Disney (NYSE:DIS) stock is slumping today on news of the latest shots fired in the entertainment giant’s ongoing feud with state officials in Florida.
The Republican-controlled Florida legislature has passed a bill seeking to dissolve a special district that allows Disney to act as its own government within the outer limits of Orange and Osceola counties where its Disney World resort is located.
The bill changes the tax status Disney enjoys in Florida and could lead to higher taxes for residents of the Orlando area where Disney World operates. DIS stock is down about 2.2% today on the news, and has fallen 23% year to date.
What Happened With DIS Stock
Disney has been feuding with Florida Gov. Ron DeSantis since the Mouse House denounced the state’s HB 1557 law last month. Bill HB 1557, dubbed the “Don’t Say Gay” legislation, “limits early education” on sexual orientation and gender identity. Disney employees had pressured the company to take a stand against the Florida legislation.
Now, the Florida legislature has fired back by voting to change Disney’s tax status and privileges in the state. Disney has operated as a special district in Florida for 55 years. Other theme parks and resorts located in Florida such as SeaWorld and Legoland do not operate under the same status as Disney enjoys.
Why It Matters
Assuming DeSantis signs it into law, the Florida legislation effectively reverses an arrangement whereby Disney World has been responsible for paying the cost of its own municipal services such as power, water, roads and fire protection. For decades, taxpaying residents near Disney World have not had to pay maintenance bills for Disney park services.
Now, taxpayers near Disney World could be on the hook to cover the cost to maintain the popular resort, leading to higher municipal taxes. Taxpayers would be responsible for any municipal improvements that Disney currently pays for, including road work. That could turn Florida taxpayers against Disney and puts pressure on the resort operator.
The battle with Florida comes at a difficult time for Walt Disney. The company’s share price has been sliding due to declining subscribers to its Disney+ streaming service and as it struggles to get its worldwide resorts and film production back on track following the pandemic of the past two years.
What’s Next for Disney
Disney appears to have picked a formidable adversary in DeSantis. Hopefully Disney can resolve its dispute with Florida lawmakers before the situation worsens and leads to more losses for DIS stock.
On the date of publication, Joel Baglole held a long position in DIS. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
