clarification from the federal government and the Internal Revenue Service on how many aspects of the new tax law will be applied.
In fact, the uncertainty has left state analysts unable to say exactly what the fiscal impact of the piggyback bill could be on state revenue, although the assumption is it could have an undetermined“ negative” impact through the end of this budget year and the new fiscal year, which begins July 1. In the long term, it is anticipated to have a more positive impact.
To offset the initial negative impact of the federal law, Stargel’ s piggyback bill is“ decoupled” from the new federal tax code on several key provisions, including a measure in the federal law that allows corporations to immediately deduct the cost of new equipment and other capital.
Under Stargel’ s bill, Florida corporations would have to spread the“ federal bonus depreciation” over seven years and lessen its impact on the state tax collections, rather than trying to claim it immediately.
The decoupling is a routine occurrence for Florida and other states, according to a Jan. 29 report from the National Conference of State Legislatures on the new federal tax law.
“ The goal is to incentivize businesses to invest more and grow the economy, but states that conform would likely see a reduction in revenues in the short term,” the legislative policy group said about the depreciation measure.“ Most states have already decoupled or modified the existing federal bonus depreciation provisions.”
But while some federal tax law changes could reduce state revenue, Florida officials and national analysts also say other provisions could increase tax collections for the states.
One issue still being analyzed is how state tax collections will be impacted as corporations bring back, or“ repatriate,” overseas cash and assets to the United States.
“ This would raise revenue for the states in the short run as businesses bring back monies held overseas, but tax experts seem divided on whether this will be a small amount or a windfall,” the NCSL report said.
In acknowledging the uncertainty and complexity of the federal tax changes, Stargel’ s bill also would direct the state Department of Revenue to create a work group to continue to analyze the revamped tax code and offer recommendations.
The work group would begin offering periodic updates in May, with a final report to state lawmakers and the governor by next Feb. 1, about a month before the start of the 2019 legislative session.
Stargel said the work group will provide“ the opportunity to give a little bit of time for us to figure out what this is doing and report back.”
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