Could a headquarters Capital Investment Tax Credit project use its share of new jobs to allocate Florida income to the project?

Plain-English summary

Florida approved a jobs-change factor for calculating the income and tax attributable to a headquarters Capital Investment Tax Credit project.

The annual factor equaled cumulative new-to-Florida project jobs divided by total headquarters jobs, including baseline employment and new project jobs. The taxpayer would multiply that percentage by its post-apportionment Florida adjusted federal income, then apply the corporate tax rate.

The allowable credit remained limited by the statutory caps. The taxpayer had to attach schedules showing the jobs factor, project tax liability, and credit, and use GAAP and section 220.13.

What this means for you

Headquarters projects

A job-based allocation can be approved when employment growth reasonably measures the qualifying project's share of an existing business.

Corporate tax teams

Maintain yearly baseline and cumulative project-employment records that reconcile to the filed schedules.

Common questions

Did Florida approve the jobs factor? Yes.

What was the denominator? Total headquarters jobs: baseline jobs plus cumulative new project jobs.

Citations and references

• Fla. Stat. Sec. 220.13
• Fla. Stat. Sec. 220.191
• Fla. Admin. Code R. 12C-1.0191

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 19C1-006

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

November 6, 2019
XXXXX
XXXXX
XXXXX
XXXXX
Re:

Technical Assistance Advisement – 19C1-006
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
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”).
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.

Technical Assistance Advisement
Page 2

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. DEO
amended and restated the certification of the project in a letter dated XXXXX. 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 the XXXXX. Taxpayer’s XXXXX. Taxpayer employs approximately XXXXX people and
is the XXXXX. Taxpayer files a consolidated federal and separate Florida corporate income tax
return.
The qualifying project involves the expansion and renovation of Taxpayer’s headquarters
(“project”) in XXXXX, Florida and the addition of approximately XXXXX net new-to-Florida jobs,
with an average annual wage of at least $XXXXX. Taxpayer estimates that its cumulative capital
investment in the project will be at least $XXXXX million. Commencement of operations is
expected to be XXXXX. Taxpayer will comprise the legal entity which will carry out all of the
project’s operations.
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 yearly by dividing
the project’s new-to-Florida jobs by total headquarters jobs employed by Taxpayer. The new
jobs will include all new jobs, to date, which are related to the project. Total headquarters jobs
will be based on Taxpayer’s Florida XXXXX baseline jobs in addition to the new jobs which are
related to the project. The jobs-change factor would be multiplied by its Florida portion of
adjusted federal income (line 7 of Taxpayer’s Florida Corporate Income Tax return, F-1120) to
determine the qualifying project’s Florida taxable income. The project’s Florida taxable income
will then be multiplied by the applicable tax rate to determine the project’s tax liability.

ISSUE PRESENTED

Technical Assistance Advisement
Page 3

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 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.

DISCUSSION

Technical Assistance Advisement
Page 5

On XXXXX, and amended 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 separate Florida corporate income tax return of Taxpayer 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 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
   XXXXX, Florida; and
5. Creation of at least XXXXX net new-to-Florida full-time equivalent jobs paying at least
   the project wage at the project’s location in XXXXX, Florida.
   No annual CITC may be claimed without a letter from DEO stating that the appropriate annual
   requirements have been satisfied or maintained.
   The Department agrees with Taxpayer’s proposed method to use a jobs-change factor to
   determine income generated by or arising out of the project. The jobs-change factor will be
   determined yearly by dividing the project’s new-to-Florida jobs by total headquarters jobs
   employed by Taxpayer. The new jobs will include all new jobs, to date, which are related to the
   project. Total headquarters jobs will be based on Taxpayer’s XXXXX baseline jobs in addition to
   the new jobs which are related to the project. The jobs-change factor will be multiplied by
   Taxpayer’s Florida portion of adjusted federal income (line 7 of Taxpayer’s Florida Corporate
   Income Tax return, F-1120), post-apportionment, to determine the qualifying project’s taxable
   income. The project’s Florida taxable income will then be multiplied by the applicable tax rate
   to determine the project’s tax liability. 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. Taxpayer will be required to provide

Technical Assistance Advisement
Page 6

with its Florida corporate income tax return a schedule of the computation of the jobs-change
factor and calculation of the project’s tax liability and allowable CITC.
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 12C1.0191, 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.
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