Another Florida ‘combined reporting’ bill filed – but this year, by a Republican

(The Center Square) — Corporations operating in Florida have the option to file single tax returns for their company or separate tax filings for each subsidiary.

Only 2 percent submit single tax returns to the Florida Department of Revenue (DOR) because filing separately for subsidiaries offers significant savings.

It’s good business but bad public policy, say critics, mostly Democrats, who have lobbied for years to make “combined reporting” mandatory to ensure tax revenues generated by Florida profits stay in Florida.

But when the 60-day 2021 legislative session kicks off Tuesday in Tallahassee, it will be a Republican spearheading the drive to make combined reporting mandatory to even the playing field between large corporations and independent small businesses in Florida.

Rep. Fred Hawkins, R-St. Cloud, a former Osceola County Commissioner elected in November to his first Legislature term, filed House Bill 999 on Feb. 15. It has not been assigned to committees for hearings.

HB 999 would force multi-state and multinational companies to file a single tax return covering their entire business rather than file separate returns for each subsidiary.

Critics say this loophole encourages multi-state businesses to form many state-based subsidiaries as they can to significantly scale back tax bills.

Mandatory combined reporting would capture tax revenues generated by profits in Florida from being funneled into “tax havens,” such as the Cayman Islands, the bill states.

According to the Florida Policy Institute, Florida could raise an additional $477 million annually in taxes if it imposed mandatory combined reporting – but at the expense of job creators.

“The separate accounting system used to measure the income of multi-state and multinational corporations for tax purposes often places Florida corporations at a competitive disadvantage,” the bill reads.

Combined reporting is required in 28 states and Washington, D.C., including “red” states such as Texas, Kentucky and Arizona.

The Florida Chamber of Commerce, Associated Industries of Florida, Florida Retail Federation and other interests have lobbied aggressively against similar proposals in the past and are certain to vigorously oppose HB 999.

But the measure includes a sweetener: additional revenues raised by combined reporting must be applied to lower the state’s 5.5-percent business rental tax (BRT) on commercial leases.

Florida is the only state that levies a BRT, which generates about $2 billion annually from about 150,000 businesses. Lowering it, or eliminating it altogether, has been a priority for businesses for years.

“Combined reporting” provisions were proposed during last year’s session as amendments to the 2020 tax-relief package in House committee hearings by Rep. Anna Eskamani, D-Orlando, and on the Senate floor the last night of the session by former Sen. Jose Javier Rodriguez, D-Miami.

The amendments came as lawmakers sliced a $120.5 million tax-relief package to $47.7 million, but left $543 million in corporate tax refunds and the optional single-filing rule in place that saved businesses $477 million in estimated taxes.

While the corporate tax refunds remained, trimmed from the package last March as the coronavirus emerged was a proposed 0.5 percent in the communications-services tax (CST) on cell phones to 4.42 percent and home satellite services to 8.57 percent, saving taxpayers $24.9 million, and a BRT cut from 5.5 to 5.4 percent.

Also removed were provisions to allow municipalities to use tourist development tax (TDTs) revenues for water quality projects, tax breaks to car-rental companies, utility operators, construction equipment rental companies, the mobile-home industry and commercial airlines.

“Combined reporting is good policy and it should not be partisan,” Eskamani told the Orlando Sentinel. “I’m super hopeful this is a beginning of a new era of Republican members who want to challenge the status quo instead of doing business as usual.”

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