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Tampa, FL 33637

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Scholarship Donations in Lieu of FL Sales Tax on Rent?

Does your business make donations to help fund scholarships? Does your business also pay sales tax on commercial rent? As of October 1, 2018, Florida businesses can apply to reduce the sales tax on commercial rent dollar for dollar by the amount of money donated to specific scholarship organizations. Even if your business never considered making donations for scholarships, would you consider helping to pay for someone to attend college instead of paying sales tax on commercial rent? With a little foreplaning, you have this option available now because of the Florida Sales Tax Credit Scholarship Program created under new Florida Statute 212.099. Does your business get goodwill with customers for paying sales tax on rent? I didn’t think so. Why not use this opportunity to not only help needy kids have a better chance in this country, but also use the scholarship funding to promote just how good your business is in the community? Continue reading the article to learn more.

Called the “Florida Sales Tax Credit Scholarship Program,” the new law allows an eligible commercial tenant to obtain a sales tax credit against the sales tax on commercial real property rent that would have otherwise been collected by a landlord. The sales tax credit equals 100% of the “eligible contributions” made to a nonprofit scholarship-funding organization that is part of the Gardiner Scholarship Program or the Florida Tax Credit Scholarship Program as defined in sec. 1002.395(2)(f), F.S.

An eligible tenant must apply to the Department of Revenue (“Department”) for an allocation of tax credits relating to the scholarship program. The application requires the tenant to provide the following:

  • the state fiscal year when the contributions will be made,
  • the scholarship organization to receive the contribution,
  • the planned amount of the contribution,
  • the address of the property subject to the commercial rental tax that the tenant plans to use for the corresponding credit,
  • and the federal employer identification number of the landlord otherwise collecting the sales tax on the rental.

After application, the Department must approve the tax credits on a first-come, first-served basis, with a state fiscal year cap of $57.5 million available to be approved. The Department must also provide an approval/denial letter for each landlord the tenant applied for the tax credit. Within 10 days of approving/denying the application, the Department must provide a copy of the decision to the charitable organization identified by the business. The approval letter will contain certain identifying information of the landlord as well as the amount of tax credit for which the business has been approved.

When a charitable organization receives an eligible contribution, the charitable organization must provide to the contributing business a separate certificate of contribution for each landlord for whom the credit will be taken. The certificate of contribution must include the following:

  • the contributor’s name,
  • federal employer identification number if available,
  • the amount contributed, the date of contribution,
  • the name of the charitable organization, and
  • the federal employer identification of the landlord.

When a landlord receives the Department’s approval letter and a certificate of contribution from the tenant, both which must identify the landlord, the landlord must reduce the commercial rental tax collected by the amount of contributions indicated on the certificate of contribution. However, the reduction may not exceed the amount of credit approved by the Department or exceed the amount of tax otherwise to be collected. The commercial rental tax may not be reduced before October 1, 2018.

If tenant cannot use all the credits due to an insufficient amount of tax on rent, then the unused credit may be carried forward for up to 10 years! Unfortunately, a tax credit may not be claimed on an amended return or through a refund.

Commercial landlords must pay attention to this new law as the landlord has no say so whether a tenant is able to take this credit, but the landlord must nonetheless follow all the rules associated with taking the credit on the landlord’s return or become liable for the sales tax not paid by the tenant. This part of the law was not well thought out as the new law exposes the landlord to sales tax liabilities. For example, a landlord must file and pay sales tax returns electronically in order to take the credit allowed by the certificate of contribution. If the landlord files a paper sales tax return, then the landlord will become liable for the sales tax. If the landlord doesn’t keep meticulous records of every certificate of contribution, then the landlord will become liable for the sales tax. This is going to be yet one more “gotcha tax” for sales tax auditors to unleash upon Florida taxpayers.

There are also specific rules focused on the tenant. For example, a tenant may not transfer its approved tax credit or carryforward of a tax credit to another entity unless all the assets of the business are conveyed in the same transaction and the successor business continues the same lease with the landlord.

Within any state fiscal year, a tenant may rescind part or all the approved tax credit, which rescinded amount will become available to other eligible businesses based on a first-come, first-served basis based on the applications received after the date the rescindment is accepted by the Department.

An “eligible contribution” is a monetary contribution from an eligible tenant to an approved nonprofit scholarship-funding organization. It is important to note the tenant making the contribution cannot designate a specific student as the recipient of the contribution.

A “charitable organization” must be a state university; or an independent college/university that is eligible to participate in the William L. Boyd, IV, Florida Resident Access Grant Program that is located/chartered in Florida, is a not-for-profit, and is accredited by the Commission on Colleges of the Southern Association of Colleges and Schools; or is a charitable organization that: (1) is a 501(c)(3); (2) is a Florida entity formed under Chapters 605, 607, or 617 and whose principal office is in Florida; and (3) complies with other statutory mandates. See, ss. 1002.385 and 1002.395, F.S.

If your company or your client’s company is interested in applying for the sales tax credits available under the new sec. 212.099, F.S., then it is not a given that your company will be approved. Consider contacting the the Law Office of Moffa, Sutton, & Donnini, PA to give your company the best chance of getting approved and start supporting scholarships for Floridians.

At the law offices of Moffa, Sutton, & Donnini, PA, our primary practice area is Florida taxes, with a very heavy emphasis in Florida sales and use tax. We have defended clients against Florida sales and use taxes for more than 25 years with over 100 years of cumulative experience working for our firm. Our partners are both CPAs/Accountants and Attorneys, so we understand both the accounting side of the situation as well as the legal side. We represent taxpayers and business owners from the entire State of Florida. Call our offices today for a FREE INITIAL CONSULTATION to confidentially discuss how we can help you qualify for the Florida Sales Tax Credit Scholarship Program.

Florida Sales Tax Attorney; Florida Sales Tax Audit; Orlando Sales Tax Attorney; Orlando Sales Tax Audit; Miami Sales Tax Attorney; Miami Sales Tax AuditABOUT THE AUTHOR: Mr. Sutton is a Florida licensed CPA and Attorney and a shareholder in the law firm the Law Offices of Moffa, Sutton, & Donnini, P.A. Mr. Sutton is in charge of the Tampa office of the firm and his primary practice area is Florida sales and use tax controversy. Mr. Sutton worked in the State and Local Tax department of Arthur Andersen for a number of years and was been an adjunct professor at Stetson University College of Law since 2002 – 2013 teaching State and Local Taxation as well as Boston University’s LLM in Tax Law. Mr. Sutton also serves as the State and Local Tax Director for the American Academy of Attorney-CPA’s and speaks frequently throughout Florida on Florida tax matters. You can read more about Mr. Sutton in his firm BIO.

AUTHORITY

Sec. 212.031, F.S. (Florida sales tax on rent)

Sec. 212.099, F.S. (Florida Sales Tax Credit Scholarship Program)

Sec. 1002.385, F.S. (Gardiner Scholarship)

Sec. 1002.395, F.S. (Florida Tax Credit Scholarship Program)

ADDITIONAL RESOURCES

2018 Florida Tax Legislative Update, published March 30, 2018, by David Brennan, Esq.

Florida’s Taxpayer Advocate Can Finally Advocate, published March 23, 2018, by James Sutton, CPA, Esq.

FL Office of Financial Regulations Extorting Business Owners for Monday, published February 20, 2018

Florida Sales Tax – Voluntary Disclosure Program, published April 9, 2018, by Jeanette Moffa, Esq.

© 2018 James Sutton, CPA, Esq. All Rights Reserved

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