Florida Governor Signs H.B. 5 to Repeal Tax Credit Programs
Florida’s Governor, Ron DeSantis, took significant action on May 31, 2023, by signing H.B. 5, a comprehensive bill designed to dismantle several tax credit programs that were previously benefiting various aspects of Florida’s business landscape. The bill’s primary focus was on repealing tax credit initiatives that aimed to foster economic growth and job creation within the state. The impact of this decision will be felt across multiple industries and sectors as the following six major tax credit programs are slated for repeal, effective July 1, 2023.
Qualified Target Industry Tax Refund Program
The first program on the chopping block is the “Qualified Target Industry Tax Refund Program.” Since its establishment in 1995, this initiative has been instrumental in encouraging Florida communities to attract high-skill jobs and corporate headquarters, as well as promoting growth in targeted industries. By offering tax refunds based on job creation and wage levels, this program has been instrumental in enticing businesses to expand within the state’s boundaries. However, its repeal could create uncertainty for businesses and may impact their future expansion plans.
Quick Action Closing Fund Program
Another affected program is the “Quick Action Closing Fund Program.” This fund played a crucial role in supporting highly competitive projects by providing discretionary grants to address unique needs and requirements. With the program no longer available, Florida may face challenges in attracting and securing high-value projects, potentially leading to missed economic opportunities.
New Markets Tax Credit Program
The “New Markets Tax Credit Program,” established in 2009, was pivotal in encouraging capital investments in low-income communities. By providing tax credits against federal income tax for investments in qualified community development entities, the program fostered growth and development in economically disadvantaged areas. Its repeal might hinder investments in these communities, impacting their overall development and potential for growth.
Entertainment Industry Tax Credit Program
The “Entertainment Industry Tax Credit Program,” introduced in 2023, was a groundbreaking initiative to support Florida’s entertainment industry. Unfortunately, despite its potential, the program failed to progress beyond the Regulatory Reform and Economic Development Subcommittee. Consequently, the program came to an end on May 5, 2023, and will be formally repealed from July 1, 2023 onwards.
Qualified Defense Contractor and Space Flight Business Tax Refund Program
In 1996, the legislature introduced the qualified defense contractor and space flight business tax refund program with the aim of generating and retaining high-quality, well-paying jobs in Florida’s defense and space industries. Businesses that were pre-approved and either created new jobs or maintained existing ones in Florida were eligible for tax refunds ranging from $3,000 to $8,000 per new full-time equivalent job created. Additionally, applicants could receive refunds on taxes paid in connection with the project. As long as the businesses maintained their employment and wage levels, they were allowed to claim up to 25% of the total refund annually.
Corporate Income Tax Credit for Spaceflight Projects Program
Lastly, the “Corporate Income Tax Credit for Spaceflight Projects Program” provided certified spaceflight businesses with a significant non-transferable tax credit. Its elimination may influence investment decisions within the spaceflight industry, potentially affecting innovation and economic growth in the space sector.
While the tax credit programs targeting various aspects of Florida’s businesses have been repealed, it is important to note that any pre-existing contracts or agreements that were authorized before July 1, 2023, will remain in effect. These agreements will provide continuity and honor the commitments made under the now-defunct programs. As the state undergoes these changes, businesses and stakeholders can find assurance in the continuation of their existing arrangements, even in the absence of the repealed tax credit initiatives. Moving forward, policymakers and industry leaders may seek new avenues to promote economic growth and foster innovation in Florida’s business landscape.
Article by Muhammad Junaid, Senior Tax Manager