Behind the Numbers (Part 3): 9 Takeaways from the Florida Legislature’s Tax Package

Introduction

Each year, during the regular legislative session, state lawmakers pass an omnibus tax bill — commonly known as the Legislature’s “tax package” — that offers an opportunity to make temporary or permanent changes to the state’s tax code.^[1] This year’s tax package, House Bill (HB) 7073, would cost $827 million in one-time (or non-recurring) tax changes, including costs incurred (about $405 million) after FY 2024-25, plus $87 million in recurring expenses.

In this third installment of Florida Policy Institute (FPI's) three-part blog series, “Behind the Numbers: What Floridians Should Know About the State Tax System in FY 2024-25,” FPI recaps nine key provisions in the Legislature's tax package for the upcoming fiscal year. Part 1 provided an overview of the state’s current tax structure, and Part 2 included a summary of missed opportunities in the tax package that would have made the tax code fairer.

1. Multistate and multinational corporations still have access to CIT loopholes that allow them to shift profits outside of Florida.

Currently, corporations can avoid paying Florida’s corporate income tax (CIT) by shifting profits (e.g., via the trademark income-shifting loophole) to subsidiaries in tax havens located in places like Delaware, Ireland, or the Cayman Islands. Currently, 28 states and the District of Columbia require corporations to report all of their profits, across all subsidiaries, regardless of their location, into one combined report. Some states with tax structures like Florida’s (i.e., those without personal income taxes but with corporate income taxes) — Alaska, New Hampshire, and Texas — require combined reporting. For FY 2024-2025, the tax package does not include strategies like combined reporting to close CIT profit shifting loopholes.^[2]

2. The tax package includes a CIT credit for employers who hire people with disabilities.

In 2016, the Legislature adopted several provisions aimed at improving the quality of life and integration of individuals with disabilities into the workforce. In line with these commitments, the tax package includes a CIT credit for corporations that employ individuals with disabilities. As passed, the credit is for $1 per hour worked, up to $1,000 per employee per year, with a maximum credit amount of $10,000 to offset CIT due. Per HB 7073, the maximum credit amount that can be awarded statewide is $5 million per state fiscal year, available for three fiscal years (FYs 2024-25, 2025-26, and 2026-27).

3. Legislators passed another round of sales tax holidays. However, they cut costs in half.

For FY 2023-2024, policymakers in 19 states passed sales tax holidays to temporarily exempt items like back-to-school and disaster preparedness supplies from taxation. However, while these holidays are popular, they also have several drawbacks: (1) these holidays do nothing to permanently address inequitable tax structures; (2) they are not well targeted to families with low to moderate income; (3) they are typically burdensome for tax agencies and small businesses to administer; and (4) these holidays can significantly reduce state and local revenue. For FY 2023-2024, the sales tax holidays that lawmakers passed reduced state revenue by an estimated $550 million. For FY 2024-2025, the final tax package cuts the cost of sales tax holidays to $289 million (nearly a 48 percent reduction compared to FY 2023-2024).^[3]

4. The tax package includes a new Child Care Tax Credit program.

Since September 30, 2023, federal COVID-19 child care investment has come to an end, leaving behind a “child care cliff.” The Century Foundation projects that, without intervention, 212,712 children in Florida will lose their child care; 2,196 child care programs will close, making it harder for families to find safe, nurturing child care options; and 15,824 child care jobs will be lost. The Legislature’s tax package looks to address parts of the issue by creating a tax incentive for employers who provide child care services on behalf of their employees. The tax credit is available for FYs 2024-25, 2025-26, and 2026-27, and the maximum amount of tax credits that may be approved is $5 million per fiscal year.

5. The tax package includes a provision requiring insurers to provide a deduction on residential property policies and personal or commercial flood policies.

Under current law, insurance companies must pay an annual tax on insurance premiums, premiums for title insurance, or assessments, including membership fees and policy fees. The tax package mandates a 1.75 percent premium tax deduction on property insurance covering residential properties with a homestead exemption, so long as the policy provides coverage for 12 months and has an effective date between October 1, 2024, and September 30, 2025. In turn, insurers would receive a credit from the state equal to 100 percent of the mandated reduction, for policyholders to offset their insurance premium tax — the credit can be carried forward up to five years. The deduction and credit also applies to commercial flood policies. The anticipated cost of the reduction and credit for insurance premium taxes is $108 million in FY 2024-25 and $340 million in FY 2025-26.

6. The Legislature provides an additional insurance premium tax deduction for the State Fire Marshal regulatory assessment.

In addition to Florida’s insurance premium tax, certain premiums are subject to the state fire marshal assessment. The assessment revenue goes to the State Fire Marshal and helps cover the division’s expenses related to its duties. Based on HB 7073, insurers would exempt policies with an effective date between October 1, 2024, and September 30, 2025. The anticipated cost of the reduction and credit for the State Fire Marshal assessment is $13 million in FY 2024-25 and $41 million in FY 2025-26.

7. The tax package includes an increase in the Strong Families Tax Credit.

In 2021, the Legislature created the Strong Families Tax Credit Program to give tax credits to businesses that make donations to certain eligible charitable organizations that provide services focused on child welfare and well-being. The program offers a dollar-for-dollar credit to offset specified business taxes. Currently, the cap (i.e., the total credits offered) is $20 million per state fiscal year. The tax legislation would increase the cap to $40 million per fiscal year beginning FY 2024-25.

8. The tax legislation makes funding for horse breeding and racing promotion permanent.

In 2023, the Legislature enacted a provision to distribute $27.5 million of general revenue to the Florida Thoroughbred Breeders’ Association ($5 million), Tampa Bay Downs ($5.5 million), and Gulfstream Park Racing Association ($17 million) for the promotion of Florida thoroughbred breeding and racing for two years. The 2024-2025 tax package repeals the sunset. Consequently, the state would distribute $27.5 million on a recurring basis.

9. Legislators include a 30-year general revenue boost to support new ways to prevent, diagnose, and treat cancer through four Florida institutions.

Florida collects excise taxes from manufacturers, distributors, and vendors of beer and malt beverages, and from manufacturers and distributors of wine, liquor, and other specified alcoholic beverages. In FY 2024-25, collections of alcoholic beverage taxes are expected to generate $292 million in general revenue funds. Starting in FY 2024-25, using revenue from Florida’s alcoholic beverage taxes, the Legislature seeks to allocate, on a recurring basis: $10 million to the University of Miami Sylvester Comprehensive Cancer Center, $10 million to the Mayo Clinic Comprehensive Cancer Center in Jacksonville, $5 million to the Brain Tumor Immunotherapy Program at the University of Florida Health Shands Cancer Center, and $5 million to the Norman Fizel Institute for Neurological Diseases at the University of Florida. The funds could be used for constructing, furnishing, equipping, financing, operating, and maintaining research and clinical facilities. The distribution would sunset on June 30, 2054.

Notes

^[1] While the omnibus tax package contains temporary and permanent tax changes for the upcoming fiscal year(s), policymakers may also submit standalone bills that make changes to specific tax issues, which could become part of the final tax package.

^[2] In 2023, lawmakers introduced House Bill 769/Senate Bill 1144 to require combined reporting; however, the bills died in committee without a hearing.

^[3] For the estimate, FPI looked at the staff analysis for HB 7063 (2023), last session’s tax package. Specifically, FPI compared the cost of “Freedom Summer,” two back-to-school holidays, two disaster preparedness holidays, and “tool time” holiday to the House (HB 7073) and Senate (SB 7074) proposals, which include: “freedom month,” one back-to-school holiday, one disaster preparedness holiday, and “tool time.”

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