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Citrus Commission OKs Idea To Progress on Tax Reform

Lakeland Ledger – April 4, 2008

The Florida Citrus Commission on Thursday agreed to “move forward” on a major reform of state citrus taxes that revives its authority to tax imported orange juice.

But whether a proposed bill actually makes its way to the Florida Legislature in time for passage this year depends upon an endorsement from Lakeland-based Florida Citrus Mutual, the largest growers’ representative, and working out concerns raised by representatives from the state’s juice processors.

Working out those problems will likely take another week, said Commissioner Mike Carrere, a vice president with Lykes Bros. Inc. in Tampa, the state’s second-largest grower who has spearheaded the effort on the tax reform. That would give the commission just 15 day left in the regular legislative session to pass the complicated reform.

“We believe from (conversations with) our lobbyist this would be a heavy lift. Even with the support of our senator (state Sen. J.D. Alexander, R-Lake Wales), it would be tough to get this through the Legislature in the next month,” said Mike Sparks, Citrus Mutual’s executive director, during the Citrus Commission’s teleconference of more than two hours.

The commission is the governing body of the Florida Department of Citrus, a state agency charged with promoting Florida citrus products. The department gets almost all its revenue from taxes paid by commercial citrus growers on oranges, grapefruit and tangerines harvested in the state.

Citrus Mutual’s board of directors met Wednesday and indicated it liked the general approach of the proposed tax reform, Sparks said, but it declined to make a formal endorsement without a detailed final draft.

Even if those details get worked out by next week, two influential members of Citrus Mutual’s board of directors told commissioners they risked a growers’ backlash by rushing the tax reform this year.

“We’re just not going about this in a way that will ensure success,” said Marty McKenna, a Lake Wales-based grower and former Citrus Mutual president. “Two years from now we’re going to have a referendum on continuing the Citrus Department, and if growers can’t understand their (tax) bills, it’s not going to be a good situation.”

McKenna referred to a bill before the Legislature that would force the Citrus Department to sunset if growers vote to take away its taxing authority. Dennis Broadaway, a Citrus Mutual director and general manager of the Haines City Citrus Growers Association, agreed there would be a backlash if growers can’t understand their tax bills under the reformed tax.

“We like the idea, but there’s too many details to work out.”

The commission took up the tax reform proposal for the first time at its March 19 meeting, but it is acting in the wake of a 5-year-old campaign to enact a new tax on imported OJ products after effectively giving up a former imports tax in a legal settlement.

In 2001, five Florida processors, the leading users of imported OJ, sued the Citrus Department over the constitutionality of the former imports tax. The processors claimed the tax amounted to a tariff, which only the U.S. Congress can levy, and that they were illegally forced to pay a tax to support advertising for Florida OJ.

In June 2003, lawyers for the importers and the department reached a settlement that allowed processors to opt out of paying two-thirds of the imports tax, representing the share spent on advertising.

Since the settlement, however, Florida growers have charged the importers are “free riders,” since they benefit from the Citrus Department’s OJ advertising campaign but don’t pay to support it.

The proposed tax reform would raise an estimated $5 million from imports for the Citrus Department’s marketing programs.

Commissioners Mike Haycock, an executive with Tropicana Products Inc. in Bradenton, the state’s largest processor, and Virginia Pena, the controller at Southern Gardens Citrus Processing Corp. in Clewiston, objected that the tax would also apply to juice byproducts not currently taxed.

That was done to head off a possible challenge under international trade rules, said Ken Keck, the department’s executive director.

Haycock was the only commissioner to vote against moving forward.

Haycock and Pena also objected that the new tax, which would be based on gallons of juice squeezed from Florida oranges and grapefruit instead of boxes of fruit currently taxed, would make it impossible for companies to pass along the tax to growers. Many existing contracts allow them to pass along “taxes on fruit” but do not mention juice, they argued.

Keck responded a tax per gallon could easily be converted to a box tax.

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