Florida Governor Signs Omnibus Tax Bill

By Carlton Huntley

On May 7, 2024, Florida Governor Ron DeSantis signed an omnibus tax bill that: adopts the current Internal Revenue Code (IRC); creates automatic filing extensions for corporate income and sales tax returns in disaster and emergency areas; creates new tax credits; makes amendments to the Strong Families Tax Credit Program; amends sales tax provisions relating to purchases and leases of boats, aircraft and the rental of motor vehicles; enacts several sales tax holidays; amends provisions related to property tax homestead exemptions; makes revisions relating to the affordable housing property tax exemption; reduces various fuel tax rates on natural gas; limits documentary stamp tax assessments for home equity conversion mortgages and creates a temporary documentary stamp tax exemption; creates insurance premium deductions and a corresponding credit on certain policies; and authorizes the Department of Revenue to reopen a final assessment or refund denial in certain instances. (L. 2024, H7073 (c. 158), effective as stated.)

Corporate income tax.  

IRC conformity:  Effective July 1, 2024, and applicable retroactively to January 1, 2024, the state adopts the IRC in effect on January 1, 2024.

Automatic fling extensions in disaster areas: Effective July 1, 2024, taxpayers that have been granted an extension or extensions of time to file federal income tax returns for any taxable year due to a federally declared disaster that includes locations within Florida, and required payments of tentative tax are made, the due date of the return required is automatically extended to 15 calendar days after the due date for the taxpayer’s federal income tax return, including any extensions provided for such return.

Credit for qualified railroad reconstruction and replacement expenditures: Effective July 1, 2024, the amount of the credit a qualifying railroad is eligible for against corporate income tax may not exceed the product of $3,500 and the number of miles of railroad track owned or leased within Florida by the qualifying railroad as of the end of the calendar year prior to the taxable year in which the qualified expenditures were incurred. The Department of Transportation must certify to the Department of Revenue the number of miles of railroad track within Florida that each qualifying railroad owned or leased on the last day of each calendar year. Such certification must be provided to the Department of Revenue no later than the last business day of January for the prior year ending December 31. A qualifying railroad must submit to the Department of Revenue with its return an application including any documentation or information required by the Department to demonstrate eligibility for the credit allowed. The application must specify the taxable year for which the credit is requested and may be filed at any time during that taxable year, once the qualifying expenditures have been made. The application must be filed no later than May 1 of the year following the year in which the qualifying expenditures were made. Only one application may be filed per qualifying railroad per taxable year.

Individuals with Unique Abilities Tax Credit Program: Effective July 1, 2024, and applicable to taxable years beginning on or after January 1, 2024, a credit is available against corporate income tax in an amount up to $1,000 for each employee that is an individual who has a disability, as defined by statute, and has been employed for at least six months by a qualified taxpayer employed during the taxable year. The tax credit equals one dollar for each hour the qualified employee worked during the taxable year up to 1,000 hours. The combined total amount of tax credits which may be granted is $5 million in each of state fiscal years 2024-2025, 2025-2026, and 2026-2027.

Credits and incentives.

Child care tax credits: Effective July 1, 2024, and applicable retroactively to January 1, 2024, a taxpayer who operates an eligible child care facility for the taxpayer’s employees is allowed a credit of 50% of the startup costs of the facility against any tax due for the taxable year such facility begins operation as an eligible child care facility. The maximum credit amount a taxpayer may be granted in a taxable year is based on the average number of employees employed by the taxpayer during such year. A taxpayer who makes payments to an eligible child care facility in the name of and for the benefit of an employee employed by the taxpayer, whose eligible child attends such facility, is allowed a credit of 100% of the amount of the payments against any tax due for the taxable year up to a maximum credit of $3,600 per child per taxable year. The taxpayer may make payments directly to the eligible child care facility or contract with an early learning coalition to process payments. For state fiscal years 2024-2025, 2025-2026, and 2026-2027, the maximum annual tax credit amount is $5 million. Credits are approved on a first-come, first-served basis. Beginning October 1, 2024, taxpayers may submit an application to the Department for the purposes of determining qualification for this credit.

Strong families tax credit:  Effective July 1, 2024, and applicable retroactively to January 1, 2024, in order to be designated as an eligible charitable organization, to which contributions are eligible for the strong families tax credit against various state taxes, an organization must provide direct services for at-risk families that do not have an open dependency case. Organizations no longer have to provide books to the homes of children eligible for a federal free or reduced-price meals program or those testing below grade level in kindergarten through grade 5 for eligibility. Also, beginning in fiscal year 2024-2025, the tax credit cap amount is increased to $40 million (previously, $20 million) in each state fiscal year. Further, taxpayers may submit an application to the Department of Revenue for the tax credit beginning at 9 a.m. on the first day of the calendar year that is not a Saturday, Sunday, or legal holiday.

Sales tax.

Nonresident purchasers of boats and aircraft: Effective July 1, 2024, the exemption for nonresident purchasers of a qualifying boat or aircraft is not allowed unless the selling dealer, within 30 days after the date of sale, provides to the Department a copy of the sales invoice, closing statement, bills of sale, and the original affidavit signed by the nonresident purchaser, affirming that the nonresident purchaser qualifies for exemption from sales tax and attesting that the nonresident purchaser will provide the documentation required to substantiate the exemption.

Leases of motor vehicles by leasing companies:  Effective July 1, 2024, sales tax does not apply to the lease or rental of a motor vehicle which is to be used primarily in the trade or established business of the lessee or rentee, for a period of 12 months or more when tax was paid on the purchase price of the vehicle by the lessor.

Discretionary surtax limitation:  Effective July 1, 2024, for purposes of applying the discretionary sales tax limitation, the sale of a boat and the corresponding boat trailer must be taxed as a single item when sold to the same purchaser, at the same time, and included in the same invoice.

Automatic filing extension for sales tax returns in disaster areas: Effective July 1, 2024, registered dealers with a certificate of registration to engage in or conduct business in a county to which an emergency declaration applies are granted an automatic 10-calendar-day extension after the due date for filing a return and remitting the tax if: (1) the governor has ordered or proclaimed a declaration of a state of emergency; (2) the declaration is the first declaration for the event giving rise to the state of emergency or expands the counties covered by the initial state of emergency without extending or renewing the period of time covered by the first declaration of a state of emergency; and (3) the first day of the period covered by the first declaration for the event giving rise to the state of emergency is within five business days before the 20th day of the month.

Sales tax holidays: Effective July 1, 2024, the bill authorizes several sales tax holidays and exemption periods during which qualifying items can be purchased without paying sales tax. These sales tax holidays and exemption periods include: (1) a sales tax holiday for the sale of school supplies that runs from July 29, 2024, through August 11, 2024; (2) two “Disaster Preparedness” tax holidays that run from June 1, 2024, through June 14, 2024 and from August 24, 2024, through September 6, 2024; (3) a “Freedom Month” sales tax holiday that runs from July 1, 2024, through July 31, 2024; and (4) the “Tool Time” sales tax holiday that runs from September 1, 2024, through September 7, 2024.

Local option food and beverage tax procedure: Effective July 1, 2024, in order for cities or towns that levy a municipal resort tax to adopt a 1% local option food and beverage tax through referendum, the ordinance must pass by a majority vote of the voters voting in the election, rather than by a majority of the registered voters.

Property tax.

Assessments on installed tangible personal property during ongoing construction: Effective July 1, 2024, and applicable retroactively to the 2024 tax roll, for the purposes of assessing if tangible personal property constructed or installed by an electric utility is substantially completed construction work, subject to property tax, construction work in progress is deemed “substantially completed” upon the earlier of when all permits or approvals required for commercial operation have been received or approved, or one year after the construction work in progress has been connected with the preexisting, taxable, operational system or facility.

Right-to-know for denied homestead exemptions: Effective, July 1, 2024, property appraisers that determine that taxpayers are not entitled to the homestead exemption for property tax, must include, in its required notice, information explaining why the owner is not entitled to the limitation; the years for which unpaid taxes, penalties, and interest are due; and the manner in which unpaid taxes, penalties, and interest have been calculated.

Unpaid taxes related to improperly granted homestead exemptions: Effective July 1, 2024, and first applicable to the 2025 tax roll, if a homestead exemption is granted as a result of a clerical mistake or omission by the property appraiser, the taxpayer may not be assessed a penalty or interest on the property taxes. If the person who received the homestead exemption as a result of a clerical mistake or omission voluntarily discloses to the property appraiser that they were not entitled to the homestead exemption before the property appraiser notifies the owner of the mistake or omission, no back taxes are due. If the person who received the homestead exemption as a result of a clerical mistake or omission does not voluntarily disclose to the property appraiser that they were not entitled to the homestead exemption before the property appraiser notifies the owner of the mistake or omission, back taxes are due for any year or years that the owner was not entitled to the limitation within the five years before the property appraiser notified the owner of the mistake or omission.

Assessment of renewable energy source devices: Effective July 1, 2024, and first applicable to the 2025 tax roll, for purposes of applying the property tax assessment limitation on renewable energy source devices, the term “renewable energy source device” includes: pipes, equipment, structural facilities, structural support, and any other machinery integral to the interconnection, production, storage, compression, transportation, processing, collection, and conversion of biogas from landfill waste, livestock farm waste (including manure), food waste; or treated wastewater into renewable natural gas. The term does not include equipment that is on the distribution or transmission side of the point at which a renewable energy source device is interconnected to an electric utility’s distribution grid or transmission lines or a natural gas pipeline or distribution system.

Property damaged by misfortune or calamity: Effective July 1, 2024, and first applicable to the 2025 tax roll, failure by the property owner to commence the repair or rebuilding of the homestead property within five (previously, three) years after January 1 following the property’s damage or destruction constitutes abandonment of the property as a homestead. After the 5-year period, the expiration, lapse, nonrenewal, or revocation of a building permit issued to the property owner for such repairs or rebuilding also constitutes abandonment of the property as homestead.

Affordable housing exemption: Effective July 1, 2024, and first applicable to the 2026 tax roll, property in a multifamily project that provides affordable housing to natural persons or families meeting certain income limitations is considered property used for a charitable purpose and is exempt from ad valorem tax beginning with the January 1 assessment immediately succeeding the date the property was placed in service and allowed to be used as an affordable housing property that provides housing to natural persons or families meeting the extremely-low-income, very-low income, or low-income limits specified by statute. Property must also be an area of critical state concern, and contain more than 10 units dedicated to housing natural persons or families meeting the income limitations. To be eligible to receive the exemption, the property owner must submit an application to the property appraiser by March 1.

Documentary stamp tax.

Exemption for home equity conversion mortgages: Effective July 1, 2024, for a home equity conversion mortgage, only the principal limit available to the borrower is subject to the documentary stamp tax. The maximum claim amount and the stated mortgage amount are not subject to the documentary stamp tax. The term “principal limit” means the gross amount of loan proceeds available to the borrower without consideration of any use restrictions. The documentary stamp tax must be calculated based on the principal limit amount determined at the time of closing as evidenced by the recorded mortgage or any other supporting documents attached.

Exemption for non-interest-bearing notes: Effective July 1, 2024, all non-interest-bearing promissory notes, non-interest-bearing nonnegotiable notes, or non-interest-bearing written obligations to pay money, or assignments of salaries, wages, or other compensation made, executed, delivered, sold, transferred, or assigned in Florida, and renewals of $3,500 or less, are exempt from documentary stamp tax when given by a customer to an alarm system contractor. This exemption expires June 30, 2027, unless reenacted.

Fuel and minerals tax.

Reduction of natural gas tax: Effective January 1, 2026, and until December 31, 2026, on each motor fuel equivalent gallon of natural gas fuel, an excise tax of 2¢ is imposed. Also, an additional 0.5¢ “ninth-cent fuel tax” is imposed on each motor fuel equivalent gallon of natural gas fuel. Further, a 0.5¢ “local option fuel tax” is imposed on each motor fuel equivalent gallon of natural gas fuel. Effective January 1, 2027, the excise tax increases to 4¢; “ninth-cent fuel tax” increases to 1¢; and the “local option fuel tax” increases to 1¢.

Before January 1, 2026, an additional tax on each motor fuel equivalent gallon of natural gas fuel, which is designated as the “State Comprehensive Enhanced Transportation System Tax,” is determined at the tax rate applicable to the sale of natural gas fuel for the following 12-month period beginning January 1, rounded to the nearest tenth of a cent, by adjusting the tax rate of 2.9¢ per gallon by the percentage change in the average of the Consumer Price Index (CPI) issued by the U.S. Department of Labor for the most recent 12-month period ending September 30, compared to the base year average, which is the average for the 12-month period ending September 30, 2013. Before January 1, 2027, and each year thereafter, the Department calculates the “State Comprehensive Enhanced Transportation System Tax” by adjusting rate of 5.8¢, instead.

Insurance premiums tax.

Deductions and credits for property insurance discounts: Effective July 1, 2024, an insurer must deduct from the total charged for polices: 1.75% of the premium, for a policy providing residential coverage on a dwelling; the amount charged for the State Fire Marshal regulatory assessment, for a policy providing residential coverage on a dwelling; and 1.75% of the premium, for a policy, contract, or endorsement providing personal or commercial lines coverage for the peril of flood or excess coverage for the peril of flood on any structure or the contents of personal property. The deductions apply to policies that provide coverage for a 12-month period with an effective date between October 1, 2024, and September 30, 2025. The deductions amount must be separately stated on the policy declarations page. For the taxable years beginning on January 1, 2024, and January 1, 2025, there is allowed a credit of 100% of the amount of deductions provided to policyholders against any insurance premium tax due after all other credits and deductions have been taken.

General administration.

Reopening of final assessments: Effective July 1, 2024, the Department may consider a request to settle or compromise any tax, interest, penalty, or other liability after the time to challenge an assessment or a denial of a refund has expired if the taxpayer demonstrates that the failure to initiate a timely challenge was due to: the death or life-threatening injury or illness of the taxpayer, an immediate family member of the taxpayer, or an individual with substantial responsibility for the management or control of the taxpayer; an act of war or terrorism; or a natural disaster, fire, or other catastrophic loss.