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Earlier this week, the Revenue Estimating Conference updated its general revenue forecast to include an additional $2.6 billion for state fiscal years 2021-22 & 2022-23. The addition of these revenues imply that the general revenues are now exceeding the State’s pre-COVID revenue forecasts; suggesting that Florida’s economy has recovered from the pandemic-related revenue losses seen between April and June 2020. A copy of the REC’s summary may be found here – http://edr.state.fl.us/Content/conferences/generalrevenue/grsummary.pdf
Most of the increased revenues are due to significantly higher than anticipated sales tax and corporate income tax collections during April, May, and June 2021. The increase also takes into consideration the recently ratified Seminole Gaming Compact, which is estimated to generate $426.7 million for the State in the current fiscal year and more in the future.
Ultimately, the economists estimate that the State will finish the current fiscal year with more than $7.3 billion in unallocated general revenue, which will be available for one-time appropriations during the 2022 Regular Session that starts next January.
Corporate Income Tax Collections Trigger Refund of $623 Million
Additionally, the Conference announced that Florida’s corporate income taxpayers will be receiving a significant tax refund in spring 2022 and a retroactive corporate tax rate reduction for taxable years beginning in 2021. Both adjustments stem from legislation previously passed 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 $623.9 million should be due back to taxpayers because of significant increased collections during the state’s 2020-2021 fiscal year. Corporate taxpayers will receive these automatic refunds on or before May 1, 2022 in an amount proportionate to the company’s corporate income tax liability as filed on its return for tax years beginning between April 1, 2019 and March 31, 2020.
Between February 1 and May 1, 2022, 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, 2022. The statewide final tax liabilities will not be known by the Department until after all taxpayer returns are filed.
Temporary Corporate Income Tax Rate Reduction
The Revenue Estimating Conference estimates that this refund amount will result in a retroactive corporate tax rate reduction to 3.535% for taxable years beginning between January 1, 2021 and December 31, 2021. The official announcement of the rate reduction will be published by the Department of Revenue on or before October 1, 2021. This change may result in over-payments during a company’s first two estimated tax payments for 2021 and may create an opportunity for taxpayer credits or refunds.
Note however, this temporary rate reduction is set to expire for taxable years beginning on or after January 1, 2022. After that date, the Florida corporate income tax is set to automatically increase back to the historic 5.5% rate in place prior to the passage of the Tax Cuts and Jobs Act. As a result, the business industry and many taxpayers are advocating for the 2022 Legislature to resolve the TCJA’s base broadening provisions, which are contributing to Florida’s surge in corporate income tax collections. If the Legislature fails to act, Florida’s corporate taxpayers will start paying hundreds of millions more in corporate income tax annually starting in 2022.
If you have any additional questions on the Revenue Estimating Conference, please reach out to author French Brown at email@example.com or 850-459-0992.
About the Authors:
French Brown, IV focuses on state and local taxation, governmental relations and lobbying, and administrative law. Prior to joining Dean Mead, Mr. Brown was in private practice at another Tallahassee law firm. He began his legal career at the Florida Department of Revenue, where he quickly rose to the position of Deputy Director of Technical Assistance and Dispute Resolution. Mr. Brown also assists businesses with Florida tax planning and controversies.