April 28, 2011--Florida hotels would be allowed to sell rooms to themselves at reduced prices in order to lower their tax bills, under an eleventh-hour proposal that could be taken up today in the Florida House of Representatives.

The measure, which has been written by lobbyists for big hotel chains such as Marriott, Hilton and Starwood, would allow those companies to set up subsidiary businesses that buy their hotel rooms at whole prices and then turn around and sell those rooms to travelers at higher prices -- while the hotel only pays sales and lodging taxes on the lower price.

Supporters say it is designed to give hotels the same favorable tax treatment as independent online-travel companies such Expedia, Orbitz and Priceline, which have for years paid taxes only on the wholesale room prices they negotiate with hotels despite lawsuits from local governments contending that the taxes are due on the retail prices they charge consumers.

The proposal has been filed as an amendment to HB 493, which would cement in law that the online-travel companies only have to pay taxes on the reduced rate. As currently written, the legislation would not allow sales between related companies to be used to deflate taxes.

"I'm trying to reduce costs and taxes for businesses," said Rep. Joseph Abruzzo, D-Wellington, who is sponsoring the amendment and is also a primary sponsor of the broader bill aimed at helping the online-travel industry.

The amendment has been filed so late that Abruzzo said he may be blocked from introducing it on the House floor today. But even if he is, Abruzzo said he intends to pursue the measure again at a later date.

Lobbyists for the hotel industry say the amendment would ensure that hotels aren't put at a competitive disadvantage with the Internet companies. Even without the change, they predict hotel companies will be able to find other loopholes to exploit and allow them to emulate the online-travel company model.

"Why not be intellectually honest?" said Pete Dunbar, a lobbyist for Marriott International, which has roughly 50,000 hotel rooms in Florida. "Either we treat everyone the same and we acknowledge that we are treating everyone the same. Or you will see an immediate migration away from the current system."

Because the amendment has been filed at the last minute, analysts haven't had been able to determine the financial impact. But it would clearly be exponentially higher than the $30 million a year in hotel taxes that counties contend they are missing out on rooms that are sold through the online-travel companies. A spokeswoman for the Florida Association of Counties predicted the change would "devastate" local spending on tourism promotion, which is financed by hotel taxes.

Dunbar said local governments are going to lose that money either way if lawmakers give the online-travel companies their tax protection.

"The fiscal impact is going to be the same whether they do it honestly or whether they do it the way it is [in the bill right now]. There's too much money at stake," he said.

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