July 21, 2019

Florida tax laws and intellectual property

Jason Garcia | 6/24/2019

Mazerov says Florida is now one of six states with a corporate income tax that hasn’t adopted an add-back law or combined reporting. And two of those six states have won court decisions ruling that they can tax intangible holding companies — Oklahoma and South Carolina, both of whom won suits against Toys “R” Us.

“So, really, Florida is one of only four states in which elected officials have chosen to leave the state completely vulnerable to the intangible holding company tax avoidance scheme,” Mazerov says.

One reason the Florida Legislature hasn’t made any changes: Opposition from the state’s largest businesses, which don’t want to pay additional income taxes.

That opposition is unyielding. Every year, for instance, Associated Industries of Florida vows to fight “any structural changes” to the state’s corporate income tax law — including combined reporting, an add-back law or “any other ‘loophole’ issues.”

The opposition is also sometimes misleading. During the legislative session earlier this year, the Florida Senate’s commerce and tourism committee held a rare hearing on a combined reporting bill. The bill failed on a 2-2 party line vote after a series of business groups testified in opposition, including AIF, Florida TaxWatch, the Florida Bankers Association and the Florida Chamber of Commerce.

French Brown, a Tallahassee attorney who began his career at the Florida Department of Revenue and is now a tax law lobbyist for the Florida Chamber and other clients, told the senators on the panel a cautionary tale about combined reporting and industrial giant General Electric.

“I will just add one other example. In 2015, the state of Connecticut passed mandatory combined reporting — and that year GE decided to move their corporate headquarters from Connecticut to Boston,” Brown said. He added, for emphasis, “Boston, tax-chusetts.”

“French, I’ve got a quick question for you,” responded Sen. Joe Gruters, a Sarasota County Republican and chairman of the Senate’s commerce and tourism committee. “When GE moved their headquarters, did they specifically mention that bill passing as the reason why they were leaving?”

“You’re absolutely correct,” Brown answered. “They did.”

What neither of them mentioned is that Massachusetts, too, is a combined reporting state.

 

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