This week saw several tax bills advance through committees,
including a 3.6 percentage point reduction in the communications services
tax, a Florida TaxWatch research priority. Other legislation relating to
Florida TaxWatch research advanced, including bills dealing with criminal justice and telehealth.
The Senate passed a package of bills that is the first draft
of the plan for implementing Amendment 1 – the environment and conservation
funding proposal approved by the voters in November. This issue will be a source of much debate
this session. Reaction to this
legislation includes criticism of the resulting decrease in funding for housing
Florida TaxWatch was on hand to present our research on
several issues, including the communications services tax, enterprise zones,
pension reform and educational assessments.
This was the last week of interim committee meetings.
The 2015 session begins on March 3.
For more information on any of these issues, please feel free to contact our Research staff by
emailing Stephani Meyers, Research Assistant.
TaxWatch Tax Priorities Sales Taxes Property Taxes General Tax Bills
Several tax bills cleared committee stops this week, including: a reduction in the communications services tax (SB 110); a $13.4 million agricultural tax exemption package (SB 298); a new Small Business Sales Tax Holiday (SB 398); extending the Community Contribution Tax Credit program (SB 302); and a proposed committee bill that would “de-couple” new federal tax reduction extensions from the Florida corporate income tax code (FTC 15-01).
Also, a bill (SB 938) that contains the Governor proposal to exempt college textbooks from the sales tax was filed this week.
For more information on these and other tax bills, see below.
Sales Tax Exemption for Manufacturing Machinery and Equipment - The 2013 Legislature passed a three year exemption, set to expire April 30, 2017. SB 544, HB 613 and HB 4035 would make the exemption permanent. This is a long-time recommendation of Florida TaxWatch. This will not cost the state any money this year, but recurring savings are expected to be $142.5 million annually. Under SB 544 and HB 613, the exemption for cement mixer drums, enacted last year, would still expire on April 30, 2017.
Corporate Income Tax Reduction - HB 49 and SB 138 would increase the standard corporate income tax exemption from $50,000 to $75,000, as was recommended by Governor Scott. This has been a priority for the Governor and the exemption was increased from $5,000 to $25,000 in 2011 and to $50,000 in 2013. His proposal to increase it to $75,000 last year did not pass. This higher exemption would eliminate corporate income taxes for 2,189 out of 9,934 taxpayers (22.0 percent), and save $18.7 million annually. Since it will apply to tax years beginning on or after January 1, 2016, the FY 2015-16 impact will be only $7.6 million. SB 138 has already passed two committees and is now in its last committee of reference – Appropriations.
Sales Tax Holiday – The Governor is recommending another of the popular “back to school” sales tax holidays. The 3-day sales tax exemption for clothing priced at $100 or less, school supplies at $15 or less, and the first $750 of the price of a computer would save consumers $41.1 million. No legislation mirror this has been filed yet (although there certainly will be), but HB 101 would create a permanent 3-day holiday on the same items.
Sales Tax Exemption for College Textbooks - The Governor also wants to exempt college textbooks from the state and local sales tax. The exemption would apply to textbooks for both public and private institutions. College students would save an estimated $41.4 million per year, or $60 to $75 per student annually. The state would lose $33.9 million annually, local governments would lose $7.5 million annually. SB 938 was filed this week. The bill includes the textbook exemption, as well as other provisions aimed at keeping higher education affordable, such as requiring an annual report to the Legislature from Board of Governors and State Board of Education on their respective college affordability efforts.
Commercial Leases - A tax cut that was not included in the Governor’s proposal, but which appears to have legislative support, is a reduction in the sales tax on commercial leases. HB 101, SB 140, and HB 245 all would reduce the tax. The first two would reduce the tax rate from 6 percent to 5 percent. HB 245 would create an increasing exemption. The first $10,000 of lease payments would be exemption in FY 2105-16. And the exemption would increase by $10,000 annually, until it reached $90,000 in FY 2023-24. While discussed, these bill have not been voted on yet. Florida TaxWatch strongly supports the reduction/elimination of this tax which is unique to Florida.
Collection of Sales Taxes on Remote Sales: Florida TaxWatch has been researching this issue and recommending solutions for more than 10 years. Many bills have been filed to help address this over the years. This year SB 310 would bring Florida fully into the Streamlined Sales and Use Tax Agreement, which provides an opportunity for Florida to begin collecting money from a compact of sellers that voluntarily collect the tax. HB 101 would have expanded nexus over remote retailers, requiring more to collect tax on sales to Floridians. These bills have not yet been heard.
HB 249 and SB 398 -- on the Agriculture Committee agenda for next week -- would create and expand several agricultural sales tax exemptions:
SB 398, which would save $13.4 million annually, passed the Senate Agriculture Committee this week and now goes to Finance and Tax.
HB 259 and SB 384 would create a one-day Small Business Saturday Sales Tax Holiday (November 28, 2015) during which no sales tax would be collected on any retail sale by a small business. A small business would be a business that remitted less than $200,000 in sales taxes to the state during the previous year. SB 384 passed the Senate Commerce and Tourism Committee this week. In an effort to reduce the $200 million fiscal impact of the bill, it was amended to cap the value of exempt items to $1,000 and to clarify that business with multiple locations be treated as a single entity.
HB 693 and SB 712 would exempts the sale or lease of all aircraft from the sales tax. Currently the exemption is provided only for aircraft over 15,000 pounds that is used by a common carrier.
HB 355 and SB 506 would change the method for calculating the amount of sales tax due on all purchases. Instead of using the current bracket system, the sales price would be multiplied by the tax rate and rounded down to the nearest cent. These bills have not been heard and its significant price tag - $101 million - will make it difficult to advance.
HB 303 and SB 624 would impose a 25 cent surcharge on tickets to professional sporting events to fund high school sports programs.
SB 198 would allow, the governing authority in each county to levy a discretionary sales surtax of 0.5 percent or 1 percent for the purpose of funding capital restoration of natural water bodies, including tributaries, canals, stormwater systems, and channels. Funds may be used for dredging operations if related to ecologically beneficial muck removal.
HB 89 and SB 188 would exempt the sale of an original work of art that is signed and sold by the artist if the work is not numbered and the sales price equals or exceeds $1,000.
SB 260 and HB 489 would allow a taxpayer to include multiple items of substantially similar tangible personal property on a single Value Adjustment Board (VAB) petition and to pay a single petition filing fee. HB 489 has passed the House Finance & Tax Committee. SB 260 has passed Community Affairs and was on the Senate Finance and Tax agenda this week. However that meeting was cancelled.
HB 173 would increase the property tax exemption for widows, blind persons, and totally and permanently disabled persons from $500 to $5,000.
HJR 229 and SJR 588 propose an amendment to the state Constitution to allow the Legislature, by general law, to exempt from taxation property owned by a municipality that is not used for municipal or public purposes.
HB 695 would make several changes to the VAB process including: taxpayers must sign the petition; interest on assessment and refunds would change from 12 percent to the prime rate; and a VAB that received more than 10,000 objections would be review by the Department of Revenue.
SB 780 would allow the governing body of a municipality to levy a law enforcement services special assessment to fund all or a portion of its costs of providing law enforcement services if property taxes millage are reduced by a like amount.
HJR 299 proposes an amendment to the state Constitution to authorize the living spouse of a deceased veteran, who upon death was aged 65 or older, partially or permanently disabled as a result of combat, and honorably discharged, to keep the discount on ad valorem taxes currently afforded the veteran. The exemption is based on the percentage of the veteran's disability. The exemption would be transferrable to another residence if the spouse remains unmarried and uses it as the primary residence.
HB 367 and SB 406 would prohibiting a bidder from placing multiple bids during the sale of certain tax certificates by a tax collector
HJR 375 and SJR 652 propose an amendment to the state Constitution that would revise the current homestead tax exemption that may be granted by counties or municipalities for low-income, elderly people that have lived in their home for at least 25 years. The current exemption is 100 percent of the assessed value of a homestead with a just value less than $250,000. The amendment would lock in the just value of the home to its value when the exemption is originally applied for, meaning the taxpayer would not lose the exemption due to rising value.
SJR 400 proposes an amendment to the state Constitution that would exempt the assessed value of a renewable energy source device or component from the tangible personal property tax and allow the Legislature, by general law, to prohibit consideration of the installation of such device in determining the assessed value for real property taxes.
HB 417 would add a new right to the Taxpayers Bill of Rights that reads: “The right to value definitions based on actual assessment practices, applicable provisions of the State Constitution, and the laws of this state, applied consistently in both assessment development by the property appraiser and assessment review by the value adjustment board and the courts of this state.”
Corporate Income Tax “Piggy-Back” - Florida uses federal taxable income as the
starting point for determining corporate income tax liability. The Legislature passes an annual “piggyback”
bill to conform to any changes in the federal tax code. Sometimes the Legislature “de-couples”
certain federal changes from Florida law and that it appears this will be the
case again. The federal Tax Increase
Prevention Act of 2014 extended two deductions: an increase in the first-year
expensing deduction from $25,000 to $500,000 and a 50 percent bonus
depreciation deduction. It has been
estimated that adopting these federal changes would cost Florida $180 million
in FY 2015-16, with increases in revenue in subsequent years. Proposed
committee bills have been drafted to de-couple these changes. The bills would require Florida taxpayers to
add-back the federal deductions and then allow them to subtract from income
one-seventh of these amounts in the next six years. The existing federal deductions are treated
this way. The House proposed bill was
approved by Finance and Tax this week.
Tax Swaps – Two bills have been filed that would be a
significant change to the state’s tax system by replacing some taxes with
others. Both would also provide a large tax cut. HB 317 replace
the corporate income tax, the sales tax on commercial leases and on
manufacturing machinery and equipment with a 1 percent increase in the state
sales tax. This would result in a net $141 tax reduction. HB 319
would replace most school property tax (Required local effort and non-voted
discretionary and capital outlay levies) with a 2.75 percent increase in the
state sales tax. This would result in a net $279 million tax cut.
Community Contribution Tax Credit Program - HB 311
and SB 302 would delay the expiration of the program for 9 years, until June
30, 2025. Under this program, businesses that have made contributions to
eligible projects (mostly homeownership opportunities for low-income people)
may receive tax credits, equal to 50 percent of the contribution, which can be
taken against sales and use taxes, corporate income taxes, and insurance
premium taxes. Total credits are limited to $21.9 annually. SB
302 cleared the Appropriations Subcommittee on Transportation, Tourism, and
Economic Development agenda this week, and was amended to allow the money to also
be used for homeownership opportunities for persons with special needs.
New Small Business Tax Credit – SB 128 and HB 517
would create a new corporate income tax credit for new small business. If
qualified, the business would receive a $1,500 credit for each employee, up to
a maximum total credit of $21,000.
Florida Student Internship Tax Credit – HB 427 would
provide a corporate income tax credit for hiring a student as an intern within
the student's field of study if the business has been in existence for at least
3 years. The credit is limited to two students per business and the
student must be employed as an intern for no more than 180 days. The
credit is equal to 50 percent of the student’s salary, with a limit of $3,600
Aviation Fuel – HB 595 and SB 722 would reduce the
tax on aviation fuel from 6.9 cents per gallon to 5.4 cents per gallon. This would be a revenue neutral change by
eliminating a tax credit that is not enjoyed by all airlines.
Class Size Requirements
Last week, Florida TaxWatch released a report showing that Florida taxpayers could save billions of dollars on class size compliance by adjusting the way class sizes are calculated, while still maintaining small classes. Florida's class size limits have cost taxpayers more than $30 billion since voters approved them in a 2002 constitutional amendment. The report encourages the Legislature to adjust Florida's class size calculation to a school wide average. Applying the school level average calculation across all of Florida's public schools would allow school districts to comply with the class size reduction mandate, while reinvesting the savings into measures to improve teacher quality and student achievement.
Two bills (HB 665 and SB 818) were filed this week that are consistent with the reports recommendations.
Testing, Student Assessments and Teacher Evaluation
Testing and the educational accountability system have received considerable attention already this session. Many legislators have called for changes and the Governor stated this week he believes testing takes up to much student time. There is a growing sentiment that “fewer, better” tests are needed. Senators have filed a trio of bills relating to these issues. All three bills were workshopped in the Senate Education Pre k -12 Committee this week. The committee ran out of time with many people still waiting to speak. Florida TaxWatch was there to testify on our research on assessments. The committee will explore options relating to the purposes and amount of state and local required Assessments, test schedules and student test-taking times and these of assessment results in teacher evaluations.
SB 616 would reduce testing time in Florida schools, capping the time students spend on state and local tests at 5 percent of their schools hours. This would not include teacher-developed tests. The bill would authorize districts to use something other than tests to assess students in some courses. It would also revamp laws pushed through the Legislature in 2011 tying teachers' evaluations and pay more closely to student performance. The bills would reduce the percentage of a teacher's evaluation that would be tied student learning growth, from 50 to 40 percent. At least 30 percent of a teacher's evaluation to be based on classroom teaching methods and up to 30 percent of the evaluation could be based on other job duties. The bill would allow districts that have demonstrated problems with the administration and implementation of the 2015 FSA exams to seek permission to use the results for diagnostic purposes only.
SB 774 would also make several changes to the state’s education accountability system. The bills would lower the amount that student scores count toward teacher evaluations from 50 percent to 30 percent. The grade 11 statewide, standardized English Language Arts assessment, including writing, would be eliminated since the grade 10 assessment is the high school graduation requirement. School grades and school improvement ratings shall be held in abeyance for the 2014-2015 and 2015-2016 school years. Performance on the new statewide, standardized assessments shall serve as an informational baseline for future years. The bill also require the commissioner of education to recommend minimum technology requirements to school districts and provide a “nonelectronic” testing option until the 2016-17 school year.
SB 100 would prohibit school districts from scheduling more than 10 school days in a school year to administer all local assessments and statewide, standardized asses without specific approval from the districts.
HB 743 would simply suspending the statewide assessment program, school grading system, personnel evaluation system until new ones are adopted. DOE or district school boards would be prohibited from entering into agreements “that cede or limit state or district autonomy over academic content standards & corresponding assessments.”
Enterprise Zones – Enterprise Zones continued to be a hot topic in committees as two more discussed the program, which is scheduled to sunset in December 2015. This follows two other committee presentations last week. Florida TaxWatch has testified at all the committee hearings, referencing our analysis of the program, which was released last week. The report calls on the Legislature to revise and extend the state's Enterprise Zone program, designed to revitalize and redevelop distressed, blighted areas in Florida. Despite all the discussion, no bill has been taken up yet. SB 392 would reauthorize the program make changes, including a requirement that zones meet annual goals or be dissolved.
Community Contribution Tax Credit Program - HB 311 and SB 302 would delay the expiration of the program for 9 years, until June 30, 2025. Under this program, businesses that have made contributions to eligible projects (mostly homeownership opportunities for low-income people) may receive tax credits, equal to 50 percent of the contribution, which can be taken against sales and use taxes, corporate income taxes, and insurance premium taxes. Total credits are limited to $21.9 annually. SB 302 cleared the Appropriations Subcommittee on Transportation, Tourism, and Economic Development agenda this week, and was amended to allow the money to also be used for homeownership opportunities for persons with special needs.
Freight Mobility and Logistics - Two Senate bills (SB 956 and SB 958) that would promote these issues were filed this week, joining already filed House companions (HB 257 and HB 331). Florida TaxWatch has researched this issue extensively. More detail on the bills will be in our next Update.
Entertainment Industry Financial Incentive Program – The House Finance and Tax Committee discussed this program, which tries to bring film and television productions to the state by offering tax credits, at its meeting this week. It heard from two state group that had evaluated the program. OPPAGA said the state is losing productions to other states because they offer greater incentives. The Office of Economic and Demographic Research, which reviewed the return on investment for many of the state’s economic development programs, said the entertainment program did not recoup the state’s investment (in terms of produced state revenue). The committee also heard from a panel of industry representatives. HB 451 makes changes to the program. It has not been heard. The Senate is also developing legislation. This issue is likely to receive considerable debate this session.
New Small Business Tax Credit – SB 128 and HB 517 would create a new corporate income tax credit for new small business. If qualified, the business would receive a $1,500 credit for each employee, up to a maximum total credit of $21,000.
Other Tax Legislation - See the Taxation Section of this Legislative Update for information on many other tax bills that effect economic development.
Telehealth - Telehealth involves providers using the Internet and other technology to care for patients remotely. It can increase access to health care in areas such as rural communities. Some healthcare providers are beginning to use telehealth and the bills (HB 545 and SB 478) would put guidelines in state law. For example, SB 478 would allow Medicaid to pay for care delivered through telehealth. Legislation filed last year, despite support for the concept, failed due to disagreements over regulation. The new House and Senate bills differ, but the sponsors have expressed optimism a compromise can be reached. Telehealth is a priority of the Florida TaxWatch Center for Health and Aging (see report). SB 478 was approved by the Health Policy Committee this week. The bill was amended to clarify that telehealth services could not be used when prescribing eyeglasses, contact lenses or any other optical devices.
Immigrant Access to KidCare - SB 294 would do away with a five-year waiting period for immigrant children to be eligible for Medicaid and the Children’s Health Insurance Program (CHIP), was passed unanimously by the Senate Health Policy Committee this week. The bill covers “lawfully residing” children and does not extend to undocumented immigrants.
Adoptions - SB 320 would offer incentives to state employees who adopt children in Florida's foster-care system. It would provide a one-time cash payment of $5,000 per child to state employees and $10,000 per child for those who adopt children with special needs. The bill would also award incentive payments to community-based care organizations that are responsible for placing children in foster and adoptive homes. A committee substitute unanimously passed the Appropriations Subcommittee on Health and Human Services this week.
Medical Tourism - SB 86 aims to establish Florida as a worldwide destination for medical tourism. Enterprise Florida, in collaboration with the Department of Economic Opportunity, is directed to market Florida as a health care destination. The Division of Tourism Marketing would have been required to include the promotion of medical tourism in a four-year marketing plan, which would specifically promote national and international awareness of healthcare specialties and expertise, and showcase key healthcare providers. An annual minimum of $3.5 million would have been appropriated from state general revenue to Florida Tourism Industry Marketing for developing and implementing medical tourism marketing. The bill also created a $1.5 million matching grant program to encourage medical tourism through local and regional economic development organizations. While similar legislation failed last session, the budget provided $5 million to Visit Florida to develop a medical tourism marketing plan and to provide medical tourism matching grants. See Florida TaxWatch report on Medical Tourism.
ARNP Scope of Practice - HB 335 would expand Baker Act powers to nurse practitioners with certain mental health certifications. The measure allows a psychiatric nurse to discharge or order emergency treatment for a patient held under the Baker Act. The bill has passed the House Health Quality Subcommittee. It is now in the Health & Human Services Committee. The Florida TaxWatch Center for Health and Aging has released reports detailing the benefits of expanding nurse and physician assistant scope of practice. The Senate companion (SB 476) has not been heard. There is also a more comprehensive scope of practice bill (HB 547) awaiting its first hearing.
Low Income Pool
One of the biggest fiscal decisions the 2015 Legislature will have to make is what do in the event federal funding for the Low Income Pool (LIP) program is not renewed. The $2 billion program helps Florida hospitals care for the poor. Florida received a one-year extension for the Medicaid pilot program from the federal government for the current fiscal year in July. The state is currently negotiating with the feds and remain hopeful. However, comments made by the federal representative put the $1.3 billion in federal funding in serious doubt.
Governor Scott’s budget assumes the payments will continue and it funds LIP at its current level.
Last week, a consultant presented the findings of its legislatively mandated report to the Senate Appropriations Subcommittee on Health and Human Services. The report offered some options to continue the program, including using general revenue, increasing provider assessments or joining the federal Medicaid expansion. No option was greeted with much enthusiasm by the committee.
Action this Week
Elderly Parole – HB
785 was filed this week. It creates the Supervised Conditional Elderly
Release Program for inmates 65 years of age or older who pose low risk to
society. Allows specific elderly inmates to reduce their sentence by up
to 50 percent if they meet certain criteria and receive a favorable
determination from the Florida Commission on Offender Review. Also
expands eligibility for Conditional Medical Release to include severely ill or
disabled inmates that do not meet the 180 day life expectancy requirement. A recent Florida
TaxWatch report warns that as the average age of the prison population
rises and the number of elderly prisoners multiplies, the cost of lengthy
sentences and prisoner healthcare needs threaten a substantial rise in
Florida’s Corrections budget. The report
offers options for reform.
Prison Reform - SB 7020 addresses prison reform,
requiring periodic safety inspections and audits, specialized training for
dealing with mentally ill inmates and allowing staff to make confidential
reports of inmate abuse or neglect. The bill passed the Senate
Criminal Justice Committee this week with an amendment to add a provision to an independent
oversight commission in charge of regulating the state’s prison system. Florida TaxWatch has recommended such an
Civil Citations – HB 99 and SB 928 would
require, rather than allow, that a law enforcement officer, upon making contact
with a juvenile who admits having committed a misdemeanor, issue a civil
citation when such a program has been established in the local area.
Job Tax Credit - HB 121 and SB 356 would create a
$1,000 corporate income tax credit for hiring a person who has been convicted
of a felony and who remains continuously employed by the corporation for at
least 1 year. The credit may be taken only once per new employee and is not
available for violent offenders or sexual offenders or predators.
Education Gain-Time – HB 591 would increase the
amount of incentive gain-time awarded to an inmate for completing a high school
equivalency diploma or vocational certificate from 60 to 120 days.
Parole – HB 481 would require that a person convicted
of a non-violent felony, and whose record during confinement is good, shall,
upon completion of 25 percent of his or her sentence, be eligible for parole
and shall have an initial interview conducted by a hearing examiner within 3
months after the date that he or she completes 25 percent of the sentence. It
also would require the Correctional Educational Program to make a masonry
apprenticeship program and seminary programs available.
Two bills dealing with local pension reform passed the Senate Community Affairs Committee this week. Florida TaxWatch was on hand to speak about its research on the issue.
Local Pension Reform – SB 172 would change the distribution of insurance premium tax revenues that provides some funding for Florida’s municipal police and fire pension plans. The new bill is similar to a measure unanimously passed by the Senate in 2014 (SB 246) that ultimately failed in the House when it was attached to a reform of the Florida Retirement System. The bill passed the Senate Government Oversight and Accountability Committee last week. Florida TaxWatch was asked for input on an alternative proposal by Representative Janet Adkins. On behalf of the Taxpayers for Sustainable Pensions coalition, Florida TaxWatch presented the letter to the Senate committee, which contained principles for quality reform that the current bill does not contain. The bill passed the Community Affairs Committee this week. A similar bill in the House (HB 341) has not been heard.
SB 242 would require local government pension plans, to use mortality table methodologies consistent with the methodologies by the Florida Retirement System (FRS). In most instances, the mortality tables used will recognize longer lifetimes for annuitants and result in higher annual contributions being required to be paid into the pension funds in the near term. The bill passed the Community Affairs Committee this week.