United States: Recent Developments in the Florida Intangibles Tax Area

We have not addressed the personal property tax imposed by various Pennsylvania counties since the summer of 2000, when we discussed the case of Annenberg v. Commonwealth of Pennsylvania, but recent developments in Florida, which we have been monitoring, have shown that personal property, or intangibles, tax issues are not unique to Pennsylvania.

A repeal of the Florida Intangibles Tax (an annual tax of .0005 on intangibles based on values at January 1) on stocks, bonds and other intangible property, a levy that Governor Jeb Bush called "insidious," was passed by the Florida Senate on April 26, 2006, and is expected to be signed into law sometime in June. (At press time, it had not yet been signed into law, but all reports indicate that Governor Bush will sign it, likely in the very near future.) The effective date of the repeal is January 1, 2007, so returns for 2006 based upon the January 1, 2006, valuation date are still due this spring. Some had hoped that the repeal would be retroactive to January 1, 2006, but that was not reflected in the legislation that will be effective once it has been signed by Governor Bush.

The intangibles tax rate has been reduced several times since 1999 and was again reduced to 0.5 mills per dollar (from 1 mill per dollar) effective January 1, 2006. Governor Bush claims that the elimination of this tax will benefit an estimated 300,000 taxpayers.

The Republican-sponsored $130.6 million intangibles tax repeal cleared the Senate 30-9, with the nine opposing votes cast by Democrats. Five other Democrats, however, crossed party lines to vote for the repeal. "The insidious intangibles tax is no longer with us, which is great," Bush said.

Democratic opponents contended the tax break would benefit some of Florida’s wealthiest citizens, shift the burden to other taxpayers and deprive the state of money for such services as food supplements for developmentally disabled children.

Democratic Senator Steve Geller called the repeal the "No Millionaire Left Behind Tax Act" and Robin Hood in reverse. He noted that retirement savings such as 401(k) accounts and money in banks are exempt from the tax. Republican supporters argued that the wealthiest investors do not pay the tax because they temporarily move their assets outside the state at year’s end. "Those who have the means will walk around it," said Republican Senator Jeff Atwater. "It is a matter of fairness."

Perhaps more interesting than the repeal of the intangibles tax is the fact that Florida has consistently moved in the direction of reducing or eliminating many of the taxes that residents of other states routinely pay. The federal Economic Growth and Tax Relief Reconciliation Act of 2001 effectively eliminated Florida’s estate tax; the state does not have an individual income tax; and the Florida legislature often passes sales tax holidays for items such as computers and back-to-school clothing and supplies. In fact, it passed a nine-day, $39 million back-to-school sales tax break the same day that it repealed the intangibles tax. It seems clear that Florida continues to make serious efforts to become the most taxpayer-friendly state in the Union. Walt Disney would be proud.