The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Finance and Tax
BILL: CS/SB 1090
INTRODUCER: Finance and Tax Committee and Senator Gruters
SUBJECT: Corporate Income Tax
DATE: February 3, 2022 REVISED:
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Covin Babin FT Fav/CS
2. AP
Please see Section IX. for Additional Information:
COMMITTEE SUBSTITUTE - Substantial Changes
I. Summary:
CS/SB 1090 updates Florida’s Corporate Income Tax Code by adopting the federal Internal
Revenue Code in effect on January 1, 2022. Additionally, the bill:
 Adopts the changes originally made in the Tax Cuts and Jobs Act of 2017 to s. 174 of the
Internal Revenue Code, relating to the treatment of research and development expenditures.
 Allows taxpayers to use the bonus depreciation deduction for property placed in service in
taxable years beginning on or after January 1, 2023.
 Revises the calculation of the business interest expense deduction for Florida tax purposes
for taxable years beginning on or after January 1, 2023, to allow taxpayers to deduct the
amount that would have been allowed prior to the federal Tax Cuts and Jobs Act of 2017.
The Revenue Estimating Conference estimates that the bill will reduce General Revenue Fund
receipts by $232.8 million in Fiscal Year 2022-2023 with a recurring reduction of $58.6 million.
Additional information regarding the fiscal impact of the bill is provided in Section V. below.
Except as otherwise provided, the bill is effective upon becoming law.
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II. Present Situation:
Florida Corporate Income Tax
Florida imposes a tax on the taxable income of corporations and financial institutions doing
business in Florida.1 The tax rate effective January 1, 2022, is 5.5 percent of a taxpayer’s net
income for its taxable year (the calendar or fiscal year or period upon which its net income is
computed).2 The determination of taxable income for Florida tax purposes begins with the
taxable income used for federal income tax purposes.3 Additional adjustments are then made to
determine Florida’s taxable income. By starting with federal taxable income, Florida eases the
administrative burden on Florida taxpayers because they receive the same treatment in Florida as
is allowed in determining their federal taxable income.
Florida maintains this relationship with the federal Internal Revenue Code (IRC) each year by
adopting the IRC as it exists on January 1 of the year. By doing this, Florida adopts any changes
that were made in the previous year to the determination of federal taxable income.
Conformity with Federal Income Tax Statutes
Florida conforms to the Internal Revenue Code and other United States statutes relating to
federal income taxes by adopting the same meanings of terms used in the Florida corporate
income tax code as when used in a comparable context in federal income tax statutes. This
includes, as mentioned above, using federal taxable income as the starting point for calculating
Florida net income. State corporate income tax systems conform to the Internal Revenue Code to
varying degrees and share a large body of common concepts and doctrines. The reasons for
“piggybacking” or conforming to federal income tax statutes, rather than developing an entirely
separate tax system, include substantial administrative savings, uniformity, and reduction in
compliance costs.
Florida conforms to federal income tax statutes as they exist on a certain fixed date (referred to
as “static” or “fixed date” conformity), meaning that legislative action is required to incorporate
any changes made to such federal statutes since the last date of conformity. The Florida
corporate income tax code currently adopts the Internal Revenue Code and other federal income
tax statutes as they existed on January 1, 2021.
In conforming to federal income tax statutes, a state may choose not to adopt (“decouple” from)
a federal amendment because of its impact to state revenues or its inapplicability to the state tax
system, and instead specify its own treatment of the issue.
The Tax Cuts and Jobs Act of 2017
On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act of 2017
(TCJA).4 The TCJA made significant changes to federal income tax provisions that affect Florida
1
Sections 220.11 and 220.63, F.S.
2
Sections 220.11(2) and 220.63(2), F.S.
3
See generally s. 220.13(2), F.S.
4
Pub. Law No. 115-97 (Dec. 22, 2017).
BILL: CS/SB 1090 Page 3
corporations. The unique structure of the TCJA resulted in corporate taxpayers generally having
more income subjected to tax (higher taxable income), but ultimately paying less federal tax.
This situation occurred because although the TCJA increased federal taxable income by limiting
deductions and creating new items of income, the TCJA also lowered the federal corporate tax
rate from 35 percent to 21 percent.
Since Florida begins its corporate income tax calculation with federal taxable income, the TCJA
has resulted in an increase of Florida taxable income. However, unlike the federal tax rate
reduction, Florida’s tax rate was not affected by the TCJA, and thus, the TCJA has resulted in an
increase in Florida’s corporate income tax collections.
Automatic Refunds and Tax Rate Reduction
During the 2018 Regular Session, in an attempt to reduce the additional Corporate Income Tax
revenue that Florida would receive as a result to changes made in the TCJA, the Legislature
created section 220.1105, F.S. This section compares Florida’s estimated revenues prior to the
TCJA with actual receipts after the TCJA and requires excess revenues to be refunded to eligible
corporate taxpayers. Section 220.1105, F.S. also requires a proportionate automatic downward
adjustment of the corporate income tax rate, and this process was in effect in fiscal years 2018-
2019 through 2020-2021.
For Fiscal Year 2018-2019, this process resulted in a refund of $543.2 million, which was paid in
May 2020, and a tax rate reduction from the historic corporate income tax rate of 5.5 percent to
4.458 percent.5 For Fiscal Year 2019-2020, this process did not result in any additional refunds
or rate reduction, and for Fiscal Year 2020-2021, this process resulted in an additional refund of
$623.9 million, which is scheduled to be paid in April 2022, along with a tax rate reduction from
the temporary rate of 4.458 percent to 3.535 percent.6 The temporary 3.535 percent tax rate
expired on December 31, 2021; taxable years that begin on or after January 1, 2022, are now
subject again to the 5.5 percent corporate income tax rate.7
Additions and Subtractions
To calculate the Florida corporate income tax due, the federal taxable income is adjusted by
applying certain additions and subtractions.8 These adjustments are intended to adjust taxable
income for Florida tax purposes and to remove federal provisions or treatments that the state has
elected not to accept. Some of the items that are added back to the federal taxable income,
pursuant to s. 220.13(1), F.S., include federal deductions taken for business interest expense9 and
certain deductions taken for depreciation.10 Section 220.13(1)(b), F.S., provides for certain items
5
Revenue Estimating Conference for the General Revenue Fund & Financial Outlook Statement, Aug. 14, 2019, Table 17,
Corporate Income Tax, http://edr.state.fl.us/Content/conferences/generalrevenue/archives/190814gr.pdf (last accessed Jan. 6,
2022). See column “Refunds ($ Millions),” row “August 2019 Adj.”
6
General Revenue Consensus Estimating Conference Comparison Report, Aug. 17, 2021, Table 17, Corporate Income Tax,
http://edr.state.fl.us/Content/conferences/generalrevenue/grpackage.pdf (last accessed Jan. 6, 2022). See column “Refunds ($
Millions),” row “August 2021 Adj.”
7
Section 220.1105(5), F.S.
8
Section 220.13, F.S.
9
Section 220.13(1)(e)4., F.S.
10
Section 220.13 (1)(e)1., F.S
BILL: CS/SB 1090 Page 4
to be subtracted from the taxable income. Some of these items include net operating losses,11
foreign source dividends,12 and foreign income.13 After the additions and subtractions are
applied, the amount of adjusted federal income attributable to Florida is determined and income
that is apportioned to Florida is subject to Florida corporate income tax.14
Bonus Depreciation
When a corporation makes a business purchase, the corporation is generally able to deduct the
cost of the item from its income. If the item purchased will be consumed within a year, the
corporation can fully deduct the cost in the year that it made the purchase.15 However, if the item
purchased will be used in service for longer than a year, the corporation must capitalize the cost
of item and recover the cost over the useful life of the asset through annual deductions for
depreciation or amortization.16
Since 2008, the federal government has allowed for bonus depreciation, which allows a
corporation to take an enhanced depreciation deduction during the first year that certain qualified
property is placed into service. Depending on the year involved, the taxpayer could deduct 50
percent or 100 percent of the cost of the item in the first year the qualified property was placed
into service.
Florida has consistently “decoupled” from the federal bonus depreciation treatment. Rather than
allowing those deductions to occur in the first year, Florida law requires those deductions to be
added back for Florida purposes and then spread out over a 7-year period.
The TCJA continued the first year bonus depreciation deduction. The TCJA’s bonus depreciation
deduction was equal to 100 percent for long term assets placed in service after September 27,
2017. The act also allows bonus depreciation to be taken for purchases of both new and used
property. The 100 percent deduction is scheduled to remain in effect until January 1, 2023, and
will phase down in later years as follows:
 80 percent for property placed in service after December 31, 2022 and before January 1,
2024.
 60 percent for property placed in service after December 31, 2023 and before January 1,
2025.
 40 percent for property placed in service after December 31, 2024 and before January 1,
2026.
 20 percent for property placed in service after December 31, 2025 and before January 1,
2027.
After enactment of the TCJA, Florida treated TCJA bonus depreciation just as it had the bonus
depreciation provisions for the prior 10 years. Corporate taxpayers are required to add-back the
11
Section 220.13(1)(b)1., F.S.
12
Section 220.13(1)(b)2.a., F.S.
13
Section 220.13(1)(b)2.b., F.S.
14
Section 220.15, F.S. Section 220.14(1), F.S, provides that the first $50,000 of net income is exempt from Florida corporate
income tax.
15
IRC s. 179.
16
IRC ss. 167 and 263(a).
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bonus depreciation deduction amount to the taxpayer’s taxable income.17 The taxpayer is then
permitted to subtract from income one-seventh (1/7) of the deduction for the current taxable year
and the following six taxable years.18
Interest Deductions
Business interest was generally deductible in the taxable year in which the interest was paid or
accrued, subject to certain limitations.19 The TCJA restricted larger businesses, those with
average gross receipts of $25 million or more, from deducting interest payments in excess of 30
percent of their adjusted taxable income. Any interest amounts that are disallowed may be
carried forward to the succeeding five taxable years. Businesses with gross receipts of less than
$25 million are not subject to this limitation and may continue to deduct all of their interest
payments. Adjusted taxable income for this purpose is the taxable income of the taxpayer
computed without regard to (1) any item of income, gain, deduction, or loss which is not
properly allocable to a trade or business; (2) any business interest or business interest income;
(3) the amount of any net operating loss deduction; and (4) any deduction allowable for
depreciation, amortization, or depletion.
After enactment of the TCJA, Florida adopted updates to the Internal Revenue Code as in effect
on January 1, 2018.20 This included the changes made in the TCJA. Current Florida law requires
taxpayers, for taxable years beginning after December 31, 2018, and before January 1, 2021, to
add-back the business interest expense deduction amount as calculated in statute to the
taxpayer’s taxable income.21
Amortization of Research and Development Expenditures
The TCJA included a provision which provided that businesses treating research or experimental
(R&E) expenditures as deductible expenses will no longer be able to recover the costs in the year
in which the costs are incurred.22 Instead, R&E expenditures are required to be capitalized and
amortized ratably over a five-year period, beginning with the midpoint of the taxable year in
which the expenditure is paid or incurred.23 This provision applies to amounts paid or incurred in
taxable years after December 31, 2021.24 Costs for research conducted outside of the U.S. must
be amortized over a 15-year period. Expenditures for the development of software will also be
treated as R&E expenditures.
III. Effect of Proposed Changes:
Section 1 amends s. 220.03, F.S., to adopt the Internal Revenue Code in effect on January 1,
2022, for use by corporations subject to Florida’s Corporate Income Tax. The section adopts the
17
Section 220.13(1)(e)1.a., F.S.
18
Section 220.13(1)(e)1.b., F.S.
19
IRC s. 163.
20
See HB 7093, Chapter 2018-119, Laws of Florida.
21
Section 220.13(1)(e)4., F.S.
22
Pub. Law No. 115-97, s. 13206 (Dec. 22, 2017).
23
IRC s. 174.
24
Supra note 31.
BILL: CS/SB 1090 Page 6
changes originally made in the Tax Cuts and Jobs Act of 2017 to s. 174 of the Internal Revenue
Code, relating to the treatment of research and development expenditures. The section applies
retroactively to January 1, 2022.
Section 2 amends s. 220.13, F.S., effective January 1, 2023, to revise the definition of “adjusted
federal income.” The section provides that the required adjustments for bonus depreciation for
Florida tax purposes (adding back bonus depreciation taken on the federal return and then
subtracting 1/7 of that amount) do not apply to property placed in service in taxable years
beginning on or after January 1, 2023. This change allows Florida taxpayers to take bonus
depreciation for Florida tax purposes.
The section also revises the calculation of business interest expense for taxable years beginning
on or after January 1, 2023, and requires taxpayers to add an amount equal to the amount of
business interest taken as a deduction for federal tax purposes to taxable income and to subtract
the amount of business interest paid or accrued within the taxable year which would have
deductible at the federal level as s. 163 of the IRC existed and applied immediately before the
enactment of the TCJA. The section deletes language that was applicable for taxable years
beginning after December 31, 2018, and before January 1, 2021.
Section 3 provides an effective date of upon becoming a law, except as otherwise expressly
provided in the bill.
IV. Constitutional Issues:
A. Municipality/County Mandates Restrictions:
Article VII, section 18 of the Florida Constitution requires a two-thirds vote of the
membership of each house of the Legislature to pass legislation requiring counties and
municipalities to spend funds, limit their ability to raise revenue, or reduce the percentage
of a state tax shared with them.25 This bill does not require counties and municipalities to
spend funds, limit their ability to raise revenue, or reduce the percentage of a shared state