Did an out-of-state corporation have to file a Florida corporate income tax return because it indirectly owned a Florida partnership interest?

Plain-English summary

The out-of-state corporation had Florida nexus and had to file a Florida corporate income tax return because of its indirect interest in partnerships doing business in Florida.

The corporation owned an interest in an upper-tier partnership, which owned another partnership that placed assets in service and conducted business in Florida. Florida income flowed through the partnership chain to the corporation even though the corporation had no other redacted Florida presence.

Florida's statute and rules attribute a partnership's Florida business, existence, and income to its corporate partners. The Department said those rules do not distinguish between direct and indirect ownership or between limited and general partnership interests for this purpose.

What this means for you

A corporation cannot assume that a tiered partnership structure shields it from Florida filing obligations. Ownership through another partnership can still create nexus when the lower-tier entity does business or derives income in Florida.

Common questions

Did the corporation have to file in Florida? Yes.

Did indirect ownership avoid nexus? No. Florida attributed the lower-tier partnerships' Florida activity through the ownership chain.

What income had to be reported? The corporation had to report its income, deductions, gains, and losses, including partnership-derived income.

How was income apportioned? Using the Chapter 220 three-factor formula described in the ruling.

Citations and references

• Fla. Stat. §§ 220.02, 220.11, 220.13, 220.22, and 220.222.
• Fla. Admin. Code rr. 12C-1.002, 12C-1.011, 12C-1.013, and 12C-1.015.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 23C1-001B

Original ruling text

QUESTION: Is a corporation that owns an indirect interest in a Florida partnership required to file a
Florida corporate income tax return?
ANSWER: The corporation that owns an indirect interest in a Florida partnership is required to file a
Florida corporate income tax return.

April 28, 2023

Re:

Dear

Technical Assistance Advisement 23C1-001B
Taxation of Corporate Partners in Florida Partnerships
Sections 220.02, 220.11, 220.13, 220.22, 220.222, F.S.
Rules 12C-1.002, 12C-1.011, 12C-1.013, 12C-1.015, 12C-1.0153, 12C-1.0154,
12C-10.155, 12C-1.022, F.A.C.
(“the taxpayer”)
FEIN:
:

This is in response to your letter dated
, requesting this Department’s issuance
of a Technical Assistance Advisement (“TAA”) pursuant to Section(s.) 213.22, F.S., and Rule
Chapter 12-11 F.A.C, Florida Administrative Code, regarding the matter discussed below. Your
request has been carefully examined, and the Department finds it to be in compliance with the
requisite criteria set forth in Chapter 12-11, F.A.C. This response to your request constitutes a
TAA and is issued to you under the authority of s. 213.22, F.S.
ISSUE
Whether the taxpayer is required to file a Florida corporate income tax return and report its items
of income, deductions, gains, and losses, in the Florida return.

Technical Assistance Advisement
April 28, 2023
Page 2

FACTS SUPPLIED BY TAXPAYER
Based on the information provided in the TAA request, the taxpayer is incorporated under the
laws of the
. It has no
. The taxpayer
has a
ownership interest in a
.
That
owns
of a
. In
, the
began
and
located in Florida.
The assets were placed in service in
and
.
of the Florida
flows through to the taxpayer. Neither of the two
have
located in the
and the Internal Revenue Code
(I.R.C.) does not consider their income to be
.
LAW
Subsection 220.02(1), F.S., states:
It is the intent of the Legislature in enacting this code to impose a tax upon all
corporations, organizations, associations, and other artificial entities which derive
from this state or from any other jurisdiction permanent and inherent attributes not
inherent in or available to natural persons, such as perpetual life, transferable
ownership represented by shares or certificates, and limited liability for all owners. It is
intended that any limited liability company that is classified as a partnership for federal
income tax purposes and is defined in and organized pursuant to chapter 605 or
qualified to do business in this state as a foreign limited liability company not be
subject to the tax imposed by this code. It is the intent of the Legislature to subject
such corporations and other entities to taxation hereunder for the privilege of
conducting business, deriving income, or existing within this state. This code is not
intended to tax, and shall not be construed so as to tax, any natural person who
engages in a trade, business, or profession in this state under his or her own or any
fictitious name, whether individually as a proprietorship or in partnership with others,
or as a member or a manager of a limited liability company classified as a partnership
for federal income tax purposes; any estate of a decedent or incompetent; or any
testamentary trust. However, a corporation or other taxable entity which is or which
becomes partners with one or more natural persons shall not, merely by reason of
being a partner, exclude from its net income subject to tax its respective share of
partnership net income. This statement of intent shall be given preeminent
consideration in any construction or interpretation of this code in order to avoid any
conflict between this code and the mandate in s. 5, Art. VII of the State Constitution
that no income tax be levied upon natural persons who are residents and citizens of
this state.
Subsection 220.11(1), F.S., states:

Technical Assistance Advisement
April 28, 2023
Page 3

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.
Subsection 220.13, F.S., states:
(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: . . .

(2) For purposes of this section, a taxpayer’s taxable income for the taxable year
means taxable income as defined in s. 63 of the Internal Revenue Code and properly
reportable for federal income tax purposes for the taxable year, but subject to the
limitations set forth in paragraph (1)(b) with respect to the deductions provided by ss.
172 (relating to net operating losses), 170(d)(2) (relating to excess charitable
contributions), 404(a)(1)(D) (relating to excess pension trust contributions),
404(a)(3)(A) and (B) (to the extent relating to excess stock bonus and profit-sharing
trust contributions), and 1212 (relating to capital losses) of the Internal Revenue Code,
except that, subject to the same limitations, the term: . . .
Subsection 220.22(2), F.S., states:
(2) Every Florida partnership having any partner subject to tax under this code, shall
make an information return setting forth:
(a) All items of income, gain, loss, and deduction;
(b) The names and addresses of all partners subject to tax hereunder who would be
entitled to share in the net income of the partnership if distributed;
(c) The amount and proportion of the distributive share of each partner-taxpayer;
and
(d) Such other pertinent information as the department may by form or regulation
prescribe.
Paragraph 220.222(1)(a), F.S., states:
Returns required by this code shall be filed with the office of the department in Leon
County or at such other place as the department may by regulation prescribe. All
returns required for a DISC (Domestic International Sales Corporation) under s.

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April 28, 2023
Page 4

6011(c)(2) of the Internal Revenue Code shall be filed on or before the 1st day of the
10th month after the close of the taxable year; all partnership information returns
shall be filed on or before the 1st day of the 4th month after the close of the taxable
year; and all other returns shall be filed on or before the 1st day of the 5th month after
the close of the taxable year or the 15th day after the due date, without extension, for
the filing of the related federal return for the taxable year, unless under subsection (2)
one or more extensions of time, not to exceed 6 months in the aggregate, for any such
filing is granted.
Rule 12C-1.002, F.A.C., states:
Corporations and other artificial entities which are to become partners in a partnership
which conducts business, derives income or exists within the state shall be subject to
tax under the Florida Income Tax Code, without regard to any other factor which
would determine the tax status of that partner for Florida income tax purposes. The
partnership’s conduct of business, derivation of income or existence within Florida
shall be deemed attributable to the partners, rather than to the partnership itself.
Rule 12C-1.011(1)(v), F.A.C., states:
Foreign (out-of-state) corporations not otherwise subject to the law but who are
partners or members of Florida partnerships or joint ventures are subject to the law by
virtue of their membership in such partnerships or joint ventures. Florida partnerships
are partnerships doing business, deriving income, or existing in Florida. A partnership
will be considered to be existing within Florida if an active partner who participates in
management decisions has permanent or extended temporary residency (for 3 months
in the aggregate of a 12 month period) within Florida. If an active partner is residing
within Florida, management of the partnership is presumed to be occurring within
Florida.
Rule 12C-1.013(1), F.A.C., states:
(1)(a) “Taxable income,” as defined by Section 220.13(2), F.S., is the starting point in
determining Florida corporate income tax due.
(b) In general, “taxable income” is the amount of a corporation’s income that is subject
to federal tax. However, the federal deductions provided for net operating losses,
capital losses, excess charitable contributions, excess pension trust contributions,
excess stock bonus and profit-sharing trust contributions are limited by Section
220.13(1)(b), F.S.
(c) Elections under s. 338(h)(10), I.R.C. For federal tax purposes, an election under s.
338(h)(10), I.R.C., can only be made if a consolidated return is being filed that includes
both the target corporation and the selling consolidated group. The federal tax
treatment of s. 338(h)(10), I.R.C., which is incorporated by reference in Rule 12C-

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April 28, 2023
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1.0511, F.A.C., will be piggybacked to the greatest extent possible even though the
taxpayer is not filing a consolidated Florida return. The target corporation should
report the gain attributable to the deemed asset sale on its separate Florida return, if
appropriate. The basis in the assets will then be stepped-up for Florida tax purposes to
the same extent as for federal income tax purposes.
(d) “Taxable income” for an S corporation is defined as the amount subject to tax
under s. 1374, I.R.C., which is incorporated by reference in Rule 12C-1.0511, F.A.C.,
(built-in gains or capital gains) or s. 1375, I.R.C., which is incorporated by reference in
Rule 12C-1.0511, F.A.C. (passive investment income).
(e) For tax years ending on or after July 1, 1998, limited liability companies and foreign
limited liability companies qualified to do business in Florida will be allowed to file in
the same manner for Florida corporate income tax purposes as for federal tax
purposes.
Rule 12C-1.013(14)(d), F.A.C., states:
A schedule reflecting all of the adjustments made under Section 220.13(1)(e), F.S.,
must be created and maintained. Taxpayers must also report any additions on
Schedule I, Additions and/or Adjustments to Federal Taxable Income, of the Florida
Corporate Income/Franchise Tax Return (Form F-1120, incorporated by reference in
Rule 12C-1.051, F.A.C.), and any subtractions on Schedule II (Subtractions from Federal
Taxable Income), of the return for the current tax year. Partnerships filing a Florida
Partnership Information Return (Form F-1065, incorporated by reference in Rule 12C1.051, F.A.C.), are required to make the adjustments required by Sections
220.13(1)(e)1. and 3., F.S., on Part I (Florida Adjustment to Partnership Income), of the
return. The additions and subtractions under Sections 220.13(1)(e)1. and 3., F.S., must
be reported in Part I of Form F-1065. Partnerships must report the amount of expenses
claimed under s. 179, I.R.C., to their partners, so that their partners can compute the
amount under subparagraph (14)(a)1., F.A.C.
Rule 12C-1.013(20), F.A.C., states:
Adjustments from partnerships. Parts I and II of Form F-1065, Florida Partnership
Information Return, are used to report to the partner and the State each partner’s
share of the Florida partnership’s adjustments.
Rule 12C-1.015(10), F.A.C., states:
Partnerships. The amounts of the property, payroll, and sales of a partnership are
attributable to the partners or members of the joint venture. A corporation that is a
partner in a partnership must add its share of the property, payroll, and sales to its
own apportionment factors, regardless of whether the partnerships are Florida

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April 28, 2023
Page 6

partnerships. Form F-1065 is used in part to distribute to each partner subject to the
tax its share of the apportionment factors of the partnership or joint venture.

Rule 12C-1.0153(9), F.A.C., states:
A portion of a partnership’s real and tangible personal property, both owned or rented
and used during the tax year in the regular course of such trade or business, is
included in the denominator of a taxpayer’s property factor to the extent of the
taxpayer’s interest in the partnership. The value of such property located in Florida is
also included in the numerator of the property factor. The value of property that is
rented or leased by the taxpayer to the partnership or vice versa is, with respect to the
taxpayer, excluded from the property factor of the partnership or eliminated to the
extent of the taxpayer’s interest in the partnership in order to avoid duplication. For
purposes of inclusion in the Florida property factor, partnership property is allocated
to each partner based on their interest in the partnership, or as designated in the
partnership agreement.
Rule 12C-1.0154(6), F.A.C., states:
Compensation paid to employees of a partnership is included in the denominator of
the taxpayer’s payroll factor to the extent of the taxpayer’s interest in the partnership.
The amount paid to employees in Florida is also included in the numerator of the
payroll factor to the extent of the taxpayer’s interest in the partnership. Partnership
payroll should be allocated to each partner based on each partner’s interest in the
partnership, or as designated in the partnership agreement, for inclusion in the Florida
payroll factor.
Rule 12C-1.0155(4), F.A.C., states:
Sales of a partnership are included in the denominator of a taxpayer’s sales factor to
the extent of the taxpayer’s interest in the partnership. The amount of sales in Florida
is also included in the numerator of the sales factor to the extent of the taxpayer’s
interest in the partnership. Partnership sales should be allocated to each partner
based on each partner’s interest in the partnership, or as designated in the partnership
agreement, for inclusion in the Florida sales factor.
Rule 12C-1.022, F.A.C., states:
(2) Foreign (out-of-state) corporations.

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April 28, 2023
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(e) Foreign (out-of-state) corporations not otherwise subject to Chapter 220, F.S., but
who are partners or members of Florida partnerships or joint ventures, are subject to
the Florida Income Tax Code by virtue of their membership in such partnerships or
joint ventures and must file Form F-1120. A copy of the federal Schedule K-1 (Form
1065) should also be attached.

(6)(a) Every Florida partnership having any partner subject to the Florida Income Tax
Code is required to make an information return. A Florida partnership is a partnership,
as defined in Section 220.03(1)(s), F.S., having income apportionable or allocated to
Florida. A partner subject to the Florida Income Tax Code includes a taxpayer, as
defined in Section 220.03(1)(z), F.S., and any corporation subject to the tax solely by
virtue of its membership in a Florida partnership.
(b) The partnership will not be required to file a partnership return if the only partner
subject to the Florida Income Tax Code is an S corporation.
(c) The following examples illustrate when a Florida partnership must file a partnership
return.

1. Example: AB, a Florida partnership, has three partners, all of whom are individuals.
   AB is not required to file a Florida Partnership Information Return because it has no
   corporate partners.
2. Example: BC, a Florida partnership, has three partners, two individuals and one
   corporation, Corporation X. Corporation X is subject to the Florida Income Tax Code;
   therefore, BC is required to file a Florida Partnership Information Return.
3. Example: CD, a Florida partnership, has three partners, two individuals and one
   corporation, Corporation Y. Corporation Y is a New York corporation which does no
   business in Florida. However, CD is required to file a Florida Partnership Information
   Return because Corporation Y is subject to the Florida Income Tax Code solely by
   virtue of its membership in the Florida Partnership, CD.
4. Example: DE, a Florida Partnership, has three partners, two individuals and one
   corporation, Corporation Z. Corporation Z is an “S” Corporation. DE is not required to
   file a Florida Partnership Information Return.
   (d) The return required of a partnership under this section shall be made on Form F1065, Florida Partnership Information Return. A copy of the related U.S. Partnership
   Return of Income, Form 1065, must be attached. The instructions for Form F-1065
   prescribe the attachments required to be submitted with the copy of the related
   federal Form 1065.
   (e) Form F-1065 is used to determine the Florida partnership income adjustment; to
   report the names and addresses of all partners subject to tax under Chapter 220, F.S.,
   who are entitled to share in the net income of the partnership; and to distribute to
   each partner subject to the tax its share of the Florida partnership income adjustment
   and its share of the apportionment factors of the partnership or joint venture.
   (f)1. The corporate taxpayer-partner filing Form F-1120, Florida Corporation Income
   Tax Return, may use Form F-1065 to report its distributive share of any partnership

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April 28, 2023
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income adjustments and its share of the apportionment factors of a partnership or
joint venture which is not a Florida partnership.

2. Example: Corporation W is subject to the Florida Income Tax Code and is also a
   partner in partnership UVW, an Ohio partnership, that does no business in Florida and
   is not required to file a Florida Partnership Information Return. However, Corporation
   W may use Form F-1065, Florida Partnership Information Return, to report its share of
   the partnership income adjustments and the partnership apportionment factors for
   partnership UVW.
   (g) Corporations who are members of a Florida partnership or joint venture must file
   Form F-1065, Florida Partnership Information Return, as well as, Form F-1120.
   ANALYSIS
   In subsection 220.02(1), F.S., the Florida Legislature expressly states its intent to tax all artificial
   entities for the privilege of conducting business, deriving income, or existing in Florida, and to
   exempt individuals and partnerships from Florida corporate income tax, including LLC’s that are
   classified as partnerships for federal income tax purposes. However, the Legislature also
   expressly states that its intent to exempt partnerships from taxation does not extend to
   corporations that have ownership interests in partnerships. As an expression of this intent, Rule
   12C-1.002, F.A.C., states that “[c]orporations and other artificial entities which are to become
   partners in a partnership which conducts business, derives income or exists within the state shall
   be subject to tax under the Florida Income Tax Code, without regard to any other factor which
   would determine the tax status of that partner for Florida income tax purposes. The partnership’s
   conduct of business, derivation of income or existence within Florida shall be deemed
   attributable to the partners, rather than to the partnership itself.” This rule became effective on
   October 20, 1972. Consistent with these provisions, Rule 12C-1.022(2)(e), F.A.C., states that
   corporations that would otherwise not be subject to the provisions of Chapter 220, F.S., become
   subject to its provisions as a result of being partners of Florida partnerships.
   Subsection 220.11(1), F.S., states that “[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.”
   Therefore, again, the Florida Legislature intended to tax artificial entities that benefit from the
   privileges and protections conferred on them by the State of Florida. Rule 12C-1.011(1)(v), F.A.C.,
   expresses the intent of Chapter 220, F.S., taken as a whole, in stating that “[f]oreign (out-of-state)
   corporations not otherwise subject to the law but who are partners or members of Florida
   partnerships or joint ventures are subject to the law by virtue of their membership in such
   partnerships or joint ventures. Florida partnerships are partnerships doing business, deriving
   income, or existing in Florida. . . .”
   Subsection 220.22(2), F.S., requires Florida partnerships that have a corporation as a partner, to
   file a Florida partnership information return. Paragraph 220.222(1)(a), F.S., establishes the filing

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April 28, 2023
Page 9

date for such partnership information returns. Rule 12C-1.022 (2)(e), F.A.C., and Rule 12C1.022(6), F.A.C., reflect this requirement.
Rule 12C-1.013(14)(d), F.A.C., Rule 12C-1.013(20), F.A.C., Rule 12C-1.015(10), F.A.C., Rule 12C1.0153(9), F.A.C., Rule 12C-1.0154(6), F.A.C., and Rule 12C-1.0155(4), F.A.C., all address how
partnership income, adjustments, payroll, property, and sales, are to be reported in the Florida
Partnership Information Return, and by corporate partners in their Florida Corporate Income Tax
Returns.
Section 220.13(1), F.S., defines “adjusted federal income,” and Rule 12C-1.013(1), F.A.C., states
that “taxable income,” as defined by section 220.13(2), F.S., is the starting point in determining
Florida corporate income tax due. In general, “taxable income” is the amount of a corporation’s
income that is subject to federal corporate income tax.
As can be seen from the framework and provisions of Chapter 220, F.S., and, as is further
expressed in Chapter 12C-1, F.A.C., it is clearly the intent of the Florida Legislature to attribute
nexus to corporations that have ownership interests in Florida partnerships, as that term is
defined, and to tax the income of corporations that is received from Florida partnerships, without
exception. Additionally, neither the statute nor the rule distinguish between the tax treatment
of income derived from ownership of a limited partnership interest and income derived from
ownership of a general partnership interest, for purposes of Florida corporate income tax.
CONCLUSION
Based on the discussion presented above, the taxpayer has Florida nexus through its
ownership interest in partnerships that exist and are doing business in Florida. Therefore,
the taxpayer should file a Florida corporate income tax return, reporting its income,
deductions, gains, and losses, and apportion its income, including income it derives from
investments in partnerships, using the three-factor formula provided by Chapter 220, F.S.,
to compute its Florida corporate income tax liability.
This response constitutes a TAA 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 backup documents are
public records under Chapter 119, F.S., and are subject to disclosure to the public under the
conditions of s. 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 TAA, the backup material and this response, deleting names, addresses

Technical Assistance Advisement
April 28, 2023
Page 10

and any other details which might lead to identification of the Taxpayer. Your response should
be received by the Department within ten (10) days of the date of this letter.
If you have any further questions with regard to this matter and wish to discuss them, you may
contact me directly at (850) 717-6794.
Sincerely,

Suzanne P. Haines
Suzanne P. Haines
Tax Law Specialist
Technical Assistance & Dispute Resolution
cc:

Record ID: 7000784156

Technical Assistance Advisement
April 28, 2023
Page 11

TADR Satisfaction Survey
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enable you to complete and submit the survey.
Notification number:

7000784156

Respondent code:

44

Tax type:

Corporate Income Tax

Correspondence type: Technical Assistance
If you need technical assistance accessing the survey, please email Douglas Charity at
[email protected].
Thank you.