Trust This. Non-Floridian Tax

👋 Happy Friday! How can I tell the 🏘️ housing market is turning? I’m getting more spam texts and phone calls asking me to buy a property instead of to sell a property.

1. A tax on non-Florida investors

A local Florida state senator proposed that a special tax be assessed on out-of-state companies and individuals investing in Florida real estate.

Part of a three-part plan laid out by Sen. Randolph Bracy, the tax portion is a new twist. It would apply to housing purchased by corporations and individuals with out-of-state addresses, including “snowbirds.”

The other two parts of the plan call for local incentives for the development of community affordable housing and tax breaks and grants for developers willing to set aside portions of new developments for affordable housing.

What's next: A potential ballot measure that would put a one-year cap on rent increases is also on the table at next week’s Commission meeting.

The tax would function much like the “tax” or fees that new incoming residents pay when registering their car in Florida. These fees or taxes would be used to finance affordable housing incentives.

Other states with income taxes charge a tax that is collected when a non-resident of the state sells real estate located in the state. The tax is a percentage of the sales price and is collected at closing and then sent to the state’s revenue department. So it’s not unheard of.

Avoiding the tax would be easy for corporations, and constitutional issues will need to be worked out.

The bottom line: These are just proposals. To be part of the discussion, participating in the August 9 meeting is essential.

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2. More insurance moves

In the continuing soap opera that is swirling around Florida’s homeowner’s insurance industry, Demotech this week withdrew ratings of two Florida insurers and downgraded two companies.

Why it matters: At least the rating agency didn’t downgrade 27 companies as it had planned to do last week. If an insurer is downgraded from “A” to “M” or “S” status, most conventional mortgage lenders will not accept the insurance. If an insurer is simply not rated at all, then no mortgage lender should accept the insurance coverage as adequate.

Demotech downgraded the following companies from “A Prime” to “A”:

It downgraded the Financial Stability Rating of United Property & Casualty Insurance Company from A to M (“Moderate”). Most mortgage lenders only accept insurers rated at some level of “A” when making and holding mortgage loans. Ratings of “M” or “S” (satisfactory) won’t cut it.

Weston Property Insurance and FedNat were dropped from Demotech’s ratings. Any borrower whose property is insured by one of these companies, or United, will have to find new insurance coverage. Being dropped from ratings is an indication that the company’s solvency is in question and could be going into liquidation.

By the numbers:

Good advice heard today from a client:

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3. What you missed

4. Parting shot

Something to think about that I heard at a community meeting this week: Why does Sunbiz have a place to insert your company’s employer identification number? How many companies have had their identities compromised because it’s out there? What statute or regulation requires that it be entered on the annual report? Should I just not enter it on the report?

Reminds me of this Men at Work ‘80’s classic. If you want to catch up with the band, they’re performing with Rick Springfield tonight in St. Augustine at 7 pm. Tickets are still available.

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