Could a separately filing subsidiary treat all of its Florida apportioned income as income from its Capital Investment Tax Credit project?

Plain-English summary

Florida approved treating all Florida apportioned income of a project-only subsidiary as income generated by its certified Capital Investment Tax Credit project.

The subsidiary belonged to its parent's federal consolidated group but filed a separate Florida corporate income tax return. Its only activity and location involved the qualifying project, and all its expenses related to that project.

The subsidiary would prepare a pro forma separate-company federal Form 1120 from the parent's consolidated return, use it as the starting point for the Florida return, account separately for all revenue, expenses, and book-to-tax adjustments, and attach the project-income and annual-credit computations. The method remained subject to GAAP, section 220.13, certification requirements, and changed facts.

What this means for you

Capital Investment Tax Credit recipients

A dedicated project subsidiary can support treating all its apportioned income as project income when it has no unrelated activity.

Corporate tax teams

Maintain a separate-company pro forma federal return and detailed schedules even when the entity joins the parent's federal consolidated return.

Common questions

Did Florida accept 100% of apportioned income as project income? Yes.

Where was the credit claimed? On the subsidiary's separate Florida corporate income tax return.

What supported the method? The subsidiary had only the qualifying project activity and no unrelated locations or expenses.

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 20C1-007

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

TAX: Corporate Income – Capital Investment Tax Credit
TAA NUMBER: 20C1-007
ISSUE: Request for written agreement for determination of project income
STATUTE CITE(S): Sections 220.11, 220.13, 220.15, and 220.191, F.S.
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: The Department concurs with Taxpayer’s suggested calculation for the income generated by or
arising out of the qualifying project. However, Taxpayer was reminded that should the facts provided in its
request be determined to be substantially different, this TAA would not apply and the methodology may be
deemed inappropriate.

May 15, 2020
XXXXX
XXXXX
XXXXX
XXXXX
Re:

Technical Assistance Advisement – 20C1-007
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
Page 2

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.
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 XXXXX (parent of Taxpayer, herein, “Parent”) as eligible to receive tax
credits under s. 220.191, F.S.1 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
Parent is a XXXXX. Taxpayer is a wholly owned subsidiary of Parent. Taxpayer is part of Parent’s
consolidated federal return and files a separate company Florida corporate income tax return.
Taxpayer XXXXX. The project has a projected XXXXX. Taxpayer anticipates that it will create at
least XXXXX net new-to-Florida full-time equivalent jobs at the project location in XXXXX, Florida
paying an average annualized wage of at least $XXXXX (“project wage”). Taxpayer, in
combination with XXXXX, anticipate making a capital investment of approximately $XXXXX.
Taxpayer projects that it will commence operations by XXXXX.2

1
2

XXXXX
XXXXX

Technical Assistance Advisement
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Taxpayer proposes that 100% of its Florida apportioned income generated in each year during the
life of the credit be considered income generated by or arising out of the qualifying project.
Taxpayer states that it is a separate corporate entity and its only activity will be the qualifying
project activity of XXXXX. The project encompasses all of Taxpayer’s Florida activities and Florida
taxable income and Taxpayer does not have any other activities, other than sales related
activities outside the state. Taxpayer will not have other locations either within or without
Florida. All of Taxpayer’s expenses will relate solely to the project. Taxpayer will file a separate
Florida corporate income tax return. Taxpayer will prepare a pro forma separate company
federal 1120, based on the federal consolidate return filed by Parent, which includes Taxpayer.
The federal pro forma return will serve as a starting point for filing Taxpayer’s separate Florida
corporate income tax return. Taxpayer’s separate return will separately account for all revenues
and expenses and any book to tax adjustments will be included in the determination of its annual
Florida taxable income. The credit will be claimed by Taxpayer only.3
ISSUE 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:

3

XXXXX

Technical Assistance Advisement
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(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.

(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.

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(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
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 100 net new-to-Florida full-time equivalent jobs paying at least
   the project wage at the project’s location in XXXXX, Florida.

Technical Assistance Advisement
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No annual CITC may be claimed without a letter from DEO stating that the appropriate annual
requirements have been satisfied or maintained.
The Department concurs with Taxpayer’s proposed methodology to determine the income
generated by or arising out of the qualifying project. Taxpayer will prepare a pro forma
separate company federal 1120, based on the federal consolidate return filed by Parent, which
includes Taxpayer. The federal pro forma return will serve as a starting point for filing
Taxpayer’s separate Florida corporate income tax return. Taxpayer’s separate return will
separately account for all revenues and expenses and any book to tax adjustments will be
included in the determination of its annual Florida taxable income. From this, the project’s tax
liability will be computed using the applicable tax rate for each tax year. Taxpayer will compute
the annual credit using the applicable percentage based on level of investment stated above.
The credit will be claimed on the separate Florida corporate income tax return of Taxpayer.
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
with its Florida corporate income tax return its separate company federal pro forma return that
separately details the qualifying project’s income. Additionally, a schedule showing the
computation of the annual credit should be included with its return.
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 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.

Technical Assistance Advisement
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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