed the state Senate by a 36-2 vote Friday night, and the House concurred in the amendments the same night by a vote of 104-8. The bill as passed would provide sales tax holidays for back-to-school and disaster preparedness supplies, which would cost the state and localities $47.4 million in nonrecurring revenue for fiscal year 2021.

The package as it came from the House was initially expanded by a Senate committee on Wednesday but was trimmed Thursday and Friday after jurisdictions across the country carried out measures to contain the spread of the new coronavirus.

The Florida Senate stripped out a proposed cut to the state's communications service taxes of 0.5 percentage points, which was estimated to cost the state $50 million and localities $9.6 million in recurring revenue. The state's general communications service tax, which is imposed on telecommunications services, cable and video service, would have gone from 4.92% to 4.42%, and the state's tax on direct-to-home satellite services would have gone from 9.07% to 8.57%.

The tax cut package had to be limited to ensure the state was being fiscally responsible given Florida's current situation in dealing with the COVID-19 pandemic, Sen. Kelli Stargel, R-Lakeland, said in the Friday session.

"The [communications services tax] reductions are removed to ensure that we have sufficient funds for addressing any revenue shortfalls caused by the coronavirus," Stargel said.

A proposed cut to the state's sales tax rate on the rental of commercial real estate, from 5.5% to 5.4% beginning in 2021, was also removed. The rate previously had been reduced from 5.7% to 5.5% effective in January. Additionally, a proposed $2 million credit for car rental companies was cut. The credit would have been provided to a company for 2018 if its tax liability was greater than $15 million and at least 700% greater than its final tax liability for its previous taxable year before the 2017 Tax Cuts and Jobs Act .

According to a sponsor of H.B. 7097, Rep. Bryan Avila, R-Miami Springs, the credit was meant to mitigate the effect of the TCJA, which disallowed companies from deferring payment of tax on income earned by selling personal or intangible property. Rental companies previously could defer tax on income earned from selling used vehicles, but the TCJA allows deferral only for real property exchanges, leaving rental car companies on the hook for years of corporate taxes.

The current bill retains a provision that would reduce the state's tax rate on surplus line insurance policies, which protect against abnormally high risks, from 5% to 4.94%, and provide that such taxable policies in Florida will be taxed at that rate regardless of where the risk is located.

Provisions that were added by the Senate committee that were omitted from the final bill approved on Friday included a sales tax exemption for tickets to Formula One Grand Prix races in the state. The bill as amended would have cost $233 million, while the House package would have cost $193 million.

The COVID-19 pandemic may disproportionately hit Florida's economy, which is largely tourism based. The Senate's trimming of the tax package Thursday came after jurisdictions across the country embraced sweeping measures to contain the spread of the virus. State and federal courts have delayed trials and limited court access, while states and cities have urged citizens to practice social distancing. 

Avila did not respond to requests for comment. Stargel declined additional comment. Republican Gov. Ron DeSantis did not respond to requests for comment. Rep. Joseph Geller, D-Aventura, who had questioned the need for the proposed cut to the communications service tax in committee and on the House floor, did not respond to requests for comment.

Representatives for Avis and Enterprise, two of the companies that would have benefited from the omitted tax break for rental car companies, did not respond to requests for comment.

--Editing by Tim Ruel.

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