How should a Florida qualifying project calculate and allocate income for the Capital Investment Tax Credit?

Plain-English summary

The Florida Department of Revenue approved a methodology for determining income from a certified Capital Investment Tax Credit project. The taxpayer would maintain a separate general ledger for the project and prepare an annual pro forma return identifying project revenue, direct and indirect expenses, book-to-tax adjustments, and other adjustments.

Only taxable income generated on or after commencement of operations counted as project income. The calculation had to follow generally accepted accounting principles and section 220.13, Florida Statutes.

Because the operating business was held through a partnership, the credit was allocated among partners by their ownership percentages. Corporate partners claimed their shares on Florida corporate returns and had to attach the pro forma calculations and credit-allocation schedule.

What this means for you

Certified capital-investment projects

Build project-level accounting before operations begin. The credit depends on isolating project income, investment, expenses, and annual tax liability.

Partnerships and corporate partners

Document ownership percentages and flow-through chains. Each claiming corporation needs support for the project's income, credit earned, and its allocated share.

Accountants and tax professionals

The credit also depends on economic-development certification of investment and job requirements. No annual credit may be claimed without the required confirmation that those conditions were met or maintained.

Common questions

Q: What accounting method did Florida approve?
A: A separate general ledger and annual pro forma project return using GAAP and section 220.13.

Q: When does project income begin?
A: Only income generated on or after commencement of operations was included.

Q: How was the credit divided among partners?
A: By ownership percentage, with further flow-through where a partner was itself an LLC.

Q: Could unused credit carry over?
A: Only if the project met the statutory requirements in 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 18C1-013

Original ruling text

Florida Department of Revenue

Technical Assistance and Dispute Resolution

Leon M. Biegalski
Executive Director

5050 West Tennessee Street, Tallahassee, FL 32399

floridarevenue.com

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 RETURN FOR THE PROJECT.

THE PRO FORMA RETURN WILL INCLUDE CATEGORIES OF INCOME AND EXPENSE
THAT 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.

November 8, 2018
XXXXX
XXXXX
XXXXX
XXXXX
Re:

Technical Assistance Advisement 18C1-013
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 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
Technical Assistance Advisement concerning how the method by which income generated by or

XXXXX
November 8, 2018
Florida Department of Revenue
Page 2
arising out of Taxpayer’s qualified capital 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 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 XXXXX business comprised of XXXXX. Taxpayer is wholly-owned by XXXXX
(“XXXXX”). XXXXX is a partnership for federal and Florida purposes. All operations of Taxpayer
are reported by XXXXX on its partnership income tax return. XXXXX is owned and controlled by
XXXXX. Certain corporate members of the consolidated group of XXXXX indirectly hold XXXXX%
of XXXXX. The remaining XXXXX% is held by XXXXX.
The current respective indirect membership interest percentages in XXXXX are (the “XXXXX
Partners”):

XXXXX
November 8, 2018
Florida Department of Revenue
Page 3

XXXXX Partners
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX

FEIN
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX

Ownership %
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
100%

Taxpayer is planning to construct a state-of-the-art XXXXX in XXXXX County. The project will be
the XXXXX for the XXXXX of the XXXXX responsible for the XXXXX.
The project is expected to retain XXXXX jobs in Florida and create at least XXXXX net new-toFlorida jobs, with an average annual wage of at least $XXXXX (plus $XXXXX in benefits).
Taxpayer estimates that its total capital investment in the project will be at least $XXXXX
million. The project capital investment will be incurred directly through Taxpayer or in part
through a third-party developer. Taxpayer expects the commencement of operations to be
XXXXX.
Taxpayer proposes a pre-apportioned methodology to compute the income generated by or
arising out of the qualifying project and the corresponding CITC. Taxpayer’s accounting system
will be structured to establish a separate general ledger to track the operation of the project.
An annual pro forma tax return will identify each category of income and expense that will be
used by Taxpayer in computing the annual taxable income generated by or arising out the
project. Only the annual taxable income generated on or after commencement of operations
will be considered income arising from the project.
ISSUE PRESENTED
In its letter dated XXXXX, 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.
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

XXXXX
November 8, 2018
Florida Department of Revenue
Page 4
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.

XXXXX
November 8, 2018
Florida Department of Revenue
Page 5
(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. 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:

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.

(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.

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

XXXXX
November 8, 2018
Florida Department of Revenue
Page 6
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 at least
   $XXXXX million, which will be allocated to the XXXXX;
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 XXXXX; or
3. The tax due on the respective XXXXX 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 XXXXX net new-to-Florida full-time equivalent
   jobs paying an average annualized wage of at least $XXXXX 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 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.
   Taxpayer proposes a pre-apportioned methodology to compute the income generated by or
   arising out of the qualifying project and the corresponding CITC. Taxpayer will establish a
   separate general ledger to track the operations of the project including the capital investment,
   expenses (direct and indirect), book to tax adjustments, any other adjustments, and revenues
   arising from the project.
   The Department concurs with Taxpayer’s methodology. Taxpayer will prepare a pro forma
   return for the project. The pro forma return will include categories of income and expense that
   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.

XXXXX
November 8, 2018
Florida Department of Revenue
Page 7

The CITC will be allocated among the XXXXX Partners. The allocation of the CITC will be based
on the ownership interest percentages. The allocated credit amount for the project will be
reported via footnote on XXXXX Florida Partnership Information Returns. If the partner is an
LLC, the allocated credit amount will flow through to the ultimate partner(s) or member(s). The
corporate partners will claim the credit on their Florida corporate income tax returns to offset
their tax liability. Each corporate 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.
XXXXX Partners

FEIN

XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX

XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX

Ownership
Percentage
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX

Flows through to the partner(s) or
member(s), if LLC
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX

FEIN
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX

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.
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
project could be substantially different from what has been agreed upon in this TAA.

XXXXX
November 8, 2018
Florida Department of Revenue
Page 8

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
CC: XXXXX