Florida Tax Attorney Blog

As someone who frequently speculates on high-risk penny stocks, I never could have imagined that buying tickets to my alma mater's homecoming football game would become one of the most volatile investments in my portfolio. But as the University of Miami's season opener against Maryland quickly approaches, news of what has been dubbed the worst college football scandal in NCAA history continues to dominate the headlines, and the future of one of the Nation's most renowned collegiate athletic programs remains uncertain.

In a recent article, Forbes contributor, Kelly Phillips Erb, put an interesting spin on the University of Miami football scandal by asking why the multi-million dollar college sports industry is exempt from federal taxation? In her opinion, the U.S. Tax Code should recognize college athletics for what it is: a business.

In support of her argument, Erb calls attention to the over $5 billion in revenue generated by college athletic programs in public universities last year and to football-related expenditures in excess of $70 million by schools like Auburn and Ohio State. But these figures are misleading when considered in the abstract.

In a 2010 report published by the NCAA, Professor Daniel L. Fulks, Ph.D., CPA, offers a pragmatic representation of the financial aspects of collegiate athletics. For Football Bowl Subdivision athletic programs (formerly known as Division 1-A), the median figure for revenue generated during 2009 was $32,264,000; the corresponding figure for expenses incurred was $45,887,000. For Football Championship Subdivision athletic programs (formerly known as Division I-AA), the median figure for revenue generated during 2009 was $2,886,000; the corresponding figure for expenses incurred was $12,019,000. For Division I athletic programs without football (formerly known as Division I-AAA), the median figure for revenue generated during 2009 was $2,099,000; the corresponding figure for expenses was $10,502,000.

With the median expenses of Division I athletics exceeding median revenues by $8.4 - $13.6 million, this is not the type of operation that comes to mind as a for-profit venture.

Still, Erb is right to call attention to the issue because although not every athletic program is being operated with an improper profit motive, a significant minority of programs probably are. In the end, the relevant question is one of profit motive. If an athletic program's primary purpose is profit, then tax-exempt status is not appropriate. However, the presence or absence of a profit motive must be evaluated on a program-by-program basis. Otherwise, undue hardship would be imposed upon many compliant colleges and universities.

But is a program-by-program evaluation practical? Probably not. The benefit of any additional tax revenue generated by revoking the tax-exempt status of a few non-compliant athletic programs would almost certainly be outweighed by the costs associated with establishing and operating a governmental program to evaluate the profit motives of collegiate athletic programs.

SOURCES:

• NCAA Division I Intercollegiate Athletics Report: Revenue & Expenses
• Kelly Phillips Erb, Miami Football Scandal Raises Questions About Tax-Exempt Athletics
• PHOTO CREDIT: Jeffrey Boan - AP

As the South Florida real estate market continues to decline, home prices throughout the State continue to drop, and property taxes are increasing for many Florida homeowners.

If this seems counter-intuitive it's because it is. Logically, a homeowner's property tax burden should increase or decrease in direct proportion to increases and decreases in the fair market value of the home. This is especially true in Florida where property is assessed at "just," or market, value and reassessed on an annualized basis (as compared to other states where property is reassessed on a biennial or triennial basis). Still, county assessments typically trail market changes by a year or more in Florida. This is because Florida law mandates that assessments be performed a year in arrears, with January 1 designated as the statutory date for assessment.

This means that your current assessment is based on comparable sales and other market indicators for January 2- December 31 of LAST year. Thus, your 2011 property tax assessment is based on 2010 market data, and changes in the market value of your home that occur after January 1 are not reflected in your 2011 property tax bill. While this may be desirable in a rising market, it deprives homeowners of a tax benefit to which they are legally entitled in a falling market.

Moreover, although every piece of real estate is unique, county tax appraisers use a mass method of appraisal to assess home values.

Continue reading "YOUR HOME MAY BE OVERVALUED FOR FLORIDA PROPERTY TAX PURPOSES" »

Police departments across the Nation are advising citizens of a disturbing trend in phishing email scams whereby identity thieves impersonate the Internal Revenue Service (IRS) in efforts to obtain personal financial information from taxpayers.

Over the past several years, various forms of this deceptive email scheme have been circulated on the Internet, but this identity theft tactic is becoming alarmingly popular. The most common IRS email scam claims to be from the IRS and notifies the taxpayer that he or she qualifies for a tax refund and instructs the taxpayer to open an attachment or click on a link to access a refund form.

The latest variation of this IRS email hoax claims to be from the IRS and informs the recipient that the IRS has rejected his or her electronic tax payment. The email instructs the taxpayer to open an attachment or click on a link to access a form to rectify the problem.

By opening the attachments or clicking on the links contained in these phishing emails, the taxpayer unknowingly downloads a virus which enables identity thieves to collect confidential information about the taxpayer (e.g., credit card numbers, online banking login information, social security numbers, birth dates). This fraudulently obtained information is then used by the identity thieves to access the victim's bank accounts and obtain credit cards, loans, and other benefits in the victim's name and at the victim's expense.

If you receive an email from the IRS requesting personal information, do not become a victim of identity theft. Do not click on any links contained within the email. Do not open any attachments. Do not send an email reply to the sender.

These emails look official (see sample email here), but the IRS never contacts taxpayers by e-mail. If the IRS must contact you regarding a tax matter, it will always do so by way of traditional mail.

SOURCES:

• IRS Resources, What To Do If You Receive a Suspicious IRS-related Communication
• IRS Newswire, IRS Warns of Email Scam About Tax Refunds
• IRS Resources, Suspicious Emails and Identity Theft
• Anthony Holloway (Columbus Dispatch), IRS Warns of Email Scams That Seek Info
• Chris Cifatte (WINK News), New Email Hoax Hitting Southwest Florida Claims To Be From IRS

In my last post, I concluded that a marijuana tax could not generate enough revenue to justify legalization solely on fiscal grounds, but that marijuana should nevertheless be legalized in the interest of preserving public respect for the law as an institution.

In response, some readers have expressed concern that the legalization of marijuana would result in decreased levels of societal productivity. I believe that their concerns are misplaced. Indeed, basic principles of economics indicate that U.S. gross domestic product (GDP) would increase, not decrease, in response to legalization.

Goods like marijuana that are illegally produced and distributed are not included in the annual calculation of GDP. If marijuana were legalized, domestic production of marijuana would be included in the calculation of GDP. In addition, with no incentive to smuggle the drug into the United States, more marijuana would be cultivated and distributed domestically, thereby further enhancing U.S. GDP. In this regard, it should also be noted that legalization would largely abate American cash flows to international drug cartels. This, in turn, could reduce marijuana-related gang violence both domestically and abroad.

Of course, any increase in GDP would be offset by any reduction in drug enforcement costs. Still, the increase in GDP would probably be substantially greater than the decrease in costs of enforcement, resulting in a net increase in overall GDP. In any event, governmental resources currently allocated to marijuana enforcement would likely be reallocated to other drug enforcement programs rather than eliminated altogether.

A sin tax is a form of excise tax levied on goods or activities that are widely perceived as harmful or immoral - e.g., alcohol, cigarettes, gambling, indoor tanning. The theory is that certain goods and activities impose costs on society that individuals do not consider before consuming harmful substances or engaging in harmful or immoral activities. By imposing a sin tax on these commodities, the government simultaneously discourages the objectionable behavior and generates tax revenue.

The Fraser Institute's Stephen Easton estimates total U.S. spending on marijuana at $45-$110 billion per year (a more precise figure is not attainable due to the illegal nature of this type of spending). Based on these figures, Easton estimates that a tax on recreational marijuana use could generate at least $40 billion annually.

Former DEA agent Robert Stutman counters Easton's revenue-generating argument by calling attention to the fiscal shortcomings of the current tax on alcohol. According to Stutman, for every dollar generated by the alcohol tax, the federal government must expend $9 to address alcohol-related consequences - e.g., Medicare and Medicaid treatment for alcohol-induced health problems and rehabilitation programs.

But while the alcohol tax is not a picture of efficiency, Stutman's attempt to analogize marijuana to alcohol is flawed. Specifically, he overlooks the minimal health consequences and proven health benefits of marijuana.

Continue reading "TAXATION OF MARIJUANA WOULD NOT GENERATE ENOUGH REVENUE TO JUSTIFY LEGALIZATION ON FISCAL GROUNDS - STILL, WISE POLICY CALLS FOR LEGALIZATION" »

As a lawyer, I am accustomed to hearing a certain seven-word phrase from my friends and family on a regular basis: "I have a legal question for you." Lately, I have been receiving many questions about Florida's homestead property tax exemption, so I thought it would be helpful to briefly discuss the basic provisions of the Florida law on this point.

Pursuant to the Florida Constitution, "'[e]very person who has the legal or equitable title to real estate and maintains thereon the permanent residence of the owner, or another legally or naturally dependent upon the owner, shall be exempt from taxation thereon, except assessments for special benefits, up to the assessed valuation of twenty-five thousand dollars ($25,000) and, for all levies other than school district levies, on the assessed valuation greater than fifty thousand dollars ($50,000) and up to seventy-five thousand dollars ($75,000), upon establishment of right thereto in the manner prescribed by law."

WHAT IT MEANS: In Florida, the owner of homestead property is constitutionally entitled to a property tax exemption of up to $50,000 ($25,000 for the first $50,000 in assessed valuation and $25,000 for the assessed valuation between $50,000 and $75,000) if he or she satisfies the statutory conditions set forth by the Florida Legislature.

Pursuant to Florida Statute 196.031(1)(a), "[e]very person who, on January 1, has the legal title or beneficial title in equity to real property in this state and who resides thereon and in good faith makes the same his or her permanent residence, or the permanent residence of another or others legally or naturally dependent upon such person, is entitled to an exemption from all taxation, except for assessments for special benefits . . ."

WHAT IT MEANS: In this statute, the Florida Legislature sets forth 4 basic conditions that must be satisfied in order to qualify for the homestead exemption from ad valorem taxation: (1) The homestead property must be located in Florida. (2) The person claiming the exemption must hold legal or equitable title to the property. In other words, the person claiming the exemption must have an ownership interest in the property. In this regard, the property may be held individually, jointly, or through a trust. (3) The property must be used as a "permanent residence" by the person claiming the exemption or by a natural dependent of the person claiming the exemption. "Permanent residence" has been defined as "that place where a person has his or her true, fixed, and permanent home and principal establishment to which, whenever absent, he or she has the intention of returning." See Fla. Stat. 196.012(18). Whether a property constitutes a "permanent residence" is a question of fact to be determined by the property appraiser on a case-by-case basis. In making this determination, the property appraiser may consider factors like where children are enrolled in school, where the person claiming the exemption is employed, payment of utilities at the subject property, and the address contained on documents like driver's licenses, vehicle registration, voter registration, bank statements, and federal tax returns. See Fla. Stat. 196.015. (4) The property must be used as a "permanent residence" as of January 1 of the tax year for which the exemption is sought.

Continue reading "WHAT YOU NEED TO KNOW ABOUT FLORIDA'S HOMESTEAD TAX EXEMPTION" »