Could a consolidated group use a Florida jobs-change factor to calculate income from a certified Capital Investment Tax Credit project?

Plain-English summary

The Florida Department of Revenue approved a jobs-change-factor method for calculating income generated by a certified Capital Investment Tax Credit project within a consolidated corporate group.

The factor divided the project's new-to-Florida jobs by all professionals employed in Florida by the parent or its subsidiaries, including the new project jobs. The taxpayer would multiply that factor by the affiliated group's Florida portion of adjusted federal income on line 7 of the consolidated Form F-1120 to determine project taxable income.

The project involved construction of a new Florida facility, an estimated investment above the statutory $25 million minimum, and at least 100 net new-to-Florida full-time-equivalent jobs at the required wage. The taxpayer also had to apply GAAP and section 220.13 and obtain annual certification that project requirements were satisfied or maintained.

What this means for you

Consolidated corporate groups

A project-income formula may allocate consolidated Florida income through a project-specific jobs ratio when the Department approves that method in the required written agreement.

Tax directors and credit teams

Keep support for both sides of the factor: qualifying project jobs and the full Florida professional headcount for the parent and subsidiaries.

Accountants and tax professionals

The annual credit remained limited to the least of the investment-based annual amount, the applicable percentage of project tax liability, or tax due on the consolidated Florida return before the credit.

Common questions

Q: What was the numerator of the jobs-change factor?
A: The project's new-to-Florida jobs.

Q: What was the denominator?
A: All professionals, including project hires, employed in Florida by the parent or its subsidiaries.

Q: What income did the factor multiply?
A: The affiliated group's Florida portion of adjusted federal income on its consolidated Form F-1120.

Q: Was annual project certification required?
A: Yes.

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 15C1-005

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: 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.
July 14, 2015
Re:

Technical Assistance Advisement – 15C1-005
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.”)
XXXXXX (“Taxpayer”)
FEIN: XXXXXX
Project ID: XXXXXX
XXXXXX (“Parent”)
FEIN: XXXXXX
XXXXXX (“Systems”)
Florida Department of Economic Opportunity (“DEO”)
Enterprise Florida, Inc. (“EFI”)

Dear XXXXXX:
This is in response to your request dated XXXXXX, 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”).1

1

Taxpayer’s request is attached to and incorporated into this TAA.
Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Sue Harlan, Interim Director  Information Services – Damu Kuttikrishnan, Director

http://dor.myflorida.com/dor/
Florida Department of Revenue
Tallahassee, Florida 32399-0100

Technical Assistance Advisement
Page 2

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 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 XXXXXX, 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 world leader in XXXXXX solutions. Taxpayer is a subsidiary of Parent, which files its
Florida and federal corporate income tax returns on a consolidated basis. Parent and its subsidiaries
provide XXXXXX2. Taxpayer is one operating unit of the Parent’s XXXXXX. This segment includes
XXXXXX systems, and services.
Some of the other operating units within Systems are:
 XXXXXX manufacturer XXXXXX.
 XXXXXX manufacturer XXXXXX.
 XXXXXX, which provides XXXXXX solutions around the world.
Taxpayer’s Qualifying Project includes Systems’ construction of a new state of the art facility in
XXXXXX, Florida. Taxpayer will purchase the land and building. The projected cumulative capital
investment to construct the facility is estimated to be $XXX million. The Qualifying Project will result in
the creation of at least 100 net new-to-Florida full-time equivalent jobs with an average annual salary,
excluding benefits, of $XXXXXX. Employees to fill the new-to-Florida jobs will be hired by Taxpayer
and several affiliates (subsidiaries of Parent).

2

In the XXXXXX meeting, the Taxpayer explained that XXXXXX.

Technical Assistance Advisement
Page 3

ISSUES PRESENTED
In its letter dated XXXXXX, 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.
LEGAL AUTHORITY
Section 220.11, F.S., states in part:
(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 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 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: …

Technical Assistance Advisement
Page 4

(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.

(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. …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 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.

(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.

(8) The Department of Revenue may specify by rule the methods by which a project’s pro forma
annual taxable income is determined.

Technical Assistance Advisement
Page 5

DISCUSSION
On XXXXXX, 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.3 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 $XXX million, but
   must be at least $25 million;
2. XXXXXX percent (XXX%) of the annual corporate income tax liability generated by or arising out
   of the Qualifying Project, assuming a cumulative capital investment of at least $XXX million; or
3. The tax due on the consolidated Florida corporate income tax return of the Parent prior to the
   application of this credit that includes the income generated by or arising out of the qualifying
   project.
   DEO has required that the Qualifying Project meet certain criteria 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 following criteria:
4. Capital investment of at least $25 million has been made at the Project’s location in XXXXXX,
   Florida; and
5. Creation of at least 100 net new-to-Florida full-time equivalent jobs paying at least the Project
   Wage at the Project’s location in XXXXXX, Florida.
   No annual CITC may be claimed without a letter from DEO stating that the appropriate annual
   requirements have been satisfied or maintained.
   Taxpayer’s Qualifying Project consists of a new state of the art facility described as the XXXXXX. The
   facility will XXXXXX developed by Sub One. Taxpayer’s XXXXXX segment is not included in the
   Qualifying Project. Taxpayer proposes using a jobs-change factor to determine the income generated by
   or arising out of the Qualifying Project. The jobs-change factor would be determined by dividing the
   Project’s new-to-Florida jobs by all professionals, including the Qualifying Project new jobs, currently
   employed by the Parent or its subsidiaries in Florida. The jobs-change factor would be multiplied by the
   affiliated group’s Florida portion of adjusted federal income (line 7 of the consolidated Florida Corporate
   Income Tax return, F-1120) to determine the Qualifying Project’s taxable income. The allowable CITC
   will be limited to the lesser of the limitations stated above. Taxpayer must apply generally accepted
   accounting principles and the provisions of s. 220.13, F.S., in computing the income of the Qualifying
   Project.

3

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

Technical Assistance Advisement
Page 6

Pursuant to s. 220.191(2)(d), F.S., when the capital investment is at least $100 million, credit amounts not
fully used in any one year because of insufficient tax liability on the part of the qualifying business may be
used in any one year or years beginning with the 21st year after the commencement of operations of the
Project and ending with the 30th year after the commencement of operations of the Project.
To determine the amount of unused credit that can be carried forward, the Taxpayer must first determine
the tax liability generated by or arising out of the qualifying project. If the credit is limited to the tax
liability generated by or arising out of the Project, not the tax liability on the consolidated return, or by the
5% annual credit cap, then there will not be a carryforward. If the credit is limited by the tax liability on
the consolidated Florida return, not the tax liability generated by or arising out of the Project and not by
the 5% annual credit cap, then there will be a carryforward that can be claimed beginning with the 21st
year after the commencement of operations.
CONCLUSION
Given the specific circumstances involved in this case, and based on the representation of the Taxpayer,
the Department concurs with Taxpayer’s suggested calculation for 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 XXXXXX, 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,

George C. Hamm
Deputy General Counsel
Florida Department of Revenue
Record ID 199234