How could a consolidated Florida taxpayer revise its method for calculating income and tax from a Capital Investment Tax Credit project?

Plain-English summary

Florida approved a revised method for computing the income, tax liability, and Capital Investment Tax Credit attributable to a qualifying project reported within a consolidated return.

The taxpayer's updated software could separately identify project revenue. Under the approved pro forma method, it would first compute separate-company Florida taxable income using the standard apportionment factor, then apply the Florida corporate income tax rate. It would multiply that separate-company Florida liability by project revenue divided by total company revenue, and then apply the credit-utilization percentage tied to the investment level.

The taxpayer had to attach the project pro forma return to its consolidated Florida return, apply generally accepted accounting principles and section 220.13, and continue satisfying its existing certification and commencement-of-operations conditions.

What this means for you

Capital Investment Tax Credit recipients

Improved project-level revenue tracking can support a revised allocation method, but the Department's written agreement remains tied to the represented facts.

Corporate tax teams

The credit remained subject to the statutory limitations, and the project calculation did not replace the consolidated return.

Common questions

Did Florida approve the revised method? Yes.

How was the project's share measured? Project revenue divided by total taxpayer revenue for the year.

Was a separate filing required? No. A project pro forma return had to accompany the consolidated Florida return.

Could changed facts affect the method? Yes.

Citations and references

• Fla. Stat. Sec. 220.13
• Fla. Stat. Sec. 220.15
• Fla. Stat. Sec. 220.191
• Fla. Admin. Code R. 12C-1.0191

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 20C1-009

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: 20C1-009
ISSUE: Request for an amended 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 an amended 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: When filing their consolidated Florida corporate income tax return, it shall be necessary
for the Taxpayer to use a pro-forma format to determine the project’s annual taxable income.
Taxpayer will apply its Florida apportionment fraction to the Project’s annual taxable income, and
apply the applicable Florida corporate income rate for the determination of the Project’s Florida
taxable income, and associated Capital Investment Tax Credit.
September 11, 2020

XXXXX
XXXXX
XXXXX
XXXXX
Re:

Technical Assistance Advisement: 20C1-009
Request for Amended 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 received August 21, 2020, 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 amended agreement concerning how the method by which income

Technical Assistance Advisement
Page 2

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 (“Department”) 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, examined your letter and
established that you complied with the statutory and regulatory requirements for issuance of a
TAA, therefore, the Department issued XXXXX on XXXXX. The Department of Revenue has
reviewed your new request and is hereby granting your request for a revised 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 amended
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
The facts supplied for the agreement under XXXXX remain the same. However, due to an
update in software, Taxpayer now has the capability to separately compute revenues generated
by XXXXX. Taxpayer is requesting a revision to the method by which income generated by or
arising from the project is determined.
Taxpayer proposes calculating its separate Florida corporate income tax then multiplying it by
the percentage of the project’s revenues to total revenues to determine the Florida tax liability
directly related to the qualifying project. Taxpayer’s percentage of revenues will be determined
by dividing revenues generated from the XXXXX (qualifying project) by total Taxpayer revenues
for the tax year.

Technical Assistance Advisement
Page 3

Taxpayer would determine its separate company Florida taxable income and then use the
standard apportionment factor as provided by s. 220.15, F.S. The apportionment factor will be
determined as if it were a separate company with nexus in all states. Property and payroll
would be 100% Florida with sales in all states. Taxpayer will multiply the apportionment factor
by the company’s separate company taxable income to determine its Florida taxable income.
Taxpayer will then multiply the Florida taxable income by the applicable Florida income tax rate
to determine its Florida tax liability. Taxpayer’s separate Florida tax liability will then be
multiplied by the qualifying project’s percentage of revenues. The resulting project’s share of
Florida tax liability will then be multiplied by the annual credit utilization percentage (based on
the level of investment) allowed by statute (s. 220.191(2)(a), F.S.).
ISSUE PRESENTED
In its letter received on August 21, 2020, Taxpayer requests a revision to the method by which
the qualifying project’s income would be computed as provided in XXXXX.
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:

Technical Assistance Advisement
Page 4

(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
Page 5

(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
Taxpayer has requested the Department revise the method by which the income generated by
or arising from the project is determined. The Department concurs with the new method
proposed by Taxpayer.
Taxpayer must apply Generally Accepted Accounting Principles (GAAP) and the provisions of s.
220.13, F.S. Taxpayer will be required to provide with its consolidated Florida corporate
income tax return the pro-forma return for the qualifying project.
The allowable CITC is limited to the lesser of the three limitations defined in XXXXX.
Additionally, the criteria set by DEO regarding commencement of operations, as described in
Taxpayer’s certification letter and XXXXX, still apply.
Taxpayer asserts its cumulative capital investment has increased to over $XXXXX million. Based
on this assertion, as provided in s. 220.191(2)(a)2., F.S., the annual credit would be calculated at
XXXXX of the annual corporate income tax liability generated by or arising out of the qualifying
project.
CONCLUSION
Given the specific circumstances involved in this case, and based on the representation of
Taxpayer, the revised 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 August 21, 2020,
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

Technical Assistance Advisement
Page 6

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