Florida DOR Seeks Input for TCJA Impact Analysis

The Florida Department of Revenue is currently examining the impact of the 2017 federal Tax Cuts and Jobs Act on Florida’s corporate income tax system. As part of that process, the Department is soliciting input from taxpayers regarding the effects of the TCJA. The Department’s evaluation will likely identify options for changing the Florida Corporate Income Tax Code in response to specific TCJA provisions. Public participation in this process is encouraged.

Florida’s Initial Response to TCJA

As we previously reported, the TCJA became law on December 22, 2017. That late effective date afforded the Florida Legislature little time during its 2018 Regular Session to evaluate the potential impact of the TCJA’s many domestic and foreign provisions on Florida’s corporate income tax. The legislature ultimately adopted the 2018 Internal Revenue Code, including the TCJA, as the basis for the Florida code (with certain modifications).^[1] One provision of that legislation directed the Department of Revenue to form a working group to examine the effects of the TCJA on the state corporate income tax.

DOR’s Working Group and Public Workshops

The Department’s working group has been examining the effects of the TCJA and receiving public input as part of that process. Comments may be submitted to the Department via email or regular mail.^[2] These comments (and other state and federal resources pertinent to the review project) are posted on the Department’s website.^[3]

As part of its review, the Department is conducting at least two public workshops to receive input from interested parties. The first workshop will be held on August 22, 2018, at 9:00 a.m., at the Department’s headquarters in Tallahassee.^[4] An agenda for the workshop, including webinar registration instructions for those who wish to participate remotely, is posted on the Department’s website.^[5]

The Department’s working group includes 14 representatives from various sections of the agency, including its Office of General Counsel, General Tax Administration, Technical Assistance and Dispute Resolution, Office of Tax Research, Office of Legislative and Cabinet Services, and Office of the Executive Director.

DOR’s Initial Status Report and Current Focus

The Department’s working group is required to issue interim status reports and a final report by February 1, 2019 to the Governor, Senate President, and House Speaker. The first status report, dated August 3, 2018, is posted on the Department’s website.^[6] The second status report is due by November 16, 2018.

The working group’s initial status report identifies 13 provisions of the TCJA that “have the potential to have significant impacts on Florida.”^[7] These identified topics are fluid and subject to change as the working group receives additional input, including IRS guidance on various aspects of the TCJA.

The 13 TCJA provisions currently identified are:

• Treatment of one-time deemed repatriated foreign income – IRC §965^[8]
• Repeal of the Alternative Minimum Tax – IRC §§53, 55 and 56
• Increases in limitations on expensing certain business assets – IRC §179
• Changes to net operating loss deduction – IRC §172
• Bonus depreciation – IRC §168(k)^[9]
• Repeal of domestic production activities deduction – IRC §199
• Base Erosion Anti-Abuse Tax (BEAT) – IRC §59A
• Amortization of research and experimental expenditures – IRC §174
• Deduction for dividends received from foreign corporations – IRC §245A
• Global Intangible Low-Taxed Income (GILTI) – IRC §951A
• Deduction for Foreign-Derived Intangible Income (FDII) – IRC §250
• Net interest deduction limitations – IRC §163(j)
• Taxability of certain federal, state and local tax incentives – IRC §118

We plan to publish our summary of each of these provisions in the coming week.

Conclusion

Dean Mead’s State and Local Tax Team is providing input to the Department of Revenue’s working group regarding its TCJA review project, and participating in the scheduled workshops. We would be glad to present your issues and concerns in that process. For assistance with these and other state and local tax matters, please contact a member of our State and Local Tax Team.

^[1] Ch. 2018-119, Laws of Fla. (HB 7093), effective for tax years beginning on or after January 1, 2018.
^[2] Comments may be submitted by email to: CITReview@floridarevenue.com or by regular mail to: Corporate Income Tax Review, c/o Director of Legislative and Cabinet Services, Department of Revenue, P.O. Box 5906, Tallahassee, Florida 32314-5906.
^[3] Available at: http://floridarevenue.com/taxes/Pages/cit_review.aspx.
^[4] Meeting notice available at: http://floridarevenue.com/taxes/Documents/NOPM_8.6.18_CITReview.pdf. The second workshop is tentatively scheduled for October 24, 2018.
^[5] Available at: http://floridarevenue.com/taxes/Documents/Agenda_8.22.18_CITReview.pdf.
^[6] Available at: http://floridarevenue.com/taxes/Documents/CIT%20Review%208.3.18%20Status%20Report.pdf.
^[7] Status Report, pp. 1 and 2.
^[8] The Department previously issued informal guidance that deemed repatriation income under IRC §965 is not generally included in the Florida corporate income tax base. TIP 18C01-01 (April 27, 2018), available at: https://revenuelaw.floridarevenue.com/LawLibraryDocuments/2018/04/TIP-121710_TIP%2018C01-01%20FINAL%20RLL.pdf.
^[9] The Legislature already decoupled the Florida code from bonus depreciation under IRC §§167 and 168(k) and requires taxpayers to take the federal deduction ratably over a 7-year period. Ch. 2018-119, Laws of Fla.

About the Authors:
H. French Brown, IV focuses on state and local taxation, governmental relations and lobbying, and administrative law. Prior to joining Dean Mead, Mr. Brown was in private practice at another Tallahassee law firm. He began his legal career at the Florida Department of Revenue, where he quickly rose to the position of Deputy Director of Technical Assistance and Dispute Resolution. Mr. Brown also assists businesses with Florida tax planning and controversies. He may be reached at fbrown@www.deanmead.com.

Robert S. Goldman offers clients over 40 years of experience practicing in state and local taxation. He represents clients in audits, protests, litigation, rulemaking, tax planning, and legislation. His experience includes all the major state and local taxes (sales taxes, property taxes, corporate income taxes, communications service taxes, gross receipts taxes, insurance premium taxes, documentary stamp taxes). Mr. Goldman’s range of experience spans diverse industries including retail, manufacturing, energy, leasing, hospitality, telecommunications, government contracting, health care, transportation, and the service sector. He may be reached at rgoldman@www.deanmead.com.

Mark E. Holcomb has 33 years of experience practicing in state and local taxation. He represents clients before the Florida Department of Revenue and local taxing authorities, and in litigation at the trial and appellate levels. Mr. Holcomb advises clients on a broad range of state and local taxes, including corporate income and franchise tax, sales and use tax, documentary stamp tax, communication services tax, insurance premium tax, ad valorem tax and motor fuels tax, in tax controversy work and in planning opportunities. He may be reached at mholcomb@www.deanmead.com.