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Florida: Pre-filed bills propose tax cuts in three areas

At the end of Jan. 2014, Florida Gov. Rick Scott released his It’s Your Money Tax Cut Budget for fiscal year 2014-2015. As he repeated when he unveiled his budget, Gov. Scott’s tenure has focused on cutting taxes, reducing spending, and reducing debt. It is, therefore, not surprising that there are already three pre-filed bills related to tax reductions—SB 110, SB 140, and SB 138—for consideration in Florida’s 2015 legislative session only one month after he was reelected in the November midterms.

According to her press release, Sen. Dorothy L. Hukill filed this trio of tax relief bills in an effort to “reduce the tax burden on Florida's families and help businesses create jobs.”

SB 110, communications services tax

Sen. Hukill’s release promises that SB 110 “will reduce the tax burden paid by Floridians on their cell phones, fax machines, cable and satellite TVs by 2%.” Citing the Tax Foundation’s Wireless Taxation in the United States 2014 (Report), the senator conceded that Floridians currently pay the fourth highest combined state and local tax rates in the nation. The Report shows that as of July 2012, Florida’s wireless tax, fee, and surcharge burden amounts to 22.38 percent, whereas Americans pay an average of 11.23 percent in state and local tax and fees on wireless service.

SB 140, commercial lease sales tax

The release informs Florida businesses that SB 140 will reduce the amount they pay in state sales tax on their commercial leases by one percent. This supports Gov. Scott’s budget cut of “around $100 million…to give small businesses more money to invest in their own future.”

SB 138, corporate income tax

SB 138 “will eliminate or reduce the corporate tax liability paid by many businesses throughout our state by increasing the corporate income subject to taxation from $50,000 to $75,000” according to the release.

While applauding the fact that Floridians do not pay personal income tax, the Tax Foundation’s 2015 State Business Tax Climate Index (Index) laments Florida’s alternative minimum tax on corporations. Even so, in the Index, Florida ranks fifth overall, after considering its corporate tax rate of 5.5 percent (ranked #14 in the category), lack of individual income tax (#1), sales tax rate of six percent (#12), unemployment insurance tax rate of 5.4 percent maximum (#13), and property tax rate of 3.45 percent of personal income (#16).

Positive outcomes

In the end, Sen. Hukill maintains that “[t]hese bills will provide much needed tax relief for Florida's families and businesses as we continue to strengthen and expand our economy. The continued goal is to make Florida the best place to live, work, and raise a family.”

Tennessee: Income approach to valuation of mineral interests is determined appropriate

Section 8-6-109 of Tennessee’s code requires the Tennessee Attorney General (AG) to give certain state officials, such as members of the general assembly, written legal opinions “on all matters submitted by them in the discharge of their official duties.”

On Dec. 2, 2014, in response to a request submitted by Sen. Ken Yager, the AG issued an opinion concluding that the income approach to determining the value of mineral interests is appropriate.

Sen. Yager questioned whether the taxation of mineral interests using the income approach results in the improper assessment of an income tax or an unauthorized severance tax.

Sen. Yager’s query presumably stems from Tennessee’s income tax prohibition. As reported after the November midterms, voters approved a constitutional amendment that prohibits a tax on income, though the state still taxes individual income in the form of interest and dividends. Tennessee imposes a three percent severance tax on the sale of oil and gas removed from the ground within the state’s borders, but prohibits any other taxes on this oil and gas.

Noting that mineral resources generate income and that “particularly productive mineral resources will generate more income and possess greater value than a less productive property,” the AG cited precedent holding that, even though net earnings determine the amount of the excise tax, that does not convert it to an income tax. The AG further reasoned that the use of the income approach results in the assessment of a property tax, and the consideration of the property’s income in this process does not change the basic nature of the tax being assessed.

Ohio and Delaware alert taxpayers of end of year deadlines

Ohio Veterans Bonus application deadline Dec. 31, 2014

The Cleveland Plain Dealer reports that under a program approved by voters in 2009, Ohio veterans who served in Iraq from March 19, 2003, to Dec. 31, 2011, have until Dec. 31, 2014, to apply for their Ohio Veterans Bonuses. According to the article, the bonus is not subject to state or federal income taxes and pays $100 per month, up to a maximum of $1,000. For Ohio veterans who served elsewhere during that eight-year period, the payment is $50 per month, up to a maximum of $500. The state will continue to award the bonus to Ohio veterans who served in Afghanistan, or anywhere else in the world, since Oct. 7, 2001.

Beyond this, the article notes that veterans who have been medically discharged due to injuries sustained in Iraq can receive $1,000, plus up to $500 for service elsewhere.

For consideration of the compensation, the Ohio Department of Veterans Services website states that online bonus applications must be submitted no later than Dec. 31, 2014, and hard copy applications sent to the Ohio Veterans Bonus program must be postmarked on or before Dec. 31, 2014.

The website provides an online eligibility tool that veterans can access to determine if they qualify, along with an online application and instructions.

The website offers additional eligibility criteria as follows:

  • The person was an Ohio resident at the start of active duty service.
  • The person is currently an Ohio resident.
  • The person has not received a bonus or compensation of a similar nature from another state.   

The website also enables Ohio veterans to check the status of an application previously submitted.

Delaware’s deadline for business license renewals is Dec. 31, 2014

The Delaware Division of Revenue (DOR) reminds businesses that they must renew their Delaware business licenses by Dec. 31, 2014.

Delaware promotes online license renewals as a convenient, fast, and secure way of ensuring that those businesses that are required to have proof of a current license, such as contractors and businesses that receive government payments, have it. This is because “the service also allows taxpayers to print a temporary license directly from their PC, which substitutes as a valid license until a permanent license is received in the mail.”

For additional information regarding these subjects, or any other multistate tax issues, please contact:

David M. Kall

David H. Godenswager, II

Susan Millradt McGlone

Multistate Tax Services

Businesses must be vigilant and careful in managing their state and local tax liabilities and exposures. We understand this can be a daunting task. McDonald Hopkins Multistate Tax Services provides a broad range of state and local tax services including tax controversy, tax evaluation, tax planning, and tax policy. With professionals who have worked both inside and outside government agencies, our multistate tax team leverages its knowledge and experience to help clients control their complex multistate taxes.