By John Haughey
The Center Square
February 12, 2020
The Florida House Ways & Means Committee reviewed a wide range of state tax revisions that are certain to be unpacked and dissected over the last month of the legislative session, which is set to adjourn March 13.
In addition to a $100.3 million tax relief package – far below Gov. Ron DeSantis’ $312 million bundle of proposed tax breaks – the House’s proposals allow tourist development tax revenues to be used for water quality projects, impose sunsets on county regional transportation penny sales tax levies, require school district capital improvement sales tax levy revenues be shared with charter schools, reduce aviation fuel sales taxes and modify tax nonprofit charity care hospitals, among other initiatives.
The proposed 89-page tax plan includes several changes to statutes regulating local option tourist development taxes (TDT) – sales taxes levied on lodging, rental cars, food, beverages and some services that can range from 3 to 6 percent in counties and cities across the state.
Among those changes, explained chairman Bryan Avila, R-Hialeah, on Tuesday, is giving cities more control on how tourist development dollars are spent and allowing counties to use TDT revenues for water quality projects.
“This would make Florida the first state to tie water quality to tourism,” he said.
Avila said under the House plan, for instance, “coastal counties that have seen issues related to flooding” could direct TDTs to stormwater projects.
“This provides an avenue for them to use these funds for water quality,” he said. “It doesn’t force them to, but if they see a need, they can shift some funds” to water-related improvements.
Makes sense, said Rep. Al Jacquet, D-West Palm Beach.
“No one is going to come to town if your water is bad,” he said.
Among other House tax proposals:
School capital improvement sales tax levies must be “proportionately shared with charter schools”: If approved by local voters in referendums, school districts can levy a 0.5 percent – or half-penny – sales tax for the construction, reconstruction or improvement of school buildings and campuses, as well as land acquisition, land improvement, design and related engineering costs.
Avila said such half-cent sales tax levies have been approved in 24 counties.
The House package would require capital outlay sales tax revenues be shared with charter schools based on their proportionate share of the total school district enrollment, beginning with any levies authorized by voters after July 1.
County transportation sales tax levy sunsets: Under state law, charter counties – the 20 of 67 counties with home-rule charters – can seek voters’ approval to levy a 1 percent sales tax – or penny – for regional transportation or transit authorities for the development, construction, operation and maintenance of rapid transit systems, bus systems, on-demand transportation services and roads and bridges. Counties eligible to levy the tax also may use up to 25 percent of the proceeds for nontransit purposes.
Under the House tax relief proposal, penny-tax-for-roads referendums can be placed only on general election ballots every two years and cannot extend beyond 20 years.
Avila said under the proposal, all previously approved penny-tax measures would expire when the current bond would be paid off regardless of how long the levy was authorized.
Corporate income tax revisions: The state has “over-collected” $543 million in corporate income taxes after the adoption in late 2017 of the federal Tax Cuts & Jobs Act, which reduced the federal corporate income tax rate from 35 percent to 21 percent.
There is no proposed change to the state’s 5.5 percent corporate income tax, but the House package would allow corporations that contribute to the Florida Tax Credit (FTC) school choice voucher program to count that dollar-for-dollar credit “for purposes of calculating refunds” the state will issue in May.
The House tax relief package also includes a one-time increase of $8.2 million available for the Voluntary Cleanup Tax Credit (VCTC) brownfields tax-credit program. Brownfields are previously developed lands now not in use that may be contaminated.
The VCTC program, created in 1998, allows the state’s Department of Environmental Protection (DEP) to issue corporate tax credits as an incentive to encourage site rehabilitation in brownfield areas and to encourage voluntary cleanup of certain other types of contaminated sites.
This corporate income tax credit applies to 50 percent of the costs of voluntary cleanup and is capped at $500,000 per site per year in tax credits.
Since 1998, the DEP has approved $108.1 million in VCTCs. Since 2014, the approved tax credits have averaged more than $12.3 million per year.
As of Feb. 1, the DEP had a backlog of $8.2 million in approved tax credits that have not been funded. DEP received 149 VCTC applications for 2019 calendar year expenses, totaling $13 million.
The House package provides a one-time additional tax credit of $8.2 million for fiscal year 2021.
Repeal the Florida Sports Development Program: The Florida Sports Development Program (FSDP) was created in 2014 with the support of former Gov. Rick Scott, who said it would enable the state to assist in major sports stadium development.
The FSDP, managed by the Department of Economic Opportunity (DEO), allocates $13 million annually from state sales-tax revenues for professional sports stadium development, with individual applicants capped at $3 million a year.
To date, no applicants have been certified and no funds have been distributed under the FSDP, and the DEO has not received any applications for three years.
Modifications for nonprofit charity-care hospitals: The House proposal amends the requirements for hospitals to qualify for a charitable tax exemption. Nonprofit hospitals would be required to document the value of charitable services they provide, and their current charity tax exemption would be limited to the value of that charity care.
To qualify for the federal tax exemption, nonprofit charity-care hospitals must report community benefit activities to the Internal Revenue Service.
These community benefit activities include net, unreimbursed costs of charity care – free or discounted services to patients – participation in Medicaid, health-professions education, health-services research, subsidized health services, community health improvement activities and cash or in-kind contributions to other community groups.
Reporting requirements for community benefit activities do not include revenues from uncompensated care pools or programs, such as Low Income Pool (LIP) or Disproportionate Share Hospital (DSH) funds.
The proposed House tax package would require the value of charity care provided by a hospital in each county to be compared with the tax value of the hospital’s property exemption in each county.
Under the House plan, if the value of the charity care is less than the tax value of the hospital’s exempt property, then the hospital’s exemption will be reduced to reflect the ratio of the hospital’s charity care in the county to the tax value of the hospital’s exempt property in the county.
One-third reduction in state aviation fuel tax for commercial air carriers: In 2018, the Legislature reduced the aviation fuel excise tax from 4.27 cents a gallon to 2.85 cents a gallon. Collections of aviation fuel tax in fiscal 21 are estimated to be $15.3 million.
Under the law, commercial airlines and air-cargo carriers must pay the 4.27 cents a gallon tax on fuel purchased in the state and then request a refund of 1.42 cents a gallon.
Under the House tax package, the aviation fuel tax would be reduced from 2.85 cents a gallon to 1.89 cents a gallon, meaning the refund would increase from 1.42 cents a gallon to 2.38 cents a gallon.
Asked why another aviation fuel tax cut is a good idea, Avila said, “When we have an opportunity to reduce a tax, we should certainly take it.”