How could the taxpayer isolate taxable income from its certified project while filing consolidated Florida and federal returns?

Plain-English summary

The Department approved a pro forma method that isolated the certified project's income from the taxpayer's consolidated records.

The taxpayer would prepare a return for the project location that separately captured all revenues, direct and indirect costs, book-to-tax adjustments, and other adjustments used to determine annual taxable income. It would then apply the project's Florida apportionment factor and the corporate tax rate to calculate the project's Florida tax liability and corresponding Capital Investment Tax Credit.

The credit remained limited to the lesser of the applicable capital-cost amount, the permitted percentage of project-generated tax liability, or the tax due on the consolidated Florida return before the credit.

What this means for you

The ruling shows how a project can be measured inside a taxpayer that files consolidated returns: maintain project-location detail, build a defensible pro forma taxable-income calculation, and connect it to Florida apportionment.

The annual Florida filing had to include the pro forma project return, credit calculations, and the agency letter confirming that the investment and employment requirements were met or maintained.

Common questions

Did the project need its own filed corporate return? No. The approved document was a pro forma calculation supporting the taxpayer's consolidated return.

What records drove the calculation? Project-location revenues, direct and indirect costs, book-to-tax adjustments, and other taxable-income adjustments.

How was the project tax calculated? The project apportionment factor and corporate tax rate were applied to its pro forma taxable income.

Was annual certification still required? Yes.

Citations and references

• Fla. Stat. §§ 220.11, 220.13, and 220.15.
• Fla. Stat. § 220.191.
• Fla. Admin. Code r. 12C-1.0191.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 23C1-005

Original ruling text

Question: 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.
Answer: Based on the representation of Taxpayer, the Department concurs with Taxpayer’s
suggested calculation of 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 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.
June 27, 2023

Re:

Dear

Technical Assistance Advisement – 23C1-005
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.”)
(“Taxpayer”)
FEIN:
Project ID:
Florida Department of Economic Opportunity (“DEO”)
Enterprise Florida, Inc. (“EFI”)
:

This is in response to your request dated
, 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:

Technical Assistance Advisement
June 27, 2023
Page 2

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
, DEO certified Taxpayer as eligible to receive tax credits under s. 220.191,
F.S. 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.
ISSUE PRESENTED
In its letter dated
, 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.
FACTS SUPPLIED BY TAXPAYER
Taxpayer is a

.

It employs about
people worldwide. Taxpayer files consolidated
Florida and federal corporate income tax returns.
Taxpayer has

.

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June 27, 2023
Page 3

Taxpayer has been awarded
. The projects upgrade the
expansion of future program efforts

facilities which allows for the retention and

For Project
, Taxpayer intends to create at least 100 net new-to-Florida full-time
equivalent jobs at the project location in
paying an average annualized wage of at
least $
(“project wage”). Taxpayer estimates that its cumulative capital investment will be
$
Taxpayer anticipates it will commence operations by
.
tracks the financial and tax records for its locations on a consolidated ledger.
. Taxpayer proposes using

.
Taxpayer will prepare a pro forma return for the
. The pro forma format will
separately account for all revenues, direct and indirect costs, book to tax adjustments and any other
adjustments made in determining the
annual taxable income.
After the taxable income is determined using the method described above, the Florida
apportionment factor for the
, as determined under section 220.15, F.S., will
be applied to taxable income to determine the Florida taxable income. The applicable Florida
corporate income tax rate will then be applied to the apportioned project income to determine
the project’s tax liability and corresponding CITC based on the level of investment.
The annual amount of CITC that

.
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….

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June 27, 2023
Page 4

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:

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June 27, 2023
Page 5

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.

(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
, DEO issued a letter approving Taxpayer’s project for participation in Florida’s
CITC program, and indicated in its letter that the “Qualifying Project” would 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 expected to exceed $
;
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 Florida consolidated corporate income tax return prior to 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:
1. Capital investment of at least $25 million has been made at the project’s
location in
; and
2. 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
.

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June 27, 2023
Page 6

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 proposal. With its annual Florida corporate income tax
filing, Taxpayer will provide a pro forma Florida corporate income tax return for the project and
calculations used in the determination of the annual CITC. Taxpayer will also provide a copy of the
letter from DEO certifying the annual requirements have been satisfied or maintained.
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 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
, 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.
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 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)717-6478.

Technical Assistance Advisement
June 27, 2023
Page 7

Sincerely,

Susan Coxwell
Susan Coxwell
Revenue Program Administrator
Technical Assistance & Dispute Resolution
(850)717-6478

Record ID: 7001007200

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June 27, 2023
Page 8

TADR Satisfaction Survey
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Notification number:

7001007200

Respondent code:

44

Tax type:

Corporate Income Tax

Correspondence type: Technical Assistance
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[email protected].
Thank you.