The Legislature ended, Sine Die, at 11:49 pm on Friday, May 6, 2005 – on time! The House filed 1083 bills during the 2005 Legislative Session; of those, 218 passed. The Senate filed 1434 bills during the 2005 Legislative Session; of those, 176 passed for a total of 2517 bills filed and 394 passed by both Chambers. Here is a recap of bills pertainent to your industry:

Many times in the closing hours of the Leigslative Session, several bills are combined together. We refer to them as "trains" and this is what happened with CS/CS/SB 1322. This bill combines provisions of numerous related bills including the Public Service Commission nominating process and ethics reform, regulation of communications including deregulation of broadband and Voice-over-Internet-Protocol, storm infrastruture recovery, government-owned communications-network services, and Lifeline.

• Public Service Commission – nominations and appointments to the PSC is revised. The Nominating Council will continue to receive applications, conduct interviews, and select a minimum of six nominees per vacancy on the Commission. However, now the list of nominees will go to a newly created joint legislative Committee on PSC Oversight. The joint committee will select three nominees to recommend to the Governor and then the Governor would appoint one commission from the list. If the Governor delays the appointment, the joint committee must select a commissioner from the list within 30 days. The bill also codifies the independence of the PSC.

• Broadband and Voice-over-Internet Protocol – The bill deregulates broadband and VoIP service and provides definition. The bill provides that communications activities that are not regulated by the PSC are subject to the state’s general applicable business regulation and deceptive trade practies and consumter protection laws. VoIP, regardless of platform, provider or protocol, is added to the prohibition that local governments may not directly or indirectly regulate terms and conditions of the provisioning of certain communications services.

• Lifeline Assistance – Several changes were made to the Lifeline section including increasing the eligibility for Lifeline services to 135 percent.

• Storm Recovery – The bill provides for recovery by local telecommunciation companies having carrier-of-last-resort responsibility to recover costs and expenses for damages to plant, lines and other infrastruture as a result of a named tropical storm. There is a process and limitation as to any recovery.

• Government provided communication services – the bill provides how a local government can provide specified communication services. If a governmental entity decides it would like to provide communication services it must first hold two public hearings no sooner than 30 days apart to consider whether the governmental entity will provide such service. All communication dealers will be electronically notified before the first hearing including information such as geographic area proposed to be served and the services that are not believed to be adequately provided. The authorization to provide communication services must be by majority vote. Then the govermental entity is required to make available to the public its written business plan for the proposed communicaitons service venture and sets forth the minimum requirements to be included in the plan. There are provisions in the bill if the governmental entity does not meet its business plan including selling off, or partnering with a private provider just to name a few.

The Florida Legislature successfully passed legislation during the closing minutes of the 2005 Legislative Session to repeal the substitute communications systems tax. For legislation that never received a negative vote and full support from the Governor, it was no easy task. It took major effort by the Coalition to Repeal the Substitute Communications Systems Tax who had 47 members by mid-Session ranging from small businesses to the state’s largest associations including Associated Industries of Florida. Even organizations such as, Florida TaxWatch, Enterprise Florida, and IT Florida joined the efforts of the Coalition to abolish this tax.

How did Florida have such a tax in its laws? In 1985, the term "substitute communications systems tax" was added to the list of services subject to gross receipts and sales tax. Remember, in 1985 most of the communications services available today were not yet in existence; "land-line" telephone was the most common means of communication.

However, in 2000 Regular Session, the Legislature did a major re-write of Florida’s communications tax law. This rewrite was very complex and many details were not considered including the substitute communications systems tax. The original intent of taxing substitute communications systems tax was to provide equal tax treatment on an in house telephone system and telephone service purchased from a commercial provider. But the tax's potential scope grew when it was not properly addressed by the Legislature and they defined taxable communications services as those that transmit or route voice, data, audio, video or any other information or signals by any existing or future medium or method. This opened the door for the Department of Revenue to consider intercom systems; two-way radio systems; computer network systems just to name a few as a form of a substitute communications system.

No one realized the magnitude of the problem until the Department of Revenue held a workshop on August 1, 2003 to draft rules on what was considered a substitute communications system. The more they discussed the issue, it seemed as though the list of taxable items grew longer. IT Florida estimated the tax could have cost Florida businesses $200 million to $500 million a year if enforced. Even individuals were at risk to pay the tax on systems used in their homes.

And to make matters worst, Florida was the only state to have such a tax. Therefore when organizations like Enterprise Florida tried to recruit companies to relocate to our state, businesses were wary about coming due to the uncertainly of the substitute communication systems tax and if it was going to be enforced, what would be included in the definition. Why would any company want to relocate to Florida and possibly have to pay up to 14% tax on its internal communications system?

To correct the problem, the Florida House of Representatives unanimously passed HB 49 by Representative John Stargel (R-Lakeland) during the first week of the Legislative Session. Rep. Stargel’s bill had bi-partisan support with 58 co-sponsors.

But in the Senate, the Coalition found several road blocks. First, Senator Mike Haridopolos had filed the companion bill to HB 49 which would have repealed the tax. SB 818 also had bi-partisan support with 23 additional sponsors signing on to the bill. Unfortunately, that bill was never heard. Instead, Senator Lee Constantine (R-Altamonte Springs), the Chairman of the Senate Committee on Utilities and Communications filed a similar version (SB 2070), but amended it in his committee from an outright repeal to a two-year suspension of the tax and created a task force to review the telecommunications tax.

At every committee stop in the Senate, Senator Constantine was asked by his fellow Senators to change this bill to a full repeal, but it was not until the final hours of the Session that the bill was amended to include the full repeal and returned to the House for final passage.

SB 2070 as passed by the Legislature contains not only the repeal, but also creates a nine-member task force to consider how communications services should be taxed.

The task force is charged with studying several areas:

• National and state regulations and tax policies relating to the communications industry, including the Internet Tax Freedom Act.
• The levels of tax revenue that have been generated by state communications services taxes and whether future revenues will be sufficient to fund government services and bonds.
• Options for funding such services and bonded indebtedness if future revenues from communication services taxes are found to be insufficient or unreliable.
• How communications services taxes have affected Florida's competitiveness.
• How changes in communications technology affect the ability to design tax laws.
• The administrative burdens imposed on service providers.

The bill appropriates $100,000 for task force members' expenses and $500,000 to pay for experts, consultants, and services needed to carry out their mission.

Legislation was filed this Session to make changes to the local occupational license taxes. We worked with the co-sponsors, Representative Susan Goldstein and Senator Nan Rich to make sure the language we added to this statute a few years ago would be protected. The House bill passed but died in Messages and the Senate bill died in Committee.