April 9, 2009 The Florida Legislature Will Ramp-Up Efforts on Major Issues in the Last Three Weeks F lorida’s Legislature will return from a Holiday Break with an Aim to Adjourn on Friday, May 1, Sine Die. This Issue of Capitol Report Summarizes the Status of the Higher Profile Policy Issues moving weeks, with an aim to adjourn on time Fri- day, May 1, sine die . through the Legislature at this point in the Session. This issue of Capitol Report summarizes the status of the higher profile policy issues mov- ing through the Legislature at this point in the session. � Budget The House and Senate have each released their respective budget proposals against a continued declining state economy. This Report Compiled by Rheb Harbison tees-up the appropriation negotiation proc- Carlton Fields Senior Government Consultant ess, which will culminate in budget confer- ences to resolve differences. T he 2009 Florida Legislature has passed the halfway mark of its 60-day Regu- The only bill the Legislature must pass under lar Session, after getting off to a slow start the state’s Constitution is a General Appro- due to a January Special Session and an priations Act. Given that Florida is a bal- unexpected change in House leadership. anced-budget state, the Legislature can only budget expenses to the extent they have Both chambers are in holiday recess for matching revenues -- and that’s going to be three days this week, but on Monday mem- tough, real tough. bers return to Tallahassee for the last three Some of the information used to compile this report was provided with thanks by Associated Industries of Florida. 14864503.1
C A F I C A R E A P 9, , 20 00 09 9 C F C R T A 9 2 AR RL LT TO ON N IE EL LD DS S AP PI IT TO OL L EP PO OR RT PR RI IL L In mid-March, the state’s economists further nies to more appropriately apportion their reduced the state’s estimated revenue by an- share of income taxes to Florida. other $3.4 billion ($1.1 billion for this year The Altman tax proposal provides for: and $2.3 billion for next year). The cumula- • Classification of Partnerships -- Requires tive reduction since the current fiscal year taxpayer adherence to classification for start on July 1, 2008, has been about $6 federal purposes; billion, meaning the available revenue for • Non-business Income (NBI) Redefined and the 2009-10 fiscal year budget is about $6 billion less than that appropriated for the cur- Limited -- NBI would be an amount that rent year budget by the 2008 Legislature. cannot constitutionally be included in “ap- portionable” income, without any refer- The estimated net reduction of available ence to the functional and transactional revenue after consideration of the Federal tests, which would be stricken; stimulus revenue is about $3.1 billion. However, the Federal assistance has to be considered non-recurring revenue, while the The estimated net reduction of state’s budget difficulties concern a lack of available revenue after recurring revenue. Use of non-recurring consideration of the Federal stimulus revenue to resolve recurring revenue issues revenue is about $3.1 billion. essentially builds a “house of cards,” and simply punts the real pain of the economy to the next Legislature. • Add-back of two years for expenses re- The longer view of the state’s economic re- lated to a sold asset, apparently where the covery remains bleak. State economists ex- proceeds of sale were treated as NBI; pect a bottom-out during the summer, fol- • Add-back of inter-company expenses, in- lowed by several months of leveling, leading cluding expenses relating to intangibles, to a slow-growth recovery well into the fourth interest, and broadly defined management quarter of 2010 and perhaps early 2011. fees. (The focus is on companies filing � Corporate Taxation separately; uses 50 percent ownership test Perhaps the biggest “worry” for business cli- for “inter-company”); ents involves the Senate’s apparent decision • Limits net operating loss (NOL) carryovers to advance a series of tax increases on the from years ending prior to December 31, backs of the business community. 2009, by requiring the add-back of intan- gible expense, interest expense, and man- One vehicle is a corporate tax bill recently agement fees; released by the Senate Finance and Tax • Requires a detail of all inter-company Committee and sponsored by its chairman, Sen. Thad Altman (R-Melbourne). transactions with each return, with no ex- ceptions for consolidated filers and a neg- Altman contends his aim is to modernize ligence penalty for failure to do so; Florida’s tax system -- when compared to • Eliminates mechanism for deconsolidation; other states. His idea is to make corporate • Limits use of NOLs incurred by entities be- income tax fairer for Florida home-grown companies by requiring multi-state compa- fore becoming a member of consolidated 2 14864503.1
C A F I C A R E A P 9, , 20 00 09 9 C F C R T A 9 2 AR RL LT TO ON N IE EL LD DS S AP PI IT TO OL L EP PO OR RT PR RI IL L return (SRLY rule), apparently to reverse In addition, the bill requires taxpayers -- tak- the holding in the “ Golden West” case; ing advantage of the federal provisions al- lowing for deferral of cancellation of indebt- • Eliminates the grandfather nexus consoli- edness income -- to add the deferred income dation election that authorized continued for Florida tax purposes and then subtract filing by a group as it was comprised the amounts added to federal taxable in- prior to September 1, 1982; come in later years. • Specifically provides that inter-company � Workers’ Compensation Insurance sales are excluded from the sales factor for consolidated filers; The House of Representatives has already passed legislation that attempts to correct an • Criteria for sourcing services, including October 2008 Florida Supreme Court deci- throwback of 50 percent to Florida if the sion that removed a cap on attorneys’ fees in taxpayer is not subject to income tax in workers’ compensation cases. the state where the service is received, and throw-out rule for “nowhere” sales; • Revamps of apportionment for financial institutions; • Corporations filing nexus group returns would file separately, or include in a con- solidated return all entities included in the federal consolidated return; • Enhanced and broad rulemaking authority to the Florida Dept. of Revenue, including The Workers’ Compensation Court the authority for rules “interpreting each fix is a priority of Speaker Larry definition used in this chapter”; and Cretul (left). Senate President Jeff • Clarification that 2002 legislation requir- Atwater will likely struggle to find ing interest on amounts paid per RAR ad- justments was intended to apply retroac- the votes needed for passage. tively. The House has released its proposed annual The business community fears the Supreme corporate “piggyback” bill with an aim to Court’s ruling in Murray v. Mariners Health update the Florida Income Tax Code to re- will substantially increase the cost of premi- flect changes Congress made to the United ums by reintroducing hourly attorney fees States IRS Code effective January 1, 2009. and encourage more attorney involvement in However, the bill contains provisions that workers’ compensation cases. have the effect of not adopting three The House bill, sponsored by Rep. Anitere changes that reduce corporate income tax Flores (R-Miami), would restore the workers’ receipts in FY 09-10 and FY 10-11. compensation system to that passed by the The House bill accomplishes this by extend- Legislature in a 2003 Special Session. The ing the provisions dealing with bonus depre- legislation is a priority of House Speaker ciation in the above Senate bill for another Larry Cretul (R-Ocala). year, meaning corporations will not be able The Senate bill, sponsored by Sen. Garrett to take advantage of federal bonus deprecia- Richter (R-Naples), is struggling its way tion provisions. 3 14864503.1
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