Which apportionment factor applies when computing the Capital Investment Tax Credit for a qualifying headquarters project?

Plain-English summary

The Florida Department of Revenue clarified that a certified headquarters project's Florida taxable income had to be apportioned using a consolidated Florida factor based solely on the entities and activities comprising that project.

The taxpayer could not apply the overall consolidated apportionment factor of its entire affiliated group. It first had to separately account for the project's direct and indirect revenues and expenses under the previously approved pro forma method, then apply the project's own Florida factor to compute project income and the related Capital Investment Tax Credit.

The advisement also required the allocation of indirect expenses to be complete and consistent with generally accepted accounting principles and statutory requirements. It superseded TAA 13C1-006 and clarified earlier project-income guidance.

What this means for you

CITC project companies

Maintain project-level factor, revenue, and expense records even when the qualifying business files as part of a larger affiliated group.

Corporate tax teams

The credit calculation follows the qualifying project's Florida activity, not the group's blended apportionment profile.

Common questions

Q: Which factor controlled the CITC calculation?
A: The qualifying project's consolidated Florida apportionment factor.

Q: Could the taxpayer use the entire group's consolidated factor?
A: No.

Citations and references

• Fla. Stat. §§ 220.191, 220.13, and 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 13C1-006R

Original ruling text

Executive Director
Marshall Stranburg

QUESTION: Whether the Project’s taxable income should be determined by using the “consolidated
Florida apportionment factor” of the Project, or by using the overall “consolidated apportionment factor”
of the entire affiliated group?
ANSWER: The Project’s income will be apportioned to Florida using an apportionment percentage that
is based solely on the factors of the Project. Therefore, the Taxpayer should use the consolidated Florida
apportionment factor of the Project when computing the CITC.
December 10, 2013
XXX
XXX
XXX
Re:

Request for Technical Assistance Advisement 13C1-006R
Corporate Income Tax
XXX (“Taxpayer”)
FEI: XXX

Dear XXX:
This letter is in response to your letter of XXX, requesting clarification of the guidance provided in TAA
08C1-004 1. This response constitutes a Technical Assistance Advisement (“TAA”) under Chapter 12-11,
Florida Administrative Code, and is issued to you under the authority of section 213.22, Florida Statutes.
FACTS AS PROVIDED BY THE TAXPAYER
Taxpayer, a publicly traded company, is the XXX and XXX company. Currently, Taxpayer operates
nearly XXX in the XXX and XXX and employs approximately XXX people who help to serve over XXX
annually.
In XXX, Taxpayer decided to relocate its new corporate headquarters to XXX. In XXX, Taxpayer
submitted an application to Enterprise Florida, Inc. requesting participation and certification in Florida’s
Capital Investment Tax Credit (“CITC) Program for its proposed invest in Florida (“Project”). On XXX,
the Office of Tourism, Trade, and Economic Development (“OTTED”), now the Department of Economic
Opportunity (DEO”), issued a letter of certification which approved the application, and certified
Taxpayers project as eligible for the CITC. This certification approval entitles the project to eligibility for
an annual tax credit against the corporate income tax imposed, in an amount equal to the lesser of the

1

This Technical Assistance Advisement supersedes Technical Assistance Advisement No. 13C1-006 issued on October 25,
2013 to the Taxpayer.
Child Support Enforcement – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – James McAdams, Director  Information Services – Damu Kuttikrishnan, Director

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

Technical Assistance Advisement 13C1-006R
Page 2

following for up to twenty years, with carryovers as provided in s. 220.191(2)(d), F.S., beginning with the
commencement of operations:

1. five (5) percent of the eligible capital costs;
2. one hundred percent of the annual corporate income tax liability generated by or arising out of the
   Qualifying Project; and
3. the income tax due on the Florida corporate income tax return that includes the income generated
   by or arising out of the Qualifying Project.
   In XXX, Taxpayer requested from the Florida Department of Revenue, a Technical Assistance
   Advisement seeking a written agreement specifying how income generated by or arising out of the Project
   will be determined. On XXX, Taxpayer was issued a TAA by the Department specifying the method by
   which income generated by or arising out of the Project was to be determined for purposes of applying the
   CITC. Subsequently, in a letter dated XXX, Taxpayer requested a Technical Assistance Advisement
   seeking clarification of the guidance provided in TAA 08C1-004.
   LEGAL AUTHORITY
   Subsection 220.191, F.S., states, in 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:
1. The costs of acquiring, constructing, installing, equipping, and financing a qualifying
project, including all obligations incurred for labor and obligations to contractors,
subcontractors, builders, and materialmen.
2. The costs of acquiring land or rights to land and any cost incidental thereto, including
recording fees.
3. The costs of architectural and engineering services, including test borings, surveys,
estimates, plans and specifications, preliminary investigations, environmental mitigation,
and supervision of construction, as well as the performance of all duties required by or
consequent to the acquisition, construction, installation, and equipping of a qualifying
project.
4. The costs associated with the installation of fixtures and equipment; surveys, including
archaeological and environmental surveys; site tests and inspections; subsurface site work
and excavation; removal of structures, roadways, and other surface obstructions; filling,
grading, paving, and provisions for drainage, storm water retention, and installation of
utilities, including water, sewer, sewage treatment, gas, electricity, communications, and

Technical Assistance Advisement 13C1-006R
Page 3

similar facilities; and offsite construction of utility extensions to the boundaries of the
property.
Eligible capital costs shall not include the cost of any property previously owned or leased
by the qualifying business.

(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.

(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:

(5) Applications shall be reviewed and certified pursuant to s. 288.061. The office, upon a
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.
ISSUE PRESENTED
Whether the Project’s taxable income should be determined by using the “consolidated Florida
apportionment factor” of the Project, or by using the overall “consolidated apportionment factor” of the
entire affiliated group?

Technical Assistance Advisement 13C1-006R
Page 4

DISCUSSION AND ANALYSIS
Taxpayer seeks guidance as to whether, for purpose of applying the CITC, the Project’s taxable income
should be determined by applying the “consolidated Florida apportionment factor” of the Project, as
distinguished from applying the Taxpayer’s overall “consolidated apportionment factor” to the Project
income.
Pursuant to TAA 08C1-004, Taxpayer will use a “pro forma” format, in conjunction with GAAP and the
applicable Florida Statutes, in the determination on the Florida taxable income solely attributed to Taxpayer’s
“Headquarters Project.” Taxpayer must use this format to separately account for all revenues and expenses,
either direct or indirect, of the legal entities comprising the “Headquarter’s Project.” After determining the
Project’s annual taxable income, Taxpayer will apply its Florida apportionment factor for the Project to the
Project’s annual taxable income, for the determination of the Project’s Florida taxable income, and associated
Capital Investment Tax Credit. 2
CONCLUSION
The Project’s income will be apportioned to Florida using an apportionment percentage that is based
solely on the factors of the Project. Therefore, the Taxpayer should use the consolidated Florida
apportionment factor of the Project when computing the CITC.
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. Our response is predicated on those facts and the specific situation summarized
above. You are advised that subsequent statutory or administrative rule changes or judicial interpretation
of the statutes or rules upon which this advice is based may subject similar future transactions to a
different treatment from that which is expressed in this response.
You are further advised that this response, your request and related backup 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 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,
Jermane L. Wright, Esq., CPA, LLM
Senior Attorney
Technical Assistance and Dispute Resolution
JLW/
Record ID: 149707
2

Taxpayer must be certain that the allocation of indirect expenses will be inclusive, and in agreement with generally accepted
accounting principles and statutory requirements. See TAA 08C1-004.