Could the consolidated taxpayer use a separate-entity pro forma return and project-specific apportionment to calculate qualified-project income?

Plain-English summary

The Department approved a separate-entity approach with project-specific apportionment for the certified project's income.

The taxpayer would build a pro forma separate return from the project's profit-and-loss statement. That calculation separately accounted for project revenues and expenses under GAAP, made book-to-tax and other adjustments, and produced annual project taxable income.

The project-specific property and payroll factors would reflect 100% of the project's property and jobs. The sales factor would follow Florida's standard sourcing method. Applying that apportionment factor and the corporate tax rate produced the project's tax liability and corresponding Capital Investment Tax Credit.

What this means for you

This method separated the project economically even though the taxpayer filed a consolidated Florida return. It required more than a management estimate: project financial statements, tax adjustments, and a complete apportionment schedule supported the calculation.

Common questions

What records established project income? The project's profit-and-loss statement, adjusted under GAAP and Florida tax rules.

How were property and payroll treated? The factors reflected 100% of the project-specific property and jobs.

How was the sales factor determined? Under the standard Florida sourcing rules.

What had to accompany the Florida return? The pro forma separate return, apportionment schedule, profit-and-loss statement, and CITC calculation.

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 23C1-006

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 – 23C1-006
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 Taxpayer1 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 an
. Taxpayer files a
consolidated Florida corporate income tax return.
The qualifying project (“Project”)
. The project will consist
. It will include
1

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June 27, 2023
Page 3

. The capital investment is currently over
$
and has resulted in the creation of over 100 net new-to-Florida jobs making an
average wage of at least $
(“project wage”). Taxpayer states it commenced
operations on
Taxpayer is proposing using a separate entity approach with a project-specific
apportionment for determining income generated by or arising out of the qualifying
project. Taxpayer will use a pro forma separate return method that utilizes the profit and
loss statement
. The profit and loss
statement will separately account for the revenues and expenses related to the project
pursuant to GAAP. Book to tax and other adjustments will be made to compute the
project’s pro forma annual taxable income. Additionally, Taxpayer will make an
adjustment
.2
Once the pro forma taxable income is determined, a project-specific apportionment factor
will be applied. The property and payroll factors will be reflected at 100% of the project
specific jobs and property. The sales factor will be determined based on the standard
sourcing method. 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.
Taxpayer states
.
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: …
2

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June 27, 2023
Page 4

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.

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June 27, 2023
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(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.
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 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
   $
   , 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 consolidated 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.
   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
   and

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June 27, 2023
Page 6

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
   .
   No annual CITC may be claimed without a letter from DEO stating that the appropriate
   annual requirements have been satisfied or maintained.
   The Department agrees with Taxpayer’s proposed method of using a separate entity
   approach with a project-specific apportionment for determining income generated by or
   arising out of the qualifying project. The Project’s taxable income would then be
   multiplied by the applicable corporate income tax rate. The allowable CITC will be limited
   to the lesser of the limitations stated above.
   Taxpayer must apply generally accepted accounting principles and the provisions of s.
   220.13, F.S., in computing the income of the qualifying project. Taxpayer will be required
   to provide with its Florida corporate income tax return the pro forma separate Florida
   return with the apportionment schedule, the profit and loss statement and the
   calculation of the CITC for the project.
   Taxpayer

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
, 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 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

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June 27, 2023
Page 7

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 Coxwell
Revenue Program Administrator
Technical Assistance and Dispute Resolution
(850) 717-6478
CC:

Record ID: 7001007166

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June 27, 2023
Page 8

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