Could a separately filing corporation use all income on its Florida return as income from its Capital Investment Tax Credit project?

Plain-English summary

Florida agreed on a method for calculating income generated by a certified Capital Investment Tax Credit project.

The taxpayer used a separate corporation to conduct the Florida project, filed a separate Florida corporate income tax return, and represented that all its Florida activities related to that project. The Department therefore allowed the taxable income reported on that separate return to serve as the project's income for calculating tax and the available credit.

The taxpayer had to compute that income under generally accepted accounting principles and section 220.13. The agreement also depended on the submitted facts remaining correct; materially different or changed facts could make the method inappropriate.

What this means for you

Certified project companies

A separate project entity can simplify the project-income calculation when its return contains no unrelated Florida activity.

Corporate tax teams

If the entity reports other activities on the same return, Rule 12C-1.0191 contemplates a pro forma attachment that separately accounts for project income, tax, and credit.

Common questions

Did Florida approve the proposed method? Yes.

What income was used? Taxable income reported on the separately filed Florida corporate income tax return.

Why was that acceptable? All of the entity's Florida activities related to the qualifying project on the represented facts.

Could the method change later? Yes, if the facts were incorrect or materially changed.

Citations and references

• Fla. Stat. Sec. 220.13
• Fla. Stat. Sec. 220.191
• Fla. Admin. Code R. 12C-1.0191(1)(a)1.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 20C1-012

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:
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 is inclined to concur 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.
November 13, 2020
XXXXX
XXXXX
XXXXX
XXXXX

Re:

Technical Assistance Advisement –20C1-012
Request for Written Agreement for Determination of Income Sections
220.11, 220.13, 220.15, 220.191, Florida Statutes (“F.S.”) Rule 12C1.0191, 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.
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. On XXXXX,
DEO issued a revised certification letter to Taxpayer. 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 XXXXX. Taxpayer files a separate company Florida corporate income tax return.
Taxpayer’s project (“qualifying project”) involves a XXXXX. The location consists of a XXXXX. In
addition to the sale XXXXX, Taxpayer also sells XXXXX imported from other XXXXX subsidiaries.
The qualifying project is required to create at least 100 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 employs approximately 300 people.
Taxpayer estimates that its cumulative capital investment will be $XXXXX. The investment includes the
production line, plant lease improvements, material transportation vehicles and other assets. Taxpayer
commenced operations of the project on XXXXX.
Since Taxpayer files separately in Florida and all the activities in Florida are related to the project,
Taxpayer proposes using the separate taxable income generated by this company as project
income. This amount will then be used to determine the amount of tax due and the subsequent
amount of the credit that is available for use, as provided in Rule 12C-1.0191(1)(a)1., F.A.C.
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:
(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.

(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.
Rule 12C-1.0191(1)(a)1., F.A.C., states:
In situations where the applicant is using a separate corporate entity to account for the activities
of the qualifying project, the taxable income generated by that entity as reported on the return
filed pursuant to section 220.22(1), F.S., will be used to determine the amount of income tax due
and the subsequent amount of the credit that will be available for use. If the applicant has other
activities not related to the project reported on this return, a pro forma attachment will be
required to separately account for the taxable income generated by the project, the resulting
amount of tax due, and the subsequent amount of the credit that will be available for use.
DISCUSSION
On XXXXX, DEO issued a revised 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, 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.
   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.
   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. 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.
No annual CITC may be claimed without a letter from DEO stating that the appropriate annual
requirements have been satisfied or maintained.
Since all the activities in Florida are related to the project, Taxpayer has proposed using the taxable
income determined on the separately filed Florida corporate income tax return as the income
generated by or arising out of the qualifying project. This amount would be used to determine the
tax liability of the project and the corresponding CITC. The Department concurs with Taxpayer’s
methodology.
Taxpayer must apply generally accepted accounting principles and the provisions of s. 220.13, F.S., in
computing the income of the qualifying project.
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 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.
Technical Assistance Advisement
Page 6
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