How should a consolidated Florida filer calculate income and tax from a qualifying Capital Investment Tax Credit project?

Plain-English summary

The Florida Department of Revenue approved a consolidated corporate filer's pro forma method for calculating income and tax generated by a certified Capital Investment Tax Credit project.

The taxpayer would compare current-year income with income from a redacted base year and treat the increase as project income. It would compute the project's apportionment factor as if the project were a separate company with nexus in every state: project property and payroll were entirely in Florida, while sales were assigned among states.

The taxpayer would apply that factor to project annual taxable income, then apply Florida's 5.5% corporate income-tax rate. Because the taxpayer's redacted investment level fell in the statutory 50% tier, the associated credit was 50% of project tax liability. The project pro forma return had to accompany the consolidated Florida return.

What this means for you

Consolidated groups with certified projects

The project needs its own supportable income and apportionment calculation even though the taxpayer files as part of a consolidated group.

Accountants and tax professionals

Document the approved base year, project-only property, payroll, and sales factors, and the investment percentage that limits the credit. Those details are facts-specific and largely redacted in the public copy.

Common questions

Q: How did the ruling identify project income?
A: It treated the increase from a redacted prior base year to the current year as income generated by the project.

Q: How was the project apportioned?
A: As if it were a separate company with nexus in all states, using its own property, payroll, and sales factors.

Q: What tax rate applied?
A: The ruling used Florida's then-stated 5.5% corporate income-tax rate.

Q: What percentage of project tax liability became the credit?
A: Fifty percent on the investment facts described in this ruling.

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 18C1-002

Original ruling text

Executive
Director
Leon M. Biegalski

QUESTION: TAXPAYER REQUESTS A WRITTEN AGREEMENT BETWEEN THEMSELVES 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 THEIR 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.
January 31, 2018

XXXXX
XXXXX
XXXXX
XXXXX
Re:

Technical Assistance Advisement 18C1-002
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.”)
XXXXX (“Taxpayer”)
FEIN: XXXXX
Project ID: XXXXX
Florida Department of Economic Opportunity (“DEO”)
Enterprise Florida, Inc. (“EFI”)

Dear XXXXX:
This is in response to your request received XXXXX, 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
Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director  Information Services – Damu Kuttikrishnan, Director

www.floridarevenue.com
Florida Department of Revenue
Tallahassee, Florida 32399-0100

Technical Assistance Advisement
Page 2
investment project shall be determined for purposes of applying the Capital Investment Tax Credit
(“CITC”).
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 XXXXX, DEO certified 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’s XXXXX and corporate headquarters are located in XXXXX. Taxpayer manufactures XXXXX.
The current product line XXXXX and is distributed around the world by a network of dealers.1 Taxpayer
is included in the consolidated corporate income tax filing of XXXXX (FEIN: XXXXX) for both Florida
and federal purposes.
Taxpayer’s project consists of the XXXXX. Taxpayer intends to create approximately XXXXX net newto-Florida positions and make a capital investment of approximately $XXXXX million. Taxpayer expects
to commence operations during tax year XXXXX.
Taxpayer proposes using a pro-forma method of calculating income generated by or arising out of the
qualifying project. This method would compare the current tax year income to a prior base year income
(tax year ended XXXXX); the resulting increase would be the income generated by or arising out of the
qualifying project. Taxpayer will apply the standard Florida apportionment factors as described in s. 220.15,
F.S., to the income generated by or arising out of the qualifying project. The project’s apportionment factor
would be determined as if the qualifying project was a separate company with nexus in all states. Property
1

XXXXX

Technical Assistance Advisement
Page 3
and payroll would be 100% Florida with sales in all states. Taxpayer will multiply the qualifying project’s
Florida apportionment factors by the qualifying project’s annual taxable income to determine the qualifying
project’s Florida taxable income. Taxpayer will then multiply the qualifying project’s Florida taxable
income by the Florida income tax rate (5.5%) to determine the qualifying project’s Florida tax liability.
That result will be multiplied by the percentage associated with the level of investment made by Taxpayer.
In this case, project tax liability would be multiplied by 50% to calculate the associated CITC.
ISSUE PRESENTED
In its letter received on XXXXX, 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:

Technical Assistance Advisement
Page 4
(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.

(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.

Technical Assistance Advisement
Page 5

(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 XXXXX, 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. 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 $XXXXX million,
   but must be at least $25 million,
2. Fifty percent (50%), seventy-five percent (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; or
3. The tax due on the Florida consolidated corporate income tax return prior to application of this credit
   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.
   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 Taxpayer
   has provided DEO with evidence that it has met the following criteria:
4. A cumulative capital investment (as defined in s. 220.191, F.S.) of at least $XXXXX million at the
   qualifying project’s location in XXXXX has been made; and
5. At least XXXXX net new-to-Florida full-time equivalent jobs paying an average annualized wage
   of at least $XXXXX have been created in connection with the qualifying project.
   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.
   Taxpayer has proposed a pro-forma methodology to compute the income generated by or arising out of the
   qualifying project and the corresponding CITC. The Department concurs with Taxpayer’s methodology.
   Taxpayer will prepare a pro-forma return that separately details the qualifying project’s income, tax liability
   and associated CITC. Taxpayer must apply Generally Accepted Accounting Principles (GAAP) and the
   provisions of s. 220.13, F.S. Taxpayer will be required to provide with its consolidated Florida corporate
   income tax return the pro-forma return for the qualifying project.

Technical Assistance Advisement
Page 6
CONCLUSION
Given the specific circumstances involved in this case, and based on the representation of 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 XXXXX, be determined to be incorrect or changed, the computation for the
income generated by or arising out of the qualifying 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
Susan R. Coxwell
Tax Law Specialist
Technical Assistance and Dispute Resolution
(850) 717-6478
CC: XXXXX

Record ID 41236