If a Florida Capital Investment Tax Credit project increases its expected investment to at least $100 million, does its project-income method change, and can unused credits carry over?

Plain-English summary

The Florida Department of Revenue kept the project-income methodology from the taxpayer's earlier TAA even after the project's expected cumulative capital investment increased to at least $100 million. The expansion did not require a new method for determining income generated by the qualifying project.

The higher investment level did change the available credit treatment. Under section 220.191(2)(d), Florida Statutes, credit that cannot be used because the qualifying business lacks enough tax liability may be carried forward for use beginning in the 21st year after the project starts operations and ending in the 30th year.

The Department described the annual carryover as 5% of the cumulative capital investment, less the Capital Investment Tax Credit used on that year's return, with the carryover from a year capped at 5% of the cumulative investment. No annual credit may be claimed without a letter from the Department of Economic Opportunity confirming commencement of operations and satisfaction or maintenance of the annual jobs and investment requirements.

What this means for you

Businesses with certified capital-investment projects

Increasing a project's investment does not necessarily reopen an agreed project-income methodology. Here, the earlier method remained in place, while reaching the statutory $100 million threshold made the special years-21-through-30 carryover available.

Corporate tax and economic-development teams

Track investment, project income, tax liability, and the commencement-of-operations date separately. The carryover applies only to credit unused because of insufficient tax liability, and the ruling also conditions annual claims on the required economic-development certification.

Accountants and tax professionals

This TAA interprets a taxpayer-specific Capital Investment Tax Credit agreement. Verify the project's certification, actual cumulative investment, employment compliance, annual credit computation, and the continuing validity of section 220.191 and Rule 12C-1.0191 before applying the analysis.

Common questions

Q: Did the investment increase change the method for calculating project income?
A: No. The Department maintained the methodology established in TAA 14C1-006.

Q: When can unused credit be used?
A: If cumulative capital investment is at least $100 million, qualifying unused credit may be used from the 21st through the 30th year after commencement of operations.

Q: Is every unused amount automatically carried over?
A: The ruling addresses credit unused because the business had insufficient tax liability. It describes the carryover calculation as 5% of cumulative investment less the credit used for the year, capped at 5% of cumulative investment.

Q: Can the business claim the credit without further project certification?
A: No annual credit may be claimed without a letter from the Department of Economic Opportunity stating that operations commenced and the applicable annual jobs and investment requirements were satisfied or maintained.

Citations and references

• Fla. Stat. § 220.191(1), (2)(a), (2)(d), (4), and (8)
• Fla. Stat. § 213.22
• Fla. Admin. Code r. 12C-1.0191

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 19C1-003

Original ruling text

Florida Department of Revenue
Technical Assistance and Dispute Resolution

5050 West Tennessee Street Tallahassee FL 32399

Jim Zingale
Executive Director

floridarevenue.com

September 23, 2019
XXXXX
XXXXX
XXXXX
XXXXX
Re:

Technical Assistance Advisement – 19C1-003
Request for Clarification of the Capital Investment Tax Credit Carryover
Section 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”)

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 clarification on the
provisions for and utilization of the carryover of credit as provided in s. 220.191(2)(d), F.S.
FACTS SUPPLIED BY TAXPAYER
Taxpayer is a XXXXX. It is engaged in the XXXXX. It employs about XXXXX people worldwide.
Taxpayer files a consolidated Florida and federal corporate income tax return.
On XXXXX, DEO certified Taxpayer as eligible to receive tax credits under s. 220.191, F.S. DEO
determined Taxpayer’s eligibility for the CITC based on several factors, one factor being
Taxpayer making a cumulative capital investment of at least $XXXXX in XXXXX, Florida.
The project is the expansion of its facility located in XXXXX, Florida. It will be relocating
employees from its facility in XXXXX, to this location. In its letter dated May 9, 2014, Taxpayer
stated the project would create at least XXXXX net new-to-Florida full-time equivalent jobs with
an average annual wage of at least $XXXXX. At that time, Taxpayer estimated its total
cumulative capital investment to be at least $XXXXX million.

Taxpayer requested from the Florida Department of Revenue, on XXXXX, a Technical Assistance
Advisement seeking a written agreement specifying how income generated by or arising out of
the project would be determine. The Department issued a TAA, TAA 14C1-006, specifying the
method on June 19, 2014.
On XXXXX, DEO provided Taxpayer an informational letter which explained the annual CITC
allowed pursuant to section 220.191(2)(a), F.S., based on the variable percentages determined
by the level of cumulative capital investment. DEO stated Taxpayer expects its total cumulative
capital investment to be at least $100 million. Taxpayer expects to begin claiming this credit on
its tax year ended XXXXX, corporate income tax return.
ISSUE PRESENTED
Given the Taxpayer’s and the Department of Economic Opportunity’s revision increasing the
anticipated cumulated capital investment to at least $100 million, how will that impact TAA
14C1-006 issued by the Department of Revenue? Will the Taxpayer be able to carry over
unused credits in accordance with section 220.192(2)(d), F.S.?
LEGAL AUTHORITY
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.

(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
The Department maintains its position regarding the methodology to determine project income
as provided in TAA 14C1-006, dated June 19, 2014. Additionally, no annual CITC may be
claimed without a letter from DEO stating the commencement of operations has occurred and
appropriate annual requirements (jobs and investment) have been satisfied or maintained.
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
The methodology to determine project income, as provided in TAA 14C1-006, remains, even
with the expansion of the cumulative capital investment. If the cumulative capital investment
is at least $100 million, any unused credit can be carried over to be used in the 21 st through the
30th year (after the commencement of operations) based upon s. 220.191, F.S., and Rule 12C1.0191, F.A.C. Taxpayer is reminded that should the provided facts be determined to be
incorrect or changed, utilization of the credit 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