Florida’s Automatic Rate Reduction Triggers Refund Opportunities

Florida law provides automatic corporate income tax rate reductions and refunds based on collections for the tax. The Florida Department of Revenue recently announced a rate reduction from 5.5% to 4.458%. The rate reduction applies to tax years beginning on or after January 1, 2019 and before 2022.

How Does the Automatic Rate Reduction and Refund Mechanism Work?

The law triggers automatic rate reductions and refunds if net collections for the tax exceed forecasts in the:

  • 2018–2019 fiscal year; and
  • 2020–2021 fiscal year.

“Net collections” means the sum of:

  • the total amount of income taxes collected, including interest and penalties, minus
  • the total amount of refunds in that fiscal year.

Florida adjusts the rates based on a formula. The adjustment formula is the tax rate for the previous tax year multiplied by the sum of:

  • the adjusted forecasted collections divided by
  • the net collections.

“Adjusted forecasted collections” means forecasted net collections for a fiscal year multiplied by 1.07.

When Does Florida Adjust the Rates?

The Department of Revenue must calculate the rate adjustment and report it by October 1 of the calendar year.

Who Can Claim a Refund?

Taxpayers can claim a refund if their final tax liability is greater than $0 and their tax year begins between:

  • April 1, 2017, and March 31, 2018 for fiscal year 2018–2019; or
  • April 1, 2018, and March 31, 2019 for fiscal year 2019–2020.

When Does Florida Issue Refunds?

Florida must determine a taxpayer’s tax liability and refund share by April 15 after the fiscal year. It must issue a refund by May 1 after the fiscal year.

By Tim Bjur, J.D.

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CCHTaxGroup

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