Florida’s Corporate Income Tax Credit Scholarship Program To Include Insurance Premium Tax Credits With Governor’s OK of HB 453

CS/CS/HB 453, a bill that expands and renames Florida’s Corporate Income Tax Credit Scholarship Program (“CTC”) and includes provision for insurance premium tax credits was passed on third reading by the Senate on April 28, 2009 after having been substituted for SB 1310 on April 23.   With the signature of Florida Governor Charlie Crist, CS/CS/HB 453 would become law on July 1, 2009.

Originally sponsored by State Representative Will Weatherford (R-Wesley Chapel), CS/CS/HB 453 allows insurance companies to receive a credit of 100 percent of an eligible contribution to an eligible scholarship-funding organization (“SFO”) against premium tax due for a taxable year.  However, the credit may not exceed 75 percent of the tax due after the deduction of allowable credits for other taxes and assessments paid by the insurer.

CS/CS/HB 453 further provides that an insurer claiming a credit against premium tax liability is not required to pay any additional retaliatory tax and insurance companies are not eligible to receive a credit against the corporate income tax authorized under the Florida Tax Credit Scholarship Program.

Under the provisions of CS/CS/HB 453, an insurance company that made eligible contributions under the CTC program for tax years beginning in 2006, 2007 or 2008, but did not receive a dollar-for-dollar benefit because of the interaction between the corporate income tax and the insurance premium tax, may apply to the Florida Department of Revenue (“DOR”) by July 31, 2009, to take a credit against its 2009 corporate tax liability. Credits taken pursuant to this provision will be counted toward a $118 million cap in fiscal year 2009-10. These credits will be treated as corporate taxes paid for purposes of computing the corporate tax credit against the insurance premium tax. 

The bill clarifies that the $118 million cap on tax credits authorized under the CTC is the total amount of corporate income tax credits and insurance premium tax credits that may be granted each state fiscal year.

Through the CTC source of funding, children in grades K-12 are provided an opportunity to attend private schools that meet the state’s eligibility requirements.

 

OPPAGA 2008 Study

In 2008, the Legislature directed the Office of Program Policy Analysis and Government Accountability (“OPPAGA”) to submit a report to the Governor and Legislature that partly addressed the use of credits for insurance premium taxes under chapter 624, F.S.,38 as an additional source of funding for the scholarship program. OPPAGA reported the following:

• Allowing insurance premium tax credits to be included in the scholarship program would broaden the base of companies likely to participate and increase the chance that higher caps set by the Legislature would be met.
• Insurance companies must have a net corporate income tax liability greater than 65 percent of their insurance premium tax liability in order to reduce their tax liability by contributing to the scholarship program. Companies that do not have such a corporate income tax liability may contribute to the program, but would not receive a reduction in tax liability for doing so.
• Allowing insurance companies the flexibility of receiving tax credits against either their corporate income taxes or their insurance premium taxes would maximize the number of companies that would make contributions to scholarship-funding organizations.
• Out-of-state insurance companies could face increased retaliatory taxes if they lowered their Florida insurance premium tax liability by taking credits for scholarship contributions. Establishing a provision that exempts these insurance companies from additional retaliatory taxes in Florida would help ensure that they have an incentive to participate in the program. Allowing the insurance premium tax credit for scholarship contributions to exceed the 65 percent credit limitation would provide more opportunity for companies to receive tax benefits than if it were included in the 65 percent credit limitation. However, including the scholarship credit in the 65 percent credit limitation would limit the tax revenue loss to the state.
• The Capital Investment Program and the Community Contribution Tax Credit Program permit insurance companies to claim an insurance premium tax credit for certain activities. While the participating insurance companies may take tax credits, they are not assessed additional retaliatory taxes. Both the Capital Investment and Community Contribution tax credits are authorized to exceed the 65 percent credit limitation.

 

Analysis of CS/CS/HB 453:  Insurance-Related Sections

 

Section 8

• Amends s. 1002.421, F.S., to provide for an insurance company that filed corporate  income tax returns under chapter 220, F.S., on a separate-company basis and made an eligible contribution under s. 220.187, F.S., for its tax year that began during the calendar year 2006, 2007, or 2008, but did not receive a dollar-for-dollar benefit for making the contribution, taking into account its net corporate income tax liability and  corresponding insurance premium tax liability, the insurance company may apply to the DOR by July 31, 2009, to apply the credits against its 2009 corporate income tax liability and carry over unused credit amounts as allowed by s. 220.187, F.S.
• Provides that an insurer’s scholarship credit amounts from 2006, 2007, and 2008 that are applied in 2009 shall be treated as corporate income taxes paid for the purposes of computing the amount of insurance premium taxes owed by the insurance company. 
• Requires the insurer to file amended corporate income tax returns as part of its application for its tax years that began during the calendar years 2006, 2007, and 2008, in order to remove all credits claimed under s. 220.187, F.S. for those years and correct the amount of corporate income taxes paid.  
• Requires the insurer to file an amended insurance premium tax return as part of its application.

 

Section 9

Provides a severability clause.

 

Section 10

Provides the act shall take effect  July 1, 2009.

 

 

For additional information on Florida’s legislative process and terminology, click here.

 

Should you have any questions or comments, please contact Colodny Fass.

 

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