How could a partnership calculate project income and allocate Florida's Capital Investment Tax Credit to its partners?

Plain-English summary

The Florida Department of Revenue approved a partnership's proposed method for calculating income from a certified headquarters project and allocating the Capital Investment Tax Credit among its corporate partners.

Because project income arose from Florida assets and workforce, the taxpayer proposed a pre-apportioned method. It would prepare a project pro forma return under generally accepted accounting principles and section 220.13, treating annual taxable income generated after commencement of operations as project income.

The credit would be allocated among the partners using the ownership percentages supplied in the request. The allocation would be reported by footnote on the partnership information return, and each corporate partner would claim its share on its Florida corporate income tax return with the project-income calculation, credit calculation, and allocation schedule.

What this means for you

Partnerships with certified projects

Agree on the project-income method and partner ownership percentages before credit claims begin, and preserve the pro forma support for every allocation.

Corporate partners

The partnership does not use the corporate credit itself. Each partner claims its allocated share subject to its own Florida tax liability and the statutory limits described in the ruling.

Common questions

Q: What method was approved?
A: A pre-apportioned project pro forma based on the Florida project's assets and workforce.

Q: How was the credit divided?
A: By the partners' represented ownership percentages.

Citations and references

• Fla. Stat. §§ 220.11, 220.13, 220.15, 220.191, 288.108, and 213.22
• Fla. Admin. Code r. 12C-1.0191

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 14C1-007

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 APPLYING THE FLORIDA
CAPITAL INVESTMENT TAX CREDIT.
ANSWER: THE DEPARTMENT IS INCLINED TO CONCUR WITH TAXPAYER'S
SUGGESTED CALCULATION FOR THE INCOME GENERATED BY OR ARISING OUT
OF THE QUALIFYING PROJECT. HOWEVER, TAXPAYER WAS REMINDED THAT
SHOULD THE FACTS PROVIDED IN ITS REQUEST BE DETERMINED TO BE
SUBSTANTIALLY DIFFERENT, THIS TAA WOULD NOT APPLY AND THE
METHODOLOGY MAY BE DEEMED INAPPROPRIATE.
June 24, 2014
Re:

Technical Assistance Advisement – TAA 14C1-007
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.”)
XXXX (“Taxpayer”)
FEIN: XXXX Project ID: XXXX
Florida Department of Economic Opportunity (“DEO”)
Enterprise Florida, Inc. (“EFI”)

Dear XXXX:
This is in response to your request dated XXXX, 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 Technical Assistance Advisement 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”). 1
Section 220.191(5), F.S., addresses applications for CITC. That statute provides:
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
1

Taxpayer’s request and exhibits are attached to and incorporated into this TAA.
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
Page 2

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.
Pursuant to Rule 12C-1.0191, F.A.C., the Department of Revenue has adopted TAAs as the
method for entering into such written agreements.
On XXXX, DEO certified the Taxpayer as eligible to receive tax credits under s. 220.191, F.S.
The Department of Revenue, having received said certification, has examined your letter and has
established that you have complied with the statutory and regulatory requirements for issuance of
a TAA. Therefore, the Department of Revenue is hereby granting your request for a TAA. The
Department of Revenue, in issuing this TAA, has relied on the representations of Taxpayer and
the certification of the Department of Economic Opportunity. This TAA specifies the method by
which income generated by or arising out of the qualifying project will be determined based on
the facts as represented to the Department of Revenue. 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 s. 213.22, F.S.
FACTS SUPPLIED BY TAXPAYER
Taxpayer is a global XXXX business comprised of XXXX operations; internet websites; mobile
applications and XXXX; a U.S. XXXX; a group of XXXX operating in major U.S. markets;
XXXX; XXXX; and an international distribution XXXX that distributes the Taxpayer’s XXXX
around the world. The Taxpayer is wholly-owned by XXXX (“XXXX”). XXXX is owned and
controlled by XXXX. The Taxpayer is a partnership for federal and Florida purposes.
Taxpayer is planning to construct a state-of-the-art global headquarters in XXXX County. The
Project will consolidate at one location the Taxpayer’s U.S. national XXXX; its XXXX; its
XXXX and XXXX, its international distribution XXXX and an affiliate’s international XXXX
distribution operations. The Project will retain XXXX jobs in Florida and create at least XXXX
net new-to-Florida jobs, with an average annual wage of at least $ XXXX. The Taxpayer
estimates that its total capital investment in the Project will be at least $ XXXX.
The project capital investment will be incurred directly through the Taxpayer or in part through
the Taxpayer with the balance incurred through a third-party developer in return for a synthetic
lease/financing arrangement by the Taxpayer.
ISSUES PRESENTED
In its letter dated XXXX, Taxpayer requests a Technical Assistance Advisement 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
Page 3

LEGAL AUTHORITY
Section 220.11, F.S., states in part:
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 part:
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 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. …

Section 220.191, F.S., states in part:
(1) DEFINITIONS.—For purposes of this section:
(a) “Commencement of operations” means the beginning of active operations by a
qualifying business of the principal function for which a qualifying project was
constructed.
(b) “Cumulative capital investment” means the total capital investment in land,
buildings, and equipment made in connection with a qualifying project during the period
from the beginning of construction of the project to the commencement of operations.
(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
Page 4

(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.

1. One hundred percent for a qualifying project which results in a cumulative capital
   investment of at least $100 million.
2. Seventy-five percent for a qualifying project which results in a cumulative capital
   investment of at least $50 million but less than $100 million.
3. Fifty percent for a qualifying project which results in a cumulative capital investment
   of at least $25 million but less than $50 million.

(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.

(8) The Department of Revenue may specify by rule the methods by which a project’s
pro forma annual taxable income is determined.
DISCUSSION
On XXXX, DEO issued a letter approving Taxpayer’s project for participation in Florida’s CITC
program, and indicated in its letter that the “Qualifying Project” will be located in a High Impact
Performance Incentive Sector pursuant to s. 288.108, F.S. 2 The certification approval entitles the
project to eligibility for an annual tax credit against the corporate income tax imposed if certain
criteria are met, in an amount equal to the lesser of the following for up to twenty years,
beginning with the commencement of operations:
1. Five (5) percent of the cumulative capital investment, which is estimated to be at least
$25 million, which will be allocated to the XXXX;
2. Fifty (50%), seventy-five (75%), or one hundred percent (100%) of the annual corporate
income tax liability generated by or arising out of the Qualifying Project depending on
the level of cumulative capital investment, which will be allocated to the XXXX Partners;
or

2

DEO certification letter is attached to and incorporated into this TAA.

Technical Assistance Advisement
Page 5

3. The tax due on the respective XXXX Partner’s Florida corporate income tax return that
   includes the income generated by or arising out of the Qualifying Project.
   Unused credits cannot be carried forward unless the qualifying Project meets the requirements
   for credit carryovers provided in s. 220.191(2)(d), F.S. In addition, DEO has required the
   qualifying project to create and maintain at least XXXX net new-to-Florida and retain XXXX
   full-time equivalent jobs paying an average annualized wage of at least $XXXX at the Project
   location by the commencement of operations.
   The “commencement of operations” (as defined in s. 220.191, F.S.) will not be deemed to occur
   unless the Taxpayer has provided DEO with evidence that it has met the investment and job
   creation and retention requirements as described in DEO’s Letter of Certification. 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.
   The Taxpayer proposes a pre-apportioned methodology to compute the income generated by or
   arising out of the qualifying project and the corresponding CITC. The income generated by or
   arising out of the project is derived from Florida assets and workforce per Taxpayer’s Exhibit A.
   The Department concurs with Taxpayer’s methodology. The Taxpayer will prepare a pro forma
   return for the Project. As illustrated in Taxpayer’s Exhibit A, the pro forma return will include
   categories of income and expense that the Taxpayer will incorporate into computing the annual
   taxable income generated by or arising out of the Project. The annual taxable income generated
   on or after the commencement of operations will be considered income arising from the Project.
   Taxpayer must apply generally accepted accounting principles and the provisions of s. 220.13,
   F.S.
   The CITC will be allocated among the XXXX Partners. The allocation of the CITC will be
   based on the ownership interest percentages as provided by the Taxpayer. Those partners and its
   respective ownership interest percentages are:
   XXXX
   XXXX
   XXXX
   XXXX
   XXXX
   XXXX
   XXXX
   XXXX
   XXXX.

FEIN
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX

Ownership
Percentage
XX%
XX%
XX%
XX%
XX%
XX%
XX%
XX%
100%

Technical Assistance Advisement
Page 6

The allocated credit amount to the XXXX% Partners will be reported via footnote on XXXX%’s
Florida Partnership Information Returns. These partners will claim the credit on their Florida
corporate income tax returns to offset their tax liability. Each partner will be required to provide
with its Florida corporate income tax return the pro forma calculations used to determine the
Project’s annual taxable income, the CITC earned, and allocation schedule of the CITC among
the partners. An example is attached hereto as Exhibit B.
CONCLUSION
Given the specific circumstances involved in this case, and based on the representation of the
Taxpayer, the computation above properly computes the income generated by or arising out of
the qualifying project based upon s. 220.191, F.S., and Rule 12C-1.0191, F.A.C. However,
Taxpayer is reminded that should the facts provided in its request of XXXX, be determined to be
incorrect or changed, the computation for the income generated by or arising out of the project
could be substantially different from what has been agreed upon in this TAA.
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,

Susan R. Coxwell
Tax Law Specialist
Technical Assistance and Dispute Resolution
(850) 717-6478
Record ID 169548