How must a consolidated corporation calculate income and tax generated by a qualifying project for Florida's Capital Investment Tax Credit?

Plain-English summary

The Florida Department of Revenue approved a project-specific method for calculating income and tax generated by a certified Capital Investment Tax Credit project included in a consolidated return.

The taxpayer had to prepare a pro forma income statement containing only accounts directly or indirectly related to the project, using generally accepted accounting principles and Florida's taxable-income rules. It then had to apportion that project income using sales, property, and payroll amounts tied only to the project and apply Florida's 5.5 percent corporate-income-tax rate.

The resulting Florida project tax determined the associated credit. The taxpayer represented that its project accounts and allocations could be supported on audit, and annual credit eligibility remained dependent on the certification and project requirements described in the ruling.

What this means for you

CITC businesses

Build project-level accounting and apportionment records from the start. A consolidated return does not permit the project calculation to blend in unrelated group activity.

Corporate tax teams

Support direct and indirect project accounts, factor components, and annual certification before claiming the credit.

Common questions

Q: Could the taxpayer use its consolidated group's full income statement?
A: No. It needed a project-only pro forma calculation.

Q: What tax rate did the advisement apply?
A: 5.5 percent.

Citations and references

• Fla. Stat. §§ 220.11, 220.13, 220.15, 220.191, and 213.22
• Fla. Admin. Code r. 12C-1.0191

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 13C1-005

Original ruling text

Executive Director
Marshall Stranburg

QUESTION: Taxpayer requests a written agreement between itself and the Florida Department of
Revenue, concerning the method by which income generated by or arising out of a “qualified capital
investment project” shall be determined for purposes of the Florida Capital Investment Tax Credit under s.
220.191, F.S.
ANSWER: When filing its consolidated Florida corporate income tax return, it shall be necessary for
the Taxpayer to use a pro-forma format to determine the project’s annual taxable income. Taxpayer will
apply its Florida apportionment fraction to the Project’s annual taxable income and apply the Florida
corporate income rate of 5.5% for the determination of the Project’s Florida taxable income and
associated Capital Investment Tax Credit.
June 19, 2013

XXX
XXX
XXX
Re: Technical Assistance Advisement 13C1-005
Request for Written Agreement for Determination of Income
Sections 220.11, 220.13, 220.15, 220.191, Florida Statutes (F.S.)
Rule 12C-1.0191, Florida Administrative Code (F.A.C.)
XXX (hereinafter referred to as “Taxpayer”)
FEIN: XXX
Florida Department of Economic Opportunity (DEO), formerly Office of Tourism, Trade and
Economic Development (OTTED)
Enterprise Florida, Inc. (hereinafter referred to as “EFI”)

Dear XXX:
This is in response to your request dated XXX, for a Technical Assistance Advisement (TAA) pursuant
to section 213.22, F.S., and Rule Chapter 12-11, F.A.C., regarding your request for an agreement
concerning how the method by which income generated by or arising out of Taxpayer’s qualified capital
investment project shall be determined for purposes of applying the Capital Investment Tax Credit
(CITC). An examination of your letter has established that you have complied with the statutory and
regulatory requirements for issuance of a TAA. Therefore, the Department is hereby granting your
request for a TAA.

Child Support Enforcement – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – James McAdams, Director  Information Services – Tony Powell, Director

www.myflorida.com/dor
Tallahassee, Florida 32399-0100

Technical Assistance Advisement 13C1-005
Page 2

Your letter of XXX, requests a written agreement between the Florida Department of Revenue,
hereinafter referred to as the Department, and the Taxpayer, concerning the method by which income
generated by or arising out of its qualified capital investment project shall be determined for purposes of
applying the Capital Investment Tax Credit (CITC). This response to your request constitutes a
Technical Assistance Advisement under Chapter 12-11, F.A.C., and is issued to you under authority of
section 213.22, F.S.
FACTS SUPPLIED BY TAXPAYER
Taxpayer is included on the consolidated corporate income tax filing of XXX (FEIN:XXX). Taxpayer
is a XXX providing systems, products, and solutions to XXX and XXX.
Taxpayer is creating a XXX package that will consist of XXX in Florida, XXX. The XXX Florida sites
are collectively known as (the “Project”). In total, the Taxpayer plans to create XXX net new positions
in Florida and incur $XXX in Project-related capital investment in Florida over a XXX period.
However, some work and positions currently located in Florida will be moving outside Florida in
conjunction with the Project. The $XXX in capital investment will be comprised of costs related to
construction and renovation, real property improvements, facility fit out and installation, facility due
diligence, construction/renovation of machinery and equipment, and employee movement.
Taxpayer submitted an application to DEO requesting participation and certification in Florida’s CITC
program, based upon its proposed capital investment and job creation in Florida (XXX). DEO issued a
letter dated XXX, approving and certifying Taxpayer’s project for participation in Florida’s CITC
program, and indicated in its report that the Project was located in a High Impact Performance Incentive
Sector pursuant to section 288.108, F.S. This approval and certification entitles the project to eligibility
for an annual tax credit against the corporate income tax imposed, of up to five (5) percent of the eligible
capital costs, for up to twenty years, beginning with the commencement of operations. The annual
credit will be limited to one hundred (100) percent of the annual corporate income tax liability generated
by or arising out of the Qualifying Project, provided the Taxpayer makes a capital investment of at least
$100 million (investment of a lesser amount will restrict the percentage of Florida taxable income that
may be offset by the CITC - see s. 220.191, F.S.). In addition, the capital investment subject to the
credit will include all “eligible capital costs,” as defined in section 220.19(1)(c), F.S., that are incurred
by the Taxpayer, or by any other vendor or contractor in connection with the development, construction,
and equipping of the facilities that will constitute the new “Qualifying Project.” Also, the annual tax
credit is dependent upon the creation and maintenance of not less than 100 net new jobs arising out of
the Project.
As the Taxpayer files on a consolidated basis and has existing operations in Florida, it intends to provide
a Pro-Forma income statement that details the income related to activities arising out of or generated by
the “Project.” The Taxpayer states that it can properly code its income and expense accounts, as well as
its asset and liability accounts, both directly and indirectly related to the Project for purposes of creating
the Pro-Forma income statement and the apportionment factors discussed below.

Technical Assistance Advisement 13C1-005
Page 3

As part of its Florida income determination, the Taxpayer intends to include the following activities as
part of the “Project” related income which will then be apportioned to Florida:
1) Income from ongoing activities that will be moving from outside the state of Florida.
2) Income from new and/or expanding work that will be performed in Florida as a result of the
“Project”; and
3) Income from existing activities moving from Florida out of the state as a part of “Project”
activity. Company will not include income from work currently being performed in Florida
that will remain in the state and is not a part of the “Project.”
Taxpayer will apply the standard Florida apportionment factors/fraction (see s. 220.15, F.S.) to the
income arising from or generated by its Project. The Taxpayer intends to include the following
activities as part of the Project sales:
1) Sales from ongoing activities that will be moving from outside the state to Florida;
2) Sales from new and/or expanding work that will be performed in Florida as a result of the
Project.
3) Sales for existing activities moving from Florida out of the state as part of Project activity.
For apportionment purposes, the Taxpayer intends to include the following activities as part of the
Project property:
1) Property from ongoing activities that will be moving from outside the state of Florida.
2) Property from new or expanding work that will be performed in Florida as a result of the
Project.
3) Property for existing activities moving from Florida out of the state as a part of Project
activity.
For apportionment purposes, the Taxpayer intends to include the following activities as part of the
Project payroll:
1) Payroll from jobs that will be moving from outside the state to Florida.
2) Payroll from jobs related to new and/or expanding work that will be performed in Florida
as a result of the Project.
3) Payroll for jobs that are moving from Florida out of the state as a part of Project activity.
Taxpayer states that it will apply the Project’s Florida apportionment factors/fractions to the Project’s
annual taxable income for the determination of its annual Florida taxable income. It will then apply the
Florida income tax rate (5.5%) for the determination of the Project’s Florida tax liability and the
associated CITC.
LEGAL AUTHORITY
Section 220.11, F.S., states in pertinent part:

Technical Assistance Advisement 13C1-005
Page 4

(1) A tax measured by net income is hereby imposed on every taxpayer for each taxable year
commencing on or after January 1, 1972, and for each taxable year which begins before and ends
after January 1, 1972, for the privilege of conducting business, earning or receiving income in this
state, or being a resident or citizen of this state. Such tax shall be in addition to all other occupation,
excise, privilege, and property taxes imposed by this state or by any political subdivision thereof,
including any municipality or other district, jurisdiction, or authority of this state….

Section 220.13, F.S., states in pertinent part:
(1) The term “adjusted federal income” means an amount equal to the taxpayer’s taxable income as
defined in subsection (2), or such taxable income of more than one taxpayer as provided in s.
220.131, for the taxable year, adjusted as follows:

Section 220.15, F.S., states in pertinent part:
(1) Except as provided in ss. 220.151, 220.152, and 220.153, adjusted federal income as defined in s.
220.13 shall be apportioned to this state by taxpayers doing business within and without this state by
multiplying it by an apportionment fraction composed of a sales factor representing 50 percent of the
fraction, a property factor representing 25 percent of the fraction, and a payroll factor representing
25 percent of the fraction. If any factor described in subsection (2), subsection (4), or subsection (5)
has a denominator that is zero or is determined by the department to be insignificant, the relative
weights of the other factors in the denominator of the apportionment fraction shall be as follows:

Section 220.191, F.S., states in pertinent part:
(1) DEFINITIONS.—For purposes of this section:

(c) “Eligible capital costs” means all expenses incurred by a qualifying business in connection with
the acquisition, construction, installation, and equipping of a qualifying project during the period
from the beginning of construction of the project to the commencement of operations, including, but
not limited to:

(d) “Income generated by or arising out of the qualifying project” means the qualifying project’s
annual taxable income as determined by generally accepted accounting principles and under s.
220.13.

Technical Assistance Advisement 13C1-005
Page 5

(f) “Qualifying business” means a business which establishes a qualifying project in this state and
which is certified by the Department of Economic Opportunity to receive tax credits pursuant to this
section.

(2)(a) An annual credit against the tax imposed by this chapter shall be granted to any qualifying
business in an amount equal to 5 percent of the eligible capital costs generated by a qualifying
project, for a period not to exceed 20 years beginning with the commencement of operations of the
project. Unless assigned as described in this subsection, the tax credit shall be granted against only
the corporate income tax liability or the premium tax liability generated by or arising out of the
qualifying project, and the sum of all tax credits provided pursuant to this section shall not exceed
100 percent of the eligible capital costs of the project. In no event may any credit granted under this
section be carried forward or backward by any qualifying business with respect to a subsequent or
prior year. The annual tax credit granted under this section shall not exceed the following
percentages of the annual corporate income tax liability or the premium tax liability generated by or
arising out of a qualifying project:

1. One hundred percent for a qualifying project which results in a cumulative investment of at least
   $100 million.

(d) If the credit granted under subparagraph (a)1. is not fully used in any one year because of
insufficient tax liability on the part of the qualifying business, the unused amounts may be used in
any one year or years beginning with the 21st year after the commencement of operations of the
project and ending the 30th year after the commencement of operations of the project.

(4) Prior to receiving tax credits pursuant to this section, a qualifying business must achieve and
maintain the minimum employment goals beginning with the commencement of operations at a
qualifying project and continuing each year thereafter during which tax credits are available pursuant
to this section.
(5) Applications shall be reviewed and certified pursuant to s. 288.061. The Department of
Economic Opportunity, upon recommendation by Enterprise Florida, Inc., shall first certify a
business as eligible to receive tax credits pursuant to this section prior to the commencement of
operations of a qualifying project, and such certification shall be transmitted to the Department of
Revenue. Upon receipt of the certification, the Department of Revenue shall enter into a written
agreement with the qualifying business specifying, at a minimum, the method by which income
generated by or arising out of the qualifying project will be determined.

(8) The Department of Revenue may specify by rule the methods by which a project’s pro forma
annual taxable income is determined.
ISSUES PRESENTED
In its letter dated XXX, Taxpayer requests a written agreement to determine how the Qualifying
Project’s income will be computed based upon s. 220.191, F.S., and Rule 12C-1.0191, F.A.C.

Technical Assistance Advisement 13C1-005
Page 6

DISCUSSION AND ANALYSIS
On XXX DEO issued a XXX certification letter indicating that Taxpayer’s Project was qualified for
Florida’s CITC program, as well as designating it as a High Impact Performance Incentive Sector
pursuant to section 288.108, F.S. This certification entitles the project to eligibility for an annual tax
credit against the corporate income tax imposed, of up to five (5) percent of the eligible capital costs, for
up to twenty years, beginning with the commencement of operations. The annual credit will be limited
to one hundred (100) percent of the annual corporate income tax liability generated by or arising out of
the Qualifying Project, provided the Taxpayer makes a capital investment of at least $100 million
(investment of a lesser amount will restrict the percentage of Florida taxable income that may be offset
by the CITC - see s. 220.191, F.S.). In addition, the capital investment subject to the credit will include
all “eligible capital costs,” as defined in section 220.19(1)(c), F.S., that are incurred by the Taxpayer, or
by any other vendor or contractor in Florida in connection with the development, construction, and
equipping of the facilities that will constitute the new Project. In addition, the annual tax credit is
dependent upon the creation and maintenance of not less than 100 net new Florida jobs and completed
construction of all facilities related to the “Project.” Beginning XXX, Taxpayer shall make an annual
report to DEO regarding the satisfaction of the above requirements. No annual CITC may be claimed
without a letter of certification from DEO stating that the appropriate annual requirements have been
met and/or maintained.
Although the Taxpayer files on a consolidated basis and has existing operations in Florida, it must
provide a pro-forma format income statement that separately details the income related to the activities
arising out of or generated solely by the Project. To determine the “Project’s” annual Florida corporate
taxable income, and the associated CITC, Taxpayer must apply Generally Accepted Accounting
Principles (GAAP) and the provisions of s. 220.13, F.S. The taxable income generated by or arising
from the “Project” may only include amounts from accounts directly or indirectly related to the
Taxpayer’s Project. 1
That pro-forma result will then be adjusted to determine the Florida portion of the federal taxable
income, using the apportionment provisions of s. 220.15, F.S., to apportion the Project’s income to
Florida. For purposes of apportioning the Project’s income to Florida, the apportionment factors may
only include amounts from accounts directly or indirectly related to the Taxpayer’s Project. 2 The
Florida portion of the federal taxable income will then be multiplied by the Florida tax rate of 5.5
percent to arrive at the Florida tax generated by or arising out of the Project.
CONCLUSION
Based on the information presented and the preceding discussion and analysis, it is the Department’s
position that the Taxpayer shall determine the income generated by or arising out of the Qualifying
1
2

Taxpayer states that it can justify these accounts in audit.
Taxpayer states that it can justify these accounts in audit.

Technical Assistance Advisement 13C1-005
Page 7

Project, for purposes of the CITC, using the specifics provided for in the foregoing discussion and
analysis. In abbreviated form, they are summarized as follows:
1) In adherence to section 220.191(1)(d), F.S., income generated by or arising out of the Qualifying
Project is defined as the project’s annual taxable income as determined by generally accepted
accounting principles and section 220.13, F.S.
2) Taxpayer is required to strictly adhere to the methodology (pro-forma format) stated in the above
section (Discussion and Analysis), which is identical to the proposed methodology, to account for
and determine the CITC Qualifying Project’s annual taxable income and subsequent tax credit.
This response constitutes a Technical Assistance Advisement under section 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 section 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 this advice is based may subject 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 section
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,

Charles J. Dunning, MBA
Technical Assistance and Dispute Resolution
Record ID 145180