Estate and Succession Planning
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Increased Florida Corporate Tax Collections Estimated to Trigger $540M in Refunds Statewide and 2019 Tax Rate Reduction to 4.459%
As previously reported by Dean Mead, Florida’s corporate income taxpayers will be receiving a significant tax refund in spring 2020 and a retroactive corporate tax rate reduction for 2019 (Tax Refunds and Rate Reductions Ahead for Florida Companies and 2018 Florida Legislature Enacts Numerous State and Local Tax Changes). Both adjustments stem from legislation over the last two years to address Florida’s adoption of the Tax Cuts and Jobs Act and some of the base broadening provisions contained therein.
According to the forecast adopted by Florida’s economists, a corporate income tax refund of $543.2 million should be due back to taxpayers as a result of significant increased collections during the state’s 2018-2019 fiscal year. Corporate taxpayers will receive these automatic refunds on or before May 1, 2020 in an amount proportionate to the company’s corporate income tax liability as filed on its return for tax years beginning between April 1, 2017 and March 31, 2018.
Between February 1 and May 1, 2020, the Department of Revenue will calculate a taxpayer’s refund share based on the corporation’s final tax liability shown on its return as a percentage of the statewide final tax liabilities as shown on the latest corporate income tax returns filed by all eligible taxpayers as of February 1, 2020. The statewide final tax liabilities will not be known by the Department until after all taxpayer returns are filed.
Example:
Assuming the statewide final tax liabilities are consistent with the amount of net collections during state fiscal year 2018-2019 ($2.869 billion), if Corporation A paid the state a net amount of $143.45 million during the period July 1, 2018 to June 28, 2019, then Corporation A would be entitled to 5% ($143,450,000 / $2,869,000,000) of the aggregate refund amount or ~$27.16 million ($543.2 million * 5%). If the ultimate statewide final tax liabilities reported on returns is higher or lower, the refund amount will change.
In addition, the economists’ determination will result in a retroactive corporate tax rate reduction to 4.459% for tax years beginning on or after January 1, 2019. The official reduction will be published by the Department of Revenue on or before October 1, 2019. This change may result in over-payments during a company’s first two estimated tax payments for 2019. Also, the change may create an opportunity for additional refunds or credits.
These significant changes were put in place by the Florida Legislature to ensure Florida continues to have one of the best tax climates in the country. With support from the state’s business community, including the Florida Chamber and Florida Retail Federation, the Legislature established this refund and rate cut mechanism in the event that corporate income tax collections significantly exceeded previous estimated revenue projections. They did.
In 2019, the Florida Legislature also agreed to decouple from the federal Global Intangible Low-Taxed Income (GILTI) tax retroactive to January 1, 2018. These changes allow businesses to continue to reinvest in their employees and their company to further strengthen Florida’s economy.
For additional information, the Florida Department of Revenue has recently published two Taxpayer Information Publications (TIPs) regarding corporate income tax changes:
TIP #19C01-01 – Florida Corporate Income Tax – Tax Cut and Jobs Act of 2017
