This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives.
STORAGE NAME: h0609a.WMC
DATE: 1/31/2024
HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: CS/HB 609 Local Business Taxes
SPONSOR(S): Ways & Means Committee, Botana and others
TIED BILLS: IDEN./SIM. BILLS: SB 1144
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Ways & Means Committee 16 Y, 7 N, As CS Berg Aldridge
2) Local Administration, Federal Affairs & Special
Districts Subcommittee
3) State Affairs Committee
SUMMARY ANALYSIS
The local business tax authorized under Chapter 205, F.S., represents the taxes charged and the method by
which a local government authority grants the privilege of engaging in or managing any business, profession,
or 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 regulatory fees or
licenses paid to any board, commission, or officer for permits, registration, examination, or inspection.
The bill provides a limitation on the amount of revenue a local government may receive from local business
taxes, based on the revenue that local government received in local fiscal year 2023-24. If a local government
receives more in local business tax revenue than it did in FY 2023-24, the local government must
proportionally reduce its tax rates and must issue refunds or credits to taxpayers. The bill provides guidance
on how those refunds/credits must be calculated and when they must occur.
The bill requires local governments to include an affidavit in their annual financial audit report to the Auditor
General attesting to compliance with the requirement to reduce rates and issue refunds, if needed. The
Auditor General must follow up with any local governments not in compliance, and report those local
governments to the Legislative Auditing Committee if the noncompliance continues.
The bill also makes conforming changes.
The bill has an effective date of July 1, 2024.
The Revenue Estimating Conference has not estimated the impact of the bill as amended.
This bill may be a county or municipality mandate requiring a two-thirds vote of the membership of the
House. See Section III.A.1 of the analysis. STORAGE NAME: h0609a.WMC PAGE: 2
DATE: 1/31/2024
FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Current Situation
Local Business Taxes
Background
The local business tax, authorized in Chapter 205, F.S., represents the fees charged and the method
by which a local government authority grants the privilege of engaging in or managing any business,
profession, or occupation within its jurisdiction. Counties and municipalities may levy a business tax,
and the tax proceeds are considered general revenue for the local government.
1
This tax does no refer
to any regulatory fees or licenses paid to any board, commission, or officer for permits, registration,
examination, or inspection.
2
Prior to 1972, the state imposed an occupational license tax and shared the revenues with the counties.
Municipalities levied their own occupational license taxes pursuant to local ordinance or resolution.
Counties had no authority to levy an occupational license tax until October 1, 1972, when Chapter 72-
306, Laws of Florida, repealed the state tax and authorized both counties and cities to impose an
occupational tax at the state or city rate then in effect. In 1980, the legislature authorized counties and
municipalities to increase rates by a specified percentage based upon the rates then in effect.
3
In
1986, the legislature authorized Miami-Dade, Broward, Monroe and Collier counties to increase their
rates by an additional 50%, with the proceeds being dedicated to specified economic development
activities.
4
Effective January 1, 2007, the legislature changed the name of the Local Occupational License Tax to
the Local Business Tax.
5
This was done in response to some individuals representing that the fact that
they had obtained an “occupational license” under Chapter 205, F.S., conferred upon them some type
of official proof of their competency to perform various repairs and services. The name change was
intended to clarify that the payments made under Chapter 205, F.S., were taxes and not some type of
regulatory fee.
Administrative Procedures
In order to levy a business tax, the governing body must first give at least 14 days of public notice
between the first and last reading of the resolution or ordinance by publishing a notice in a newspaper
of general circulation within its jurisdiction as defined by law.
6
The public notice must contain the
proposed classifications and rates applicable to the business tax.
7
A number of other conditions for
levy are imposed on counties and municipalities.
8
For purposes of Chapter 205, F.S., the terms “business,” “profession,” and “occupation” do not include
the customary religious, charitable, or educational activities of nonprofit religious, nonprofit charitable,
and nonprofit educational institutions in the state.
9
These institutions are more particularly defined and
limited in statute.
10
The term “receipt” means the document that is issued by the local governing
authority which bears the words “Local Business Tax Receipt” and evidences that the person in whose
1
Sections 205.033 and 205.042, F.S.
2
Section 205.022(5), F.S.
3
Chapter 80-274, L.O.F.
4
Chapter 86-298, L.O.F.
5
Chapter 2006-152, L.O.F.
6
Sections 205.033 and 205.042, F.S.
7
Id.
8
Sections 205.033 and 205.043, F.S.
9
Section 205.022(1), F.S.
10
Id. STORAGE NAME: h0609a.WMC PAGE: 3
DATE: 1/31/2024
name the document is issued has complied with the provisions of Chapter 205, F.S., relating to the
business tax.
11
The governing body of a municipality that levies the tax may request that the county in which the
municipality is located issue the municipal receipt and collect the tax.
12
The governing body of a county
that levies the tax may request that municipalities within the county issue the county receipt and collect
the tax.
13
However, before any local government issues any business receipts on behalf of another
local government, appropriate agreements must be entered into by the affected local governments.
14
All business tax receipts are sold by the appropriate tax collector beginning July 1st of each year.
15
The taxes are due and payable on or before September 30th of each year, and the receipts expire on
September 30th of the succeeding year.
16
In several situations, administrative penalties are also
imposed.
17
New Tax Levies
A county or municipality that has not yet adopted a business tax ordinance or resolution may adopt a
business tax ordinance pursuant to s. 205.0315, F.S. The tax rate structure and classifications in the
adopted ordinance must be reasonable and based upon the rate structure and classifications
prescribed in ordinances adopted by adjacent local governments that have implemented a local
business tax.
18
If no adjacent local government has implemented a local business tax, or if the
governing body of the county or municipality finds that the rate structures or classifications of adjacent
local governments are unreasonable, then an alternative method is authorized. In such a case, the rate
structure or classifications prescribed in the ordinance of the local government seeking to impose the
tax may be based upon those prescribed in ordinances adopted by local governments that have
implemented a local business tax, in counties or municipalities that have a comparable population.
19
Tax Base/Rate Restructuring
Currently, counties and municipalities with an existing local business tax may not reclassify businesses,
professions, and occupations.
20
However, those counties and municipalities that underwent a
reclassification and rate structure revision pursuant to s. 205.0535, F.S., prior to October 1, 1995, or
during a window of time available from July 1, 2007, through October 1, 2008, for certain municipalities
may, every other year, increase or decrease by ordinance the rates of business taxes by up to 5
percent.
21
However, an increase may not be enacted by less than a majority plus one vote of the
governing body.
22
A county or municipality is not prohibited from decreasing or repealing any
authorized local business tax.
23
Exemptions
Chapter 205, F.S., provides several exemptions and exclusions from local business taxes. Customary
religious, charitable, or educational activities of nonprofit religious, nonprofit charitable, and nonprofit
educational institutions are excluded from the definition of “business,” “profession,” and “occupation”
11
Section 205.022(2), F.S.
12
Section 205.045, F.S.
13
Id.
14
Id.
15
Section 205.053, F.S.
16
Id.
17
Id.
18
Section 205.0315, F.S..
19
Id.
20
Section 205.0535, F.S.
21
Section 205.0535(4), F.S.
22
Id.
23
Id. STORAGE NAME: h0609a.WMC PAGE: 4
DATE: 1/31/2024
and are thereby excluded from paying local business taxes.
24
There is an optional partial exemption for
businesses located in enterprise zones.
25
The delivery and transportation of tangible personal property
by a business that is otherwise required to pay a local business tax may not be charged a separate
local business tax for such delivery or transportation service.
26
There are also exemptions for persons
engaged in specified farming activities,
27
certain nonresident persons regulated by the Department of
Professional Regulation,
28
certain employees of businesses that are required to pay a local business
tax,
29
certain disabled persons, the aged, and widows with minor dependents,
30
disabled veterans of
any war or their unremarried spouses,
31
and certain mobile home setup operations.
32
Charitable,
religious, fraternal, youth, civic, service, or other similar organization that make occasional sales or
engage in fundraising projects that are performed exclusively by the members where the proceeds
derived from the activities are used exclusively in the charitable, religious, fraternal, youth, civic and
service activities of the organization are also exempt.
33
Regulatory Provisions
Section 205.194, F.S., provides that any person applying for or renewing a local business tax receipt to
practice any profession or engage in or manage any business or occupation regulated by the
Department of Business and Professional Regulation, the Florida Supreme Court, or any other state
regulatory agency, including any board or commission thereof, must exhibit an active state certificate,
registration, or license, or proof of copy of the same, before such local receipt may be issued.
Sections 205.196, 205.1965, 205.1967, 205.1969, 205.1971, 205.1973 and 205.1975, F.S., provide
similar requirements for production of evidence of appropriate licensure prior to issuance of a business
tax receipt for pharmacies and pharmacists, assisted living facilities, pest control, health studios, sellers
of travel and telemarketing businesses, respectively.
Distribution of Revenues
The revenues derived from the business tax imposed by county governments, exclusive of the costs of
collection and any credit given for municipal business taxes, are apportioned between the county’s
unincorporated area and the incorporated municipalities located within the county by a ratio derived by
dividing their respective populations by the county’s total population.
34
Within 15 days following the
month of receipt, the apportioned revenues are sent to each governing authority; however, this
provision does not apply to counties that have established a new rate structure pursuant to s. 205.0535,
F.S.
35
Authorized Uses of Revenues
The tax proceeds are considered general revenue for the county or municipality. Additionally, the
county business tax proceeds may be used for overseeing and implementing a comprehensive
economic development strategy through advertising, promotional activities and other sales and
marketing techniques.
36
The proceeds of the additional county business tax imposed pursuant to s.
205.033(6), F.S., shall be distributed by the county’s governing body to a designated organization or
24
Section 205.022(1), F.S.
25
Section 205.054, F.S.
26
Section 205.063, F.S.
27
Section 205.064, F.S.
28
Section 205.065, F.S.
29
Section 205.066, F.S.
30
Section 205.162, F.S.
31
Section 205.171, F.S.
32
Section 205.193, F.S.
33
Section 205.192, F.S.
34
Section 205.033(4), F.S.
35
Section 205.033(5), F.S.
36
Section 205.033(7), F.S. STORAGE NAME: h0609a.WMC PAGE: 5
DATE: 1/31/2024
agency for the purpose of implementing a comprehensive economic development strategy through
advertising, promotional activities, and other sales and marketing techniques.
37
Total Revenues Collected
In fiscal year 2019-20, the last year for which complete and final data is available, counties collected a
total of $28.5 million of local business tax revenue.
38
In that same fiscal year, municipalities collected a
total of $168.4 million of local business tax revenue.
39
Local Government Financial Reports and Audits
Annual Financial Reports
Florida law requires all units of local government to complete annual financial reports and annual
financial audit reports. Each unit of local government must submit its annual financial report to the
Department of Financial Services (DFS) within nine months of the completion of its fiscal year.
40
A unit
of local government required to have a financial audit conducted must also file a copy of the audit report
along with its annual financial report within the same time period.
41
If a local government fails to file a
completed annual financial report within the required period, DFS must notify the Legislative Auditing
Committee.
42
Annual Financial Audits
Each county and each municipality with revenues or total expenditures and expenses exceeding
$250,000 must have an annual financial audit prepared by an independent certified public accountant,
unless the district has been notified before the start of the fiscal year that the Auditor General will
conduct a financial audit for that year.
43
Municipalities with revenues (or a total of expenditures and
expenses) between $100,000 and $250,000 are required to conduct a financial audit every three
years.
44
The financial audit must be performed according to specific statutory criteria and the rules of
the Auditor General.
45
At the conclusion of the audit, the auditor must discuss with the statutorily designated person for each
entity all of the auditor’s comments that will be included in the audit report.
46
If the designated person is
not available to discuss the auditor’s comments, their discussion is presumed when the comments are
delivered in writing to his or her office. The auditor is required to prepare an audit report in accordance
with the rules of the Auditor General.
47
The audit report must be filed with the Auditor General within 45
days after delivery of the audit report to the governing body of the audited entity, but no later than nine
months after the end of the audited entity’s fiscal year.
48
The audit report must include a written
statement describing corrective actions to be taken in response to each of the auditor’s
recommendations included in the audit report.
The Auditor General is required to notify the Legislative Auditing Committee of any audit report
prepared pursuant section 218.39, F.S., which indicates that an audited entity has failed to take full
37
Section 205.033(6)(b), F.S.
38
Revenue Estimating Conference Workpapers for HB 609, Impact Conference dated December 8, 2023, available at
http://edr.state.fl.us/Content/conferences/revenueimpact/archives/2024/_pdf/page36-39.pdf (last visited January 27, 2024).
39
Id.
40
Section 218.32(1)(d), F.S.
41
Section 218.32(1)(f), F.S.
42
Section 218.32(1)(d) F.S.
43
Section 218.39(1)(a) and (b), F.S.
44
Section 218.39(1)(g), F.S.
45
Section 218.39(2)-(7), F.S. See Report No. 2024-087, Review of Local Governmental Entity 2021-22 Fiscal Year Audit Reports
(December 2023), at https://flauditor.gov/pages/pdf_files/2024-087.pdf (last visited January 30, 2024), for information regarding audits
of local governments.
46
Section 218.39(5), F.S.
47
Section 218.39(7), F.S.
48
Section 218.39(7), F.S. STORAGE NAME: h0609a.WMC PAGE: 6
DATE: 1/31/2024
corrective action in response to a recommendation that was included in the two preceding financial
audit reports.
49
Legislative Auditing Committee
The Legislative Auditing Committee is a joint committee of the Florida Legislature, established by the
Joint Rules of the Florida Legislature and Section 11.40, F.S., that is tasked with continuous oversight
of government operations thorough the auditing and review activities of the Auditor General and the
Office of Program Policy Analysis and Government Accountability (OPPAGA).
50
After receiving a
notification from the Auditor General, the Legislative Auditing Committee may direct the governing body
of the audited entity to provide a written statement to the committee explaining why full corrective action
has not been taken or, if the governing body intends to take full corrective action, describing the
corrective action to be taken and when it will occur.
51
If the Legislative Auditing Committee determines
that the written statement is not sufficient, it may require the chair of the governing body of the local
governmental entity or the chair’s designee, the elected official of each county agency or the elected
official’s designee, the chair of the district school board or the chair’s designee, the chair of the board of
the charter school or the chair’s designee, or the chair of the board of the charter technical career
center or the chair’s designee, as appropriate, to appear before the committee.
52
If the Legislative
Auditing Committee determines that an audited entity has failed to take full corrective action for which
there is no justifiable reason for not taking such action, or has failed to comply with committee requests
made pursuant to this section, the committee may proceed in accordance with s. 11.40(2), F.S.
53
Section 11.40, F.S., governs the Legislative Auditing Committee, including the scope of its authority
and actions it may take in specified circumstances. In the case of a local governmental entity or district
school board, these actions include, but are not limited to, directing the Department of Revenue (DOR)
and the Department of Financial Services (DFS) to withhold any funds not pledged for bond debt
service satisfaction which are payable to such entity until the entity complies with the law.
54
Effect of Proposed Changes
Local Business Taxes
The bill revises s. 205.0535, F.S., to create a new limitation on the revenue a local government may
receive from local business taxes under ch. 205, F.S. The bill provides that local fiscal year 2023-24 is
the base year that future years are measured against. If revenues in a future year exceed the base
year, the local government must proportionately reduce the local business tax rates so that the revenue
raised from the local business tax will not exceed the base year. The local government must also
provide refunds for the year that exceeded the base year, back to the businesses that paid the tax, so
that the total revenue for that year aligns with the base year. The local government must also provide
refunds for amounts received in the current year before the rates are reduced, of the difference
between the rate collected and the adjusted rate.
These changes do not apply to a local government that levies a local business tax on the basis of gross
receipts.
55
The bill also makes conforming changes to several other sections of ch. 205, F.S.
Local Government Financial Reports and Audits
49
Section 218.39(8), F.S.
50
Section 11.40, F.S., See also, Joint Legislative Auditing Committee, available at http://www.leg.state.fl.us/cgi-
bin/View_Page.pl?File=about.cfm&Directory=committees/joint/Jcla/&Tab=committees (last visited January 30, 2024).
51
Section 218.39(8)(a), F.S.
52
Section 218.39(8)(b), F.S.
53
Section 218.39(8)(c), F.S.
54
Section 11.40(2)(a), F.S.
55
The local business tax levied on the basis of gross receipts is found in s. 205.044, F.S., and is currently levied only by Panama City
and Panama City Beach. STORAGE NAME: h0609a.WMC PAGE: 7
DATE: 1/31/2024
The bill creates a new s. 205.046, F.S., which requires the annual audit reports described above to
include an affidavit signed by the chair of the governing board of the local government stating the local
government has complied with the requirements of s. 205.0535, F.S., as revised by the bill. This
affidavit must be contained in a separate document. If the local government has not complied, the
affidavit must include a description of the noncompliance and corrective action taken by the local
government to correct the noncompliance and to prevent such noncompliance in the future. The bill
requires the Auditor General to request evidence of corrective action from each local government not in
compliance with s. 205.0535, F.S., and for such local government to provide evidence of the initiation of
corrective action within 45 days and evidence of completion of corrective action within 180 days after
the date it is requested by the Auditor General. The Auditor General must notify the Legislative Auditing
Committee if the local government does not take corrective action within the specified timeframe or fails
to comply with the Auditor General’s request.
Failure to comply with s. 205.0535, F.S., could therefore ultimately result in the Legislative Auditing
Committee directing DOR and DFS to withhold any funds not pledged for bond debt service satisfaction
which are payable to such local government entity until the entity complies with the law.
56
This would
include revenue sharing monies that the state distributes to local governments.
B. SECTION DIRECTORY:
Section 1: Amends s. 11.40, F.S., related to the types of hearings the Legislative Auditing Committee
can schedule.
Section 2: Amends s. 11.45, F.S., to add a reporting requirement for the Auditor General.
Section 3: Amends s. 205.0315, F.S., to modify the statute to reflect new restrictions on the levy of
local business taxes.
Section 4: Amends s. 205.033, F.S., to modify the statute to reflect new restrictions on the levy of
local business taxes.
Section 5: Amends s. 205.043, F.S., to modify the statute to reflect new restrictions on the levy of local
business taxes.
Section 6: Amends s. 205.0535, F.S., to restrict the levy of local business taxes to no more than the
taxes levied in fiscal year 2023-24, and to require refunds and rate reductions if that
limitation is exceeded.
Section 7: Amends s. 205.0536, F.S., conforming provisions to changes made by the bill.
Section 8: Creates s. 205.046, F.S., to require a new affidavit as part of the audit of financial
statements pursuant to s. 218.39, F.S.
Section 9: Amends s. 215.97, F.S., conforming provisions to changes made by the bill.
Section 10: Amends s. 218.32, F.S., conforming provisions to changes made by the bill.
Section 11: Amends s. 489.537, F.S., conforming provisions to changes made by the bill.
Section 12. Provides an effective date of July 1, 2024
II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
A. FISCAL IMPACT ON STATE GOVERNMENT:
1. Revenues:
56
Section 11.45(2), F.S. STORAGE NAME: h0609a.WMC PAGE: 8
DATE: 1/31/2024
None.
2. Expenditures:
None.
B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
1. Revenues:
The Revenue Estimating Conference has not estimated the impact of the bill on local government
revenues.
2. Expenditures:
Amounts collected in excess of the new limitation will be required to be refunded or credited to
businesses, which may have an administrative cost.
C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR:
Persons and businesses currently paying a local business tax would not pay more than they did in
2023-24 when paying the tax in future years.
D. FISCAL COMMENTS:
None.
III. COMMENTS
A. CONSTITUTIONAL ISSUES:
1. Applicability of Municipality/County Mandates Provision:
The county/municipality mandates provision of Art. VII, section 18, of the Florida Constitution may
apply if the bill requires the expenditure of funds to administer the refund and credit provisions of the
bill. An exemption may apply if this results in an insignificant fiscal impact.
The county/municipality mandates provision of Art. VII, section 18, of the Florida Constitution may
also apply because this bill eliminates the ability for counties and municipalities to collect more in
local businesses taxes than they did in local fiscal year 2023-24, which may have the effect of
reducing their authority to raise revenue. This aspect of the bill does not appear to qualify under any
exemption or exception. If the bill does qualify as a mandate, final passage must be approved by
two-thirds of the membership of each house of the Legislature.
2. Other:
None.
B. RULE-MAKING AUTHORITY:
None.
C. DRAFTING ISSUES OR OTHER COMMENTS:
None.
IV. AMENDMENTS/COMMITTEE SUBSTITUTE CHANGES
On January 31, 2024, the Ways & Means Committee adopted a strike-all amendment and reported the bill
favorably as a committee substitute. The amendment:
Removed provisions that would have repealed Chapter 205, F.S., related to local business taxes. STORAGE NAME: h0609a.WMC PAGE: 9
DATE: 1/31/2024
Replaced those provisions with provisions that will cap the revenue local governments may receive
from local business taxes to no more than the revenue received in local fiscal year 2023-24, other than
local governments that impose a local business tax levied upon gross receipts.
Required the local government to calculate and adopt rate reductions and provide refunds if the
revenue in any given year exceeds the revenue in 2023-24.
Required an annual affidavit of compliance with any necessary reductions or refunds to be submitted to
the Auditor General with existing annual financial reports.
Required the Auditor General to identify any local governments not in compliance with these new
requirements, and to notify the local government of the need to comply.
Required the Auditor General to notify the Legislative Audit Committee of any local governments with
persistent noncompliance.
Made implementing and conforming changes.
This analysis is drafted to the committee substitute as approved by the Ways & Means Committee.