A new report is analyzing the impacts of the federal corporate income tax (CIT) reform in Florida and the state’s response to the Tax Cuts and Jobs Act (TCJA).
Florida TaxWatch (FTW), a nonprofit government watchdog, released the Corporate Income Tax Issues for the 2022 Legislature: Repeal the Impending Tax Increase and Fix the “Retail Glitch” and Like-Kind Exchanges on Tuesday. In particular, the report notes that “federal tax reform has resulted in increased taxes at the state level, even after subsequent state refunds and rate cuts,” and urges the 2022 Legislature to stop Florida’s scheduled CIT rate hike which is set to return to 5.5 percent.
“No state works harder to help businesses remain competitive than Florida. Florida TaxWatch commends the Florida Legislature for supporting our favorable business climate by keeping corporate taxes low through cuts whenever possible and by maintaining revenue neutrality when cutting isn’t an option, said Florida TaxWatch President and CEO Dominic M. Calabro.
“But tax policy and administration is complex in the best of times, and it was complicated even more by the many federal reforms that went into effect before and during the pandemic. Challenges coordinating state and federal corporate tax policies over the past five years have actually caused us to increase taxes on businesses in Florida, he continued. “In fact, even after refunds and rate reductions, corporate taxpayers will have paid $1.7 billion more from Fiscal Year 2018-2019 through Fiscal Year 2022-23 than was forecasted before federal tax reform was implemented – despite COVID-19’s negative impact on tax collections. And while formulating a response to the Tax Cuts and Jobs Act, changes made led to tax increases across the state, and some barriers to investment were put in place, which largely impacted businesses hardest hit by the pandemic.”
To combat the impending major tax increase, the analysis also calls for corrective action from the Legislature in 2022. In particular, FTW is recommending that officials repeal the CIT’s scheduled rate increase and consider maintaining the current reduced rate of 3.535 percent. FTW is also encouraging lawmakers to address massive tax increases levied against car rental and leasing companies and adopt the federal fix to the “retail glitch.”
“During the upcoming legislative session, we urge lawmakers to prevent the scheduled increase of the corporate income tax rate to 5.5 percent, which could lead to businesses being on the hook for another billion dollars in increased tax payments next year. We also encourage them to address the ‘retail glitch’ for Qualified Improvement Property and provide relief to companies affected by the change to like-kind exchanges,” Calabro added.
To read the full report, click here.