Mike Colodny Corporate Law Blog on Lawyers.com

Also known as the corporate income tax "glitch" bill, SB 1112 by State Senator Thad Altman became the first bill to be approved by the 2009 Florida Legislature and ultimately was signed into law by Florida Governor Charlie Crist. 

To view SB 1112, click here.

The bill corrects the bonus depreciation problem created by Florida's 2008 passage of a corporate income tax "piggyback" bill.  As passed, SB 1112 requires corporate taxpayers to add back the bonus depreciation amounts allowed under federal law to Florida income, but then allows this amount to be deducted from Florida income over a seven-year period.  

Click here to view additional information on this issue, including a November 18, 2008 letter from Senate President Jeff Atwater and then-House Speaker Ray Sansom to Florida Department of Revenue Executive Director Lisa Echeverri requesting that penalties be  " . . . waived for any taxpayer that takes action in good faith reliance on (the) plan, but would otherwise be subject to penalties."

Background (Courtesy of the Florida Chamber)

In Florida's annual corporate income tax "piggyback" bill in 2008 (HB 5065), the Florida Legislature decoupled from provisions of federal policy to avoid a loss of revenue.

Unfortunately, the legislation inadvertently contained a glitch that created problems for corporate taxpayers:

• It increased the amount required to be added-back to Florida taxable income by decreasing the section 179 expense deduction from $128,000 to $25,000; and
• It required taxpayers to add back to their Florida income certain bonus depreciation and section 179 expense amounts.  This created the risk of a permanent loss of these depreciation deductions for Florida income tax purposes by not allowing the employer to subtract them in later years as they had always done.

Florida was the only state in the country to decouple from federal law and penalize employers by not making corresponding adjustments for state tax collections. Employers wishing to avoid the serious financial impacts of this unintended glitch only had two options: pay higher federal taxes by foregoing the federal tax incentives enacted as a means of stimulating capital investment or take the federal tax incentives and pay higher Florida corporate income taxes.

If the glitch in HB 5065 had not been fixed, it would have resulted in a significant financial consequence for Florida employers by discouraging economic stimulus purchasing, aggravating Florida's current economic crisis and discouraging corporate relocation to the State.

Should you have any questions or comments, please contact Colodny, Fass, Talenfeld, Karlinsky & Abate.