Could an acquired corporation stop filing Florida consolidated returns after its former affiliated group ended and the new parent filed separately?

Plain-English summary

Florida permitted a corporation and the members of its former affiliated group to stop filing consolidated corporate income-tax returns after an acquisition changed the group.

The acquisition ended the taxpayer's prior affiliated group and nullified its federal and Florida consolidated filing election. The acquiring parent filed separate returns and had never made a Florida consolidated election. The taxpayer nevertheless continued filing consolidated Florida returns by mistake.

The Department concluded that the taxpayer should have stopped filing its old consolidated return after the acquisition. It granted deconsolidation based on the change in circumstances and directed the former group members to begin separate Florida filings for the redacted tax year stated in the TAA.

What this means for you

Acquired corporate groups

An acquisition can end the affiliated group that made the original election. Confirm the new parent's filing history instead of automatically carrying forward the old group's Florida return method.

Corporate tax teams

Florida consolidated filing generally continues in later years, but the Department may consent to separate returns when a qualifying change in circumstances occurs.

Common questions

Did Florida allow the taxpayer to deconsolidate? Yes.

Why? The acquisition ended the former group, the old election was nullified, and the new parent had never elected Florida consolidated filing.

Were the continued consolidated returns correct? No. The TAA described them as filings made in error.

Citations and references

• Fla. Stat. Sec. 220.131
• Fla. Admin. Code R. 12C-1.0131(3)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 22C1-002

Original ruling text

QUESTION: May a parent company be granted permission to cease filing Florida consolidated
tax returns based upon a change in business circumstances regarding the members of the
taxpayer's affiliated group?
ANSWER: The parent company was granted permission to cease filing Florida consolidated tax
returns based on provisions of the F.A.C. which address changes in business circumstances
regarding the members of the taxpayer's affiliated group.

March 2, 2022
XXX
XXX
XXX
XXX
XXX
XXX
Re:

Technical Assistance Advisement 22C1-002
Request for Authority to Discontinue Consolidated Filing
Section 220.131, F.S.
Rule 12C-1.0131(3), F.A.C.
XXX (“The Taxpayer”)
FEIN: XXX

Dear XXX:
This is in response to your request dated XXXX, for a Technical Assistance Advisement (“TAA”) pursuant
to s. 213.22, F.S., and Rule Chapter 12-11, F.A.C., regarding permission to discontinue filing consolidated
corporate income tax returns. An examination of your letter has established that you have complied
with the statutory and regulatory requirements for issuance of a TAA. Therefore, the Department is
hereby granting your request for a TAA.
ISSUE
Whether the taxpayer has established sufficient reasonable cause for the Executive Director to permit it
to stop filing consolidated Florida corporate income tax returns beginning with the tax year ended XXXX.

XXX
March 2, 2022
Florida Department of Revenue
Page 2

FACTS SUPPLIED BY TAXPAYER
Based on the information provided in the TAA request, XXX acquired the taxpayer in XXXX. At that time,
the taxpayer’s affiliated group ceased to exist, and its consolidated filing election was nullified for both
federal and Florida corporate income tax purposes. The taxpayer has provided documentation in
support of this information.
The TAA request further states that the taxpayer continued filing its tax returns on a consolidated basis
in error, as the acquiring parent files its tax returns on a separate basis, never having made a Florida
consolidated filing election. The taxpayer is requesting permission to discontinue filing its Florida
corporate income tax returns on a consolidated basis.

LAW
Section 220.131(1), F.S., states:
(1) Notwithstanding any prior election made with respect to consolidated returns, and subject
to subsection (5), for taxable years beginning on or after September 1, 1984, any corporation
subject to tax under this code which corporation is the parent company of an affiliated group of
corporations may elect, not later than the due date for filing its return for the taxable year,
including any extensions thereof, to consolidate its taxable income with that of all other
members of the group, regardless of whether such member is subject to tax under this code,
and to return such consolidated taxable income hereunder, in which case all such other
members must consent thereto in such manner as the department may by rule prescribe,
provided:
(a) Each member of the group consents to such filing by specific written authorization at the
time the consolidated return is filed;
(b) The affiliated group so filing under this code has filed a consolidated return for federal
income tax purposes for the same taxable year; and
(c) The affiliated group so filing under this code is composed of the identical component
members as those which have consolidated their taxable incomes in such federal return.
Section 220.131(3), F.S., states:
The filing of a consolidated return for any taxable year shall require the filing of consolidated
returns for all subsequent taxable years so long as the filing taxpayers remain members of the
affiliated group or, in the case of a group having component members not subject to tax under
this code, so long as a consolidated return is filed by such group for federal income tax
purposes, unless the director consents to the filing of separate returns.
Rule 12C-1.0131(3)(b), F.A.C., provides:
(b)1. Notwithstanding that a consolidated return is required for a taxable year, the Executive

XXX
March 2, 2022
Florida Department of Revenue
Page 3
Director or the Executive Director’s designee is authorized to grant permission to a group to
discontinue filing consolidated returns. Any such application shall be made to Technical
Assistance and Dispute Resolution, P. O. Box 7443, Tallahassee, Florida 32314-7443, and shall
be made not later than the 90th day before the due date for the filing of the consolidated
return, including extensions of time. Permission to revoke will be contingent upon an
agreement between the taxpayer and the Executive Director or the Executive Director’s
designee to the terms, conditions, and adjustment under which the change will be effected.

2. The Executive Director or the Executive Director’s designee is authorized to grant
   permission to a group to discontinue filing consolidated returns if the net result of all
   amendments to the Florida Income Tax Code or the Internal Revenue Code or regulations with
   effective dates commencing within the taxable year has a substantial adverse effect on the
   consolidated tax liability of the group for such year relative to what the aggregate tax liability
   would be if the members of the group filed separate returns for such year. Other factors which
   will be taken into account in determining whether good cause exists for granting permission to
   discontinue filing consolidated returns beginning with the taxable year include:
   a. Changes in law or circumstances, including changes which do not affect income tax liability;
   b. Changes in law which are first effective in the taxable year and which result in a substantial
   reduction in the consolidated net operating loss for such year relative to what the aggregate
   net operating losses would be if the members of the group filed separate returns for such
   year; and
   c. Changes in the Florida Income Tax Code or the Internal Revenue Code or regulations which
   are effective prior to the taxable year but which first have a substantial adverse effect on the
   filing of a consolidated return relative to the filing of separate returns by members of the
   group in such year.
3. Permission to revoke may be contingent upon an agreement between the taxpayer and the
   Executive Director or the Executive Director’s designee to the terms, conditions, and
   adjustment under which the change will be effected.
   ANALYSIS
   Section 220.131(1), F.S., allows “any corporation subject to tax under this code which corporation is
   the parent company of an affiliated group of corporations” to elect to consolidate its taxable
   income with that of all other members of the group. Once such election is made, the consolidated
   group is required to continue filing a consolidated Florida return as long as it continues to file a
   consolidated federal return, regardless of whether the parent corporation continues to have nexus
   in Florida. The language of s. 220.131(1), F.S., clearly indicates that it is the parent corporation that
   both makes the election to consolidate and files the consolidated return.
   As stated in s. 220.131(1), F.S., the parent corporation that makes a consolidated filing election
   must be subject to Florida corporate income tax, that is, have nexus with Florida, at the time it
   makes a consolidated filing election. It is not required to maintain nexus in subsequent years, but
   the group must continue to file a consolidated Florida corporate income tax return in all
   subsequent years.

XXX
March 2, 2022
Florida Department of Revenue
Page 4
The federal tax returns on which the taxpayer’s Florida returns filed with the Department are
based, indicate that they have been filed on a consolidated basis, as do the taxpayer’s Florida
corporate income tax returns. The information provided indicates that the taxpayer’s consolidated
filing election was nullified when it was acquired by XXX. Therefore, under the provisions of section
220.131, F.S., the taxpayer should have ceased filing its own consolidated return following its
acquisition, based on a change in circumstances.
CONCLUSION
The taxpayer’s request for permission to deconsolidate is granted, based on a change in circumstances.
The taxpayer and the members of its prior consolidated group should begin filing their Florida corporate
income tax returns on a separate basis beginning with the returns for the tax year ended XXXX.

This response constitutes a Technical Assistance Advisement under s. 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 s. 213.22, F.S. Our response is predicated on those facts and the specific situation
summarized above. You are advised that subsequent statutory or administrative rule changes, or judicial
interpretations of the statutes or rules, upon which this advice is based, may subject similar future
transactions to a different treatment than expressed in this response.
You are further advised that this response, your request and related documents are public records
under Chapter 119, F.S., which are subject to disclosure to the public under the conditions of s. 213.22,
F.S. Your name, address, and any other details, which might lead to identification of the taxpayer, must
be deleted before disclosure. In an effort to protect the confidentiality of such information, we request
you provide the undersigned with an edited copy of your request for Technical Assistance Advisement,
backup material and response within fifteen days of the date of this advisement.
Sincerely,

Suzanne C. Paul
Suzanne C. Paul
Tax Law Specialist
Technical Assistance and Dispute Resolution