Cabinet approves emergency fix for corporate income tax glitch

TALLAHASSEE, Fla. –- Dec. 10, 2008 – The Florida Cabinet yesterday approved an emergency rule to fix a glitch in a 2008 law that prevented businesses from taking the same depreciation and expensing deductions they had in previous years. The rule is in effect for 90 days.

Every year, the Legislature passes a “piggyback” bill that conforms Florida’s corporate income tax code to the federal code by picking up annual changes made by Congress. Without the bill, businesses would have to keep two sets of books and track two different tax systems – one for federal taxes and one for state taxes. Piggybacking also allows for better auditing by the state, which depends heavily on federal audits.  

In drafting its piggyback legislation (HB 5065), the 2008 Legislature had to take into consideration the federal Economic Stimulus Act of 2008, which Congress passed to stimulate the economy by encouraging capital investment by corporations. The Act allows federal taxpayers to claim an extra 50 percent “bonus depreciation” on assets placed in service during 2008 and provides for increased expensing allowances under section 179 of the Internal Revenue Code.

While businesses would have enjoyed the tax break, the state expected to lose $146.8 million in revenues. So the 2008 Legislature decided not to adopt provisions of the federal Economic Stimulus Act that allowed taxpayers to claim “bonus depreciation” and immediately expense rather than depreciate costs of certain assets.

But HB 5065 was written in such a way that, if a corporation claimed the 50 percent federal bonus depreciation, it would permanently lose half of its state depreciation deduction. Businesses would also lose state deductions if they choose to take the additional expense allowances. Florida would be the only state to permanently deny these deductions.

The emergency rule allows corporations to use the same depreciation deductions they have in the past.

Florida Association of Realtors’® Office of Public Policy worked with the Florida Chamber of Commerce, Associated Industries of Florida, the Florida Institute of Certified Public Accountants, Florida Tax Watch, the Retail Federation and a number of other business groups to fix this problem before December 15. That’s the deadline for corporations to make their estimated federal income tax payments.

“We were very concerned that in addition to paying more in taxes, Realtors and their companies would have to have two sets of books when filing their corporate income taxes,” says John Sebree, FAR’s vice president of public policy. “We believe this stop-gap measure solves the unintended consequences created by HB 5065 until the Legislature acts.”

Florida Senate President Jeff Atwater (R-North Palm Beach) and Speaker of the House Ray Samson (R-Fort Walton Beach) have pledged to draft legislation in 2009 to fix the problems created by HB 5065.

© 2008 FLORIDA ASSOCIATION OF REALTORS

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