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Disaster Responders REVENUE ESTIMATING CONFERENCE Tax: Various Taxes Issue: Emergency Management Bill Number(s): CS/HB 1133 and CS/SB 1262 X Entire Bill Partial Bill: Sponsor(s): Representative Young, Senator Simpson Month/Year Impact Begins: effective upon becoming law Date of Analysis: February 5, 2016 Section 1: Narrative a. Current Law: Currently, out-of-state businesses and employees are not specifically exempted from paying taxes and fees in Florida while they are in the state to conduct work related to emergencies or natural disasters. b. Proposed Change: The bill creates an exemption for out-of-state businesses and employees from certain state and local taxes while they are in Florida and participating in emergency-related work during a disaster-response period. Specifically, exemptions for businesses include: reemployment taxes, state or local professional or occupational licensing requirements or related fees, local business taxes, taxes on the operation of commercial motor vehicles, corporate income taxes, and tangible personal property taxes and use taxes on equipment brought into the state for emergency-related work during the disaster-response period. In addition, out-of-state employees are not required to file or remit state or local taxes or comply with state or local occupational licensing requirements or related fees. Section 2: Description of Data and Sources . Discussions with professional staff of several state agencies including: DBPR, DOT, DOR, DEO. Unemployment Insurance Program Letter No. 20-04 (May 10, 2004). U.S. Department of Labor. Available at https://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=1565. Accessed 2/3/2016. HSMV IFTA and IRP Temporary Trip and Fuel-Use revenue data for Fiscal Years 2002-03 through 2014-15. DBPR Annual Reports for Fiscal Years 2002-03 through 2014-15. Summary of Reported County and Municipal Local Business Tax Revenues, 1993-2014. Available at http://edr.state.fl.us/Content/local-government/data/data-a-to-z/g-l.cfm Accessed 2/4/2016. FEMA Disaster Declarations. Available at https://www.fema.gov/disasters/grid/state-tribal-government/47. Accessed 2/4/2016. Florida Executive Orders, 2011-2015. Available at http://www.flgov.com/all-executive-orders/. Accessed 2/1/2016. Florida Executive Orders, 2004-2010. Available at http://archive.law.fsu.edu/library/collection/executiveorders/. Accessed 2/3/2016 Section 3: Methodology (Include Assumptions and Attach Details) The potential impact of the exemption on each of the specific tax sources included in the bill is discussed below. It should be noted that s. 252.36(5)(a), F.S., provides broad authority for the Governor to suspend the provisions of any regulatory statute prescribing the procedures for conduct of state business or the orders or rules of any state agency during an emergency. A review of selected Executive Orders indicates that this authority has been used in some previous disasters to modify or waive, for example, contractor licensing requirements and the registration of commercial vehicles (see EO 04-210 and EO 11-128). Reemployment assistance taxes Florida’s Reemployment Assistance Program imposes a tax on wages paid by Florida employers to pay for unemployment benefits received by unemployed individuals. In general, businesses that enter Florida to perform temporary emergency services following a disaster are not required to file Reemployment Assistance tax because their employees are insured by the state law where the company primarily conducts its business. The U.S. Department of Labor doctrine of localization of services ensures that the workers for such companies would be insured for unemployment compensation in the state where the company has already established its liability for the tax. Based on the provisions of UIPL 20-04 and s. 443.1216(9), F.S., the DEO does not believe that there would be a significant revenue impact from this bill. Given DEO’s interpretation, there are no data related to new business filings of the tax during previous disasters. State or local professional or occupational licensing requirements or related fees The Department of Business and Professional Regulation (DBPR) licenses and regulates a wide range of businesses and professionals in Florida. Of the areas that the department regulates, the one most likely to be affected by this bill is the construction industry. According to the department, there are about 9 basic types of licenses that can be issued to contractors. The annual fees range from $109 to $209 depending on the type, and licenses for new businesses are an additional $50. Over the most recent six fiscal years, the 515 REVENUE ESTIMATING CONFERENCE Tax: Various Taxes Issue: Emergency Management Bill Number(s): CS/HB 1133 and CS/SB 1262 number of construction industry licenses in Florida hovered around 70,000. There was more variation in the amount of licenses prior to that, but differences or increases in Fiscal Years 2004-05 and 2005-06 – those years with very active storm seasons – cannot be solely attributed to additional licenses acquired due to storm-related work since this period was also during the height of the housing boom. It is also unknown how many of these licenses went to individuals who were previously in another state. See table below for number of active construction licenses for Fiscal Years 2002-03 through 2014-15. Construction Licenses % change 2002-03 72,000 2003-04 85,000 18.1% 2004-05 91,000 7.1% 2005-06 99,523 9.4% 2006-07 109,874 10.4% 2007-08 113,133 3.0% 2008-09 118,693 4.9% 2009-10 71,835 -39.5% 2010-11 68,747 -4.3% 2011-12 70,446 2.5% 2012-13 68,315 -3.0% 2013-14 70,069 2.6% 2014-15 69,574 -0.7% Local business taxes The local business tax represents the fees charged and the method by which a local government grants the privilege of engaging in or managing any business, profession, and occupation within its jurisdiction. Counties and municipalities may levy a business tax, and the tax proceeds are considered general revenue for the local government. This tax does not refer to any fees or licenses paid to any board, commission, or officer for permits, registration, examination, or inspection. The collected revenues are reported annually by local governments via their statutorily-required Annual Financial Report (AFR) pursuant to s. 218.32, F.S., and the reported revenues for the local fiscal years ending 2002 through 2014 are as follows. Total Local Fiscal Total County Municipal TOTAL Year (ending Revenue Revenue REVENUE TOTAL Sept 30) ($ millions) # Counties ($ millions) # Municipalities ($ millions) ENTITIES 2002 $47.6 53 $106.8 359 $154.4 412 2003 $37.3 52 $114.5 372 $151.8 424 2004 $38.1 52 $116.6 361 $154.7 413 2005 $39.0 52 $125.4 362 $164.4 414 2006 $38.7 52 $131.0 365 $169.7 417 2007 $36.9 45 $120.6 335 $157.5 380 2008 $32.3 33 $117.7 265 $150.0 298 2009 $31.8 35 $120.7 280 $152.6 315 2010 $28.4 36 $128.3 291 $156.7 327 2011 $28.9 39 $137.2 294 $166.1 333 2012 $26.9 37 $134.7 296 $161.6 333 2013 $26.7 33 $130.4 287 $157.1 320 2014 $27.4 33 $141.0 288 $168.4 321 516 REVENUE ESTIMATING CONFERENCE Tax: Various Taxes Issue: Emergency Management Bill Number(s): CS/HB 1133 and CS/SB 1262 Although total revenues are reported via the AFR, no data are available on the number of businesses paying the tax, the types of businesses paying the tax, or the tax rates imposed. It is also unknown whether any of the businesses paying the tax during years that had declared states of emergency were out-of-state businesses who would meet the criteria for the exemption provided in the bill. If it is assumed that 100 percent of the increased revenues observed in fiscal years 2004-05 and 2005-06 (i.e., years with very active storm seasons) could be attributed to local business taxes paid by out-of-state businesses engaged in emergency-related work in Florida, then it may be possible to estimate a fiscal impact. By smoothing revenue growth between 2003-04 and 2006-07, it may be possible to attribute $9.0 million and $13.6 million in fiscal years 2004-05 and 2005-06, respectively, to those out-of-state businesses. However, due to the previously-stated data limitations, the estimated impact of the bill, as it relates to local business taxes, is negative indeterminate. Taxes on the operation of commercial motor vehicles The Department of Motor Vehicles and Highway Safety provides two 10-day permits to an out-of-state entity wanting to operate a commercial motor vehicle in the state. A $30 Florida trip permit allows these vehicles to operate in Florida under the International Registration Plan in lieu of application for an apportionable tag (s. 320.0715(2)(a), F.S.). A $45 temporary fuel-use permit that exempts the vehicle from the payment of the motor fuel or diesel fuel tax imposed under chapter 207 (s. 207.004 (4), F.S.). Between Fiscal Years 2002-03 and 2014-15, these two permits generated, on average, approximately $300,000 annually. In Fiscal Years 2004-05 and 2005-06 (two fiscal years with a high number of executive orders declaring states of emergency), there was an approximately 40% increase in the revenue from these permits (approximately $150,000 each per year). While this increase cannot be solely attributed to the states of emergency, there is evidence that during a state of emergency there are a larger number of these permits being provided by the department.
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