State Farm on the hook for almost $2.7 million in Florida
State Farm on the hook for almost $2.7 million in Florida | Insurance Business America
Insurance News
State Farm on the hook for almost $2.7 million in Florida
Appeals court believes insurer miscalculated its net income
Insurance News
By
Mika Pangilinan
State Farm is on the hook for nearly $2.7 million in corporate taxes after a Florida appeals court found it had miscalculated its net income.
The ruling upholds the judgment made by a circuit court regarding a dispute between the insurer and the Florida Department of Revenue.
At the heart of the matter is a specific section of Florida’s corporate income tax code requiring insurance companies to add back the amount of interest from state and local bonds that is excluded from their federal taxable income.
State Farm argued that it shouldn’t have to add back the entire interest from state and local bonds. It said 15% of that interest had been used to reduce its losses incurred deduction and was not fully excluded from its federal taxable income.
Meanwhile, the Florida Department of Revenue said the use of the phrase “excluded from taxable income” in the state’s tax code is broad enough to cover both express exclusions and deductions. It also argued that State Farm had to add back the entire amount of interest regardless of how it was treated elsewhere in the federal tax code.
In the ruling, Judge Adam Tanenbaum of the First District Court of Appeal referred to a textual analysis of the phrase “excluded from taxable income,” as well as the absence of any qualifying terms in the statute and the comparable use of the term in the Internal Revenue Code.
The court determined that the phrase refers to the total amount of interest either omitted from or deducted from gross income, not the net effect of other calculations that may reduce the tax liability.
“The circuit court’s reading of section 220.13(1)(a)2. in support of its judgment in favor of the department is consistent with the reading of that statute as we have explained here,” Tanenbaum wrote in the court’s ruling. “We, in turn, find no legal error in the judgment on review.”
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