Florida Lawmakers Consider Reduction in Commercial Lease Tax

Florida Lawmakers Consider Reduction in Commercial Lease Tax

Florida lawmakers are currently discussing a reduction in the commercial lease tax as part of a broader tax-cut package. This comes amidst discussions of a less robust fiscal plan compared to previous years, with potential changes to sales-tax holidays and other tax relief measures.

Business groups have long argued for the scrapping of the tax, and state lawmakers are now considering further reductions. The House Ways & Means Committee recently reviewed tax-cut concepts, including a possible reduction in the lease tax, as the House and Senate prepare to negotiate a tax package in the coming weeks.

However, committee Chairman Stan McClain agrees with Senate Appropriations Chairman Doug Broxson’s assessment that the final tax-cut package won’t reach a total of $1.3 billion in the current fiscal year.

Potential Changes to Sales-Tax Holidays

McClain stated that the proposed tax-cut package will be less robust than in previous years. His committee plans to roll out a proposal next week, which could include shorter sales-tax holidays compared to the current fiscal year.

During the current fiscal year, the state offered two 14-day tax holidays for back-to-school items, two 14-day tax holidays for disaster-preparedness supplies, a three-month tax holiday for recreational items and activities, and a seven-day tax holiday for tools. McClain indicated that all of these options are being considered, but did not disclose the overall amount that could be allocated for tax packaging.

Broader Tax Package Negotiations

House and Senate leaders are set to negotiate a budget for the 2024-2025 fiscal year, along with a linked tax package, before the scheduled end of the annual legislative session on March 8th.

Senate Appropriations Chairman Doug Broxson recently mentioned that the final budget will include paying off debt and building record reserves. However, it is likely to result in tax holidays that are more restricted than those implemented last year.

Deeper Cut in Commercial-Lease Tax

The House committee also reviewed proposals to make a deeper cut in the commercial-lease tax, which is currently set to decrease from 4.5 percent to 2 percent in June. A 1 percentage point reduction would reduce state revenue by approximately $360 million each year.

The reduction to 2 percent was part of a 2021 legislative deal that aimed to collect sales taxes from out-of-state retailers on purchases made by Floridians, while replenishing a state unemployment trust fund that was depleted during the early stages of the COVID-19 pandemic. The trust fund is expected to reach a pre-pandemic benchmark of $4 billion in March.

The commercial-lease tax has been imposed by the state since 1969, and business groups have been advocating for rate reductions for years. In the 2023 session, lawmakers reduced the tax from 5.5 percent to 4.5 percent.

Other Proposals Under Consideration

In addition to the potential reduction in the commercial-lease tax, the House committee also discussed limiting the number of years local tourist-development taxes could be imposed and providing up to $10,000 in credits against corporate income taxes for companies that employ people with disabilities.

Representative Anna Eskamani suggested expanding the credits to include small businesses. However, she noted that small businesses might not pay corporate income taxes depending on their legal structure.

The committee is also considering Governor Ron DeSantis’ proposal to provide a one-year exemption on certain taxes, fees, and assessments on property-insurance policies for homes up to $750,000. Overall, DeSantis has recommended $1.1 billion in tax breaks for the next fiscal year, including six sales-tax holidays similar to the current year.

Conclusion

As Florida lawmakers discuss a reduction in the commercial lease tax, they are also considering changes to sales-tax holidays and other tax relief measures. The final tax-cut package is expected to be less robust than in previous years, with a focus on paying off debt and building reserves.

While the reduction in the commercial-lease tax and other proposals are being reviewed, it remains to be seen what the final tax-cut package will include. House and Senate leaders will negotiate the budget and tax package before the end of the legislative session in March.

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