How should a joint-venture project calculate and allocate Florida Capital Investment Tax Credit income?

Plain-English summary

The Florida Department of Revenue approved a joint venture's method for computing income from a certified Capital Investment Tax Credit project. The partnership would prepare a pro forma attachment separately detailing project revenue, direct and indirect expenses, and adjustments.

The annual credit would be allocated between the two partners according to their ownership percentages. Each partner's parent would attach the Florida F-1065 and the pro forma schedule to its consolidated Florida corporate-income-tax return.

Annual claims also depended on economic-development certification that the investment and employment requirements were met or maintained.

What this means for you

Joint ventures and tax teams

Maintain project-level accounts and a clear partner-allocation schedule. Each claiming parent needs the same supporting partnership and pro forma information.

Accountants and tax professionals

The approved computation was facts-specific and could change if the project, ownership, or certification facts changed.

Common questions

Q: How was the credit allocated?
A: Proportionately to the partners' ownership interests.

Q: What had to accompany the parents' returns?
A: The F-1065 and the project pro forma attachment.

Q: Could unused credit carry over?
A: Only if the project met section 220.191(2)(d), including the applicable investment threshold.

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 18C1-004

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: TAXPAYER WILL PREPARE A PRO FORMA ATTACHMENT THAT SEPARATELY
DETAILS THE INCOME AND EXPENSES RELATED TO THE ACTIVITIES ARISING OUT OF OR
GENERATED BY THE QUALIFYING PROJECT. BOTH THE F- 1065 AND PRO FORMA
ATTACHMENT MUST BE ATTACHED TO EACH PARENT’S CONSOLIDATED TAX FILING.

April 18, 2018

XXXXX
XXXXX
XXXXX
XXXXX
Re:

Technical Assistance Advisement 18C1-004
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 (“Company A”)
FEIN: XXXXX
Project ID: XXXXX
XXXXX (“Company B”) and XXXXX (“Company C”) (collectively, “Partners”)
Florida Department of Economic Opportunity (“DEO”)
Enterprise Florida, Inc. (“EFI”)

Dear XXXXX:
This is in response to your request dated 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 – Brandi Gunder, 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
In XXXXX, Company B and Company C entered a partnership to form a joint venture, Company A.
Company B holds XXXXX interest and Company C holds XXXXX interest in Company A. Company B
is part of XXXXX. XXXXX focuses on the areas of XXXXX. It is a supplier XXXXX.1 Company C is an
XXXXX. Company B is a XXXXX (“Parent”) (XXXXX) and is included in its consolidated Florida
corporate income tax return. Company C is owned XXXXX (“Parent”) (XXXXX) and its income/loss
flows through and is reported on XXXXX consolidated Florida corporate income tax return.
The project will establish a XXXXX. Company A anticipates creating up to XXXXX net new-to-Florida
full-time equivalent jobs in connection with the project, paying an average annual wage of at least
$XXXXX. Taxpayer expects to make a capital investment of approximately $XXXXX million.
Commencement of operations is expected to occur in XXXXX.
Taxpayer intends to operate, XXXXX. As a result, Taxpayer anticipates XXXXX. Because Taxpayer is a
joint venture and treated as a pass-through entity, its corporate liability will be passed through to Company
1

XXXXX

Technical Assistance Advisement
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B and Company C proportionate to each Partner’s percentage interest in the joint venture. Both Company
B and Company C will file separate consolidated Florida income tax returns with their respective Parent.
Taxpayer is required to file federal form 1065 and Florida F-1065 as a limited liability company classified
as a partnership for federal and Florida income tax purposes. Taxpayer will use a pro forma approach to
separately account for the taxable income generated by the qualifying project; the annual Florida corporate
income tax liability generated by or arising out of the qualifying project to the extent apportioned to the
State of Florida in accordance with the F-1065; and the associated CITC.
The pro forma attachment will indicate separately all revenues, expenses, either direct or indirect, and any
other adjustments made in the determination of the qualifying project’s annual taxable income and
associated annual amount of the CITC. Each year, the CITC established in the pro forma attachment will
be allocated proportionate to the respective Partner’s percentage interest in the joint venture (currently
XXXXX to Company B and XXXXX to Company C). Both the F-1065 and pro forma attachment will be
attached to each Parent’s consolidated tax filings.
ISSUES PRESENTED
In its letter dated 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

Technical Assistance Advisement
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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.

(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.

Technical Assistance Advisement
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(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 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 (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; or
3. The tax due on the respective Parents’ Florida corporate income tax returns 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.

Technical Assistance Advisement
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Notwithstanding the foregoing, Taxpayer states it expects to make a capital investment of $XXXXX2 in
connection with the qualifying project. If Taxpayer makes the projected capital investment prior to
commencement of operations of the qualifying project, Taxpayer will be eligible to receive CITCs equal to
up to 100% of its capital investment.
Taxpayer has proposed a pro forma approach to separately account for the taxable income generated by the
qualifying project; the annual Florida corporate income tax liability generated by or arising out of the
qualifying project to the extent apportioned to the State of Florida in accordance with the F-1065; and the
associated CITC. The CITC established in the pro forma attachment will be allocated proportionate to the
respective Partner’s percentage interest in the joint venture (currently XXXXX to Company B and XXXXX
to Company C). Both the F-1065 and pro forma attachment will be attached to each Parent’s consolidated
tax filings.
The Department concurs with Taxpayer’s methodology. Taxpayer will prepare a pro forma attachment that
separately details the income and expenses related to the activities arising out of or generated by the
qualifying project. Both the F-1065 and pro forma attachment must be attached to each Parent’s
consolidated tax filing.
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 qualifying project.
In general, the amount of carryover from any one taxable year is five (5) percent of the cumulative capital
investment that is at least $100 million less the amount of capital investment tax credit that could be used
on the tax return for the taxable year. The amount of carryover from a taxable year may not exceed five (5)
percent of the cumulative capital investment that is at least $100 million.
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

2

XXXXX.

Technical Assistance Advisement
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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 59812