How did an eligible citrus processor elect Florida's single-sales-factor formula and combine it with three-factor affiliates on a consolidated return?

Plain-English summary

An eligible citrus processor elected single-sales-factor apportionment by using that method on its original Florida return for the taxable year. It could not make the election later on an amended return or revoke it for that year. The election expired after the year and had to be made again annually.

Eligibility and election were determined separately for each company. Qualifying citrus processors in the affiliated group could elect even if other members could not, and not every eligible member had to make the same choice.

For the consolidated return, a member's single-sales factor had to be converted into a three-factor format under Rule 12C-1.015(7)(e), then combined with the property, payroll, and sales factors of other apportioning members.

What this means for you

The election was neither group-wide nor permanent. Qualification, original-return timing, and the consolidated-factor conversion each required separate attention.

Common questions

Q: How was the election made? By filing the original return using the single-sales-factor method.

Q: Could it be made on an amended return? No.

Q: Was it permanent? No, but it was irrevocable for the elected year and had to be renewed annually.

Q: Did every consolidated member have to elect? No.

Citations and references

• Fla. Stat. § 220.151(3) — citrus-processor single-sales-factor election
• Fla. Stat. §§ 220.03(1)(ee) and 220.15(1), (5) — citrus processor and apportionment formulas
• Fla. Admin. Code r. 12C-1.015(7)(e) — mixed-formula consolidated returns
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01C1-015

Original ruling text

SUMMARY

QUESTION: How does a citrus processing company which
qualifies to apportion its income using the single-factor
formula authorized by subsection 220.151(3), F.S., make the
election to use that formula?

How should the single-factor apportionment formula be
reflected in a consolidated tax return which includes
entities that are required to use a three-factor
apportionment formula?

ANSWER - Based on the Facts Below: - The election to
apportionment income using the single factor apportionment
formula is made by filing a return for the taxable year
using this method.

When a citrus processor which elected to apportion its
income using the single-factor formula is included in a
Florida consolidated return with other entities that are
required to use a three-factor formula, the single-factor
formula should be converted to a three-factor formula, as
provided by Rule 12C-1.015(7)(e), F.A.C., and included with
the other three-factor formulas.

Dec 12, 2001

Re: Technical Assistance Advisement 01C1-015
Corporate Income Tax - Apportionment
s. 220.151, F.S.
XXX, hereinafter referred to as "A"
XXX, hereinafter referred to as "B"

Dear :

XXX letter of XX, requested a Technical Assistance Advisement
concerning apportionment of sales for corporate income tax
purposes. This response to your request constitutes a Technical

Assistance Advisement under Chapter 12-11, Florida
Administrative Code, and is issued to you under the authority of
s. 213.22, Florida Statutes.

FACTS

"A", the parent company of an affiliated group of corporations,
processes citrus and produces juice products. "A" is domiciled
in Florida, where its operations take place. "B", a subsidiary
of "A", also processes citrus and produces juice products.
However, most of "B's" business operations occur outside
Florida. "A's" other subsidiaries do not process citrus or
manufacture juice products.

The affiliated group files its federal and Florida corporate
income tax returns on a consolidated basis.

LAW

Paragraph 220.03(1)(ee), F.S., states:

"Citrus processing company" means a corporation which,
during the 60-month period ending on December 31, 1997, had
derived more than 50 percent of its total gross receipts
from the processing of citrus products and the manufacture
of juices.

Subsection 220.151(3), F.S., states:

For any taxable year beginning on or after January 1, 1999,
a citrus processing company may, if required to apportion
its taxable net income pursuant to the three-factor
apportionment method set forth in s. 220.15(1), elect to
have such apportionment determined for that taxable year
solely by use of the sales factor, as set forth in s.
220.15(5). The election shall be made by the filing of a
return for the taxable year utilizing this method.

DISCUSSION

Subsection 220.151(3), F.S., provides that a "citrus processing

company", as defined by paragraph 220.03(1)(ee), F.S., may elect
to apportion its income using only its sales factor, if such
corporation is required, by Chapter 220, F.S., to apportion its
income.

Based on statements in XXX letter of XX, both "A" and "B"
derived more than 50 percent of their gross receipts from
processing citrus and producing juice products during the 60month period ended December 31, 1997. Therefore, both "A" and
"B" meet the definition of a "citrus processing company"
provided by paragraph 220.03(1)(ee), F.S. Additionally, the
letter dated XX, states that both "A" and "B" are required to
apportion their income, which satisfies the additional
requirement imposed by subsection 220.151(3), F.S., and allows
them to elect to apportion their income using only their sales
factors.

Subsection 220.151(3), F.S., authorizes only taxpayers which
meet the definition of a "citrus processing company", and which
meet all other requirements of that subsection, to apportion
their income using only their sales factors. The inclusion of
an entity that does not meet the requirements of subsection
220.151(3), F.S., in a consolidated Florida corporate income tax
return does not entitle such entity to apportion its income
using the method provided in that subsection, even if other
entities included in the same consolidated return are eligible
to do so.

Additionally, in a consolidated return that includes entities
which are eligible to apportion their income and entities which
are not, the apportionment factor is computed by including 100%
of the property, payroll, and sales of the entities ineligible
to apportion, in both the numerator and denominator of the
property, payroll, and sales factors, while including only the
Florida property, payroll, and sales of the entities which are
eligible to apportion their income in the numerators of the
property, payroll, and sales fractions. One hundred percent of
the property, payroll, and sales of entities eligible to
apportion their income should be included in the denominators of
the factors.

In response to the questions posed in the letter dated XX:

1. Based on the facts presented, only "A" and "B" meet the
   definition of a "citrus processing company", and may elect
   single-factor apportionment pursuant to subsection 220.151(3),
   F.S. The other members of the affiliated group do not meet the
   definition of a "citrus processing company", or the other
   requirements of subsection 220.151(3), F.S., and are ineligible
   to elect to apportion their income as provided therein.

2. Only the entities within an affiliated group which are
   eligible to elect single-factor apportionment pursuant to
   subsection 220.151(3), F.S., may make such election. Any other
   entities within the group, assuming that they are eligible to
   apportion, will apportion as directed by Chapter 220, F.S.
   Subsection 220.151(3), F.S., does not require that all entities
   within an affiliated group which are eligible to make this
   election do so, nor does it require any of the eligible entities
   within an affiliated group to make such election. The decision
   to make the election or not to make the election is made on an
   individual company basis.

3. If at least one member of the affiliated group elects to
   apportion using the single-factor method described in subsection
   220.151(3), F.S., the consolidated factor for the affiliated
   group should be computed as directed by Rule 12C-1.015(7)(e),
   F.A.C. Although this rule addresses the inclusion of
   transportation companies or insurance companies using singlefactor formulas in consolidated returns with corporations using
   a three-factor formula, the same concept would apply to a
   corporation eligible to elect single-factor apportionment
   pursuant to subsection 220.151(3), F.S.

4. As stated in subsection 220.151(3), F.S., the method of
   apportionment provided therein is elected by "filing a return
   for the taxable year utilizing this method". This is a positive
   election which would be made on the initial filing of the
   Florida corporate income tax return, and would not be available
   for entities which may file an amended return.

5. The wording of the statute indicates that the election

provided by subsection 220.151(3), F.S., may not be revoked once
it has been made for a taxable year. However, it is an annual
election that must be made for each taxable year to which it
applies. Therefore, if the election were made for one taxable
year, it would expire at the end of that taxable year, and would
not apply to any subsequent taxable years unless such election
was made, annually, for those subsequent taxable years.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the Department only
under the facts and circumstances described in the request for
this advice as specified in s. 213.22, F.S. Our response is
based on those facts and specific situation summarized above.
You are advised that subsequent statutory or administrative rule
changes or judicial interpretations of the statutes or rules
upon which this advice is based may subject similar future
transactions to a different treatment than expressed in this
response.

You are further advised that this response, your request and
related backup documents are public records under Chapter 119,
F.S., and are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Confidential information must be
deleted before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement,
the backup material and this response, deleting names, addresses
and any other details which might lead to identification of the
taxpayer. Your response should be received by the Department
within 15 days of the date of this letter.

Sincerely,

Suzanne C. Paul
Technical Assistance and
Dispute Resolution

SCP/
Control No.: 47532