How could the taxpayer calculate income generated by its qualified project for Florida's Capital Investment Tax Credit?

Plain-English summary

The Department approved a two-step formula for determining the income generated by the qualified project.

First, the taxpayer would calculate its Florida apportionment factor with and without the project. It would apply the project's increase in that factor to Florida net income to produce the "First Income Amount."

Second, it would calculate the project's product sales as a percentage of total product sales and apply that percentage to Florida net income remaining after the First Income Amount. That produced the "Second Income Amount." Project income was the sum of the two amounts.

The project income would be multiplied by the applicable corporate tax rate, and the allowable Capital Investment Tax Credit would remain capped by the statutory limitations.

What this means for you

The method captured two ways the project affected Florida income without counting the same income twice: its effect on the apportionment factor and its share of product sales.

The taxpayer had to apply GAAP and section 220.13 and file a schedule showing project income, tax liability, and allowable credit.

Common questions

What was the first calculation? The increase in the Florida apportionment factor caused by the project, applied to Florida net income.

What was the second calculation? The project's percentage of total product sales, applied to Florida net income after subtracting the first amount.

How was total project income determined? By adding the First Income Amount and Second Income Amount.

Could the formula change? Yes. The Department conditioned its approval on the represented facts remaining accurate.

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 23C1-009

Original ruling text

QUESTION: Taxpayer request a written agreement between itself 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 agrees with Taxpayer’s proposed method of using the cumulative
impact of two calculations to determine the income generated by or arising out of the 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 in
appropriate.
July 6, 2023

Via email:
Re:

Technical Assistance Advisement – 23C1-009
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:
Business Partner Number:
Florida Department of Commerce FKA Florida Department of Economic Opportunity
(“DEO”)

Dear

:

This is in response to your request dated April 24, 2023, 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

Technical Assistance Advisement
July 6, 2023
Page 2

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
, DEO certified
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 April 24, 2023, Taxpayer request 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

in the
.

The qualifying project (“Project”) is the
,
., This facility will be held within
(“
”), a newly formed
. Taxpayer is
. For federal and Florida income tax purposes,
is
of Taxpayer. Taxpayer currently files a consolidated federal
income tax return and a separate Florida income tax return.
will create at least
paying an average
.

Technical Assistance Advisement
July 6, 2023
Page 3

will make a cumulative capital investment (as such term is defined in s. 220.191(1)(b), F.S.) of at
least $
. The project will commence operation on or about
.
Taxpayer has proposed using the cumulative impact of two calculations to determine the income
generated by or arising out of the project. First, Taxpayer will calculate its Florida apportionment
factor with and without the project. Any increase in the factor resulting from the project will be
applied as a percentage to Taxpayer’s Florida net income to determine the first portion of the income
related to the project (hereafter “First Income Amount”). Second, Taxpayer will determine the
percent of product sales sourced from the project in relation to total product sales. The percentage
will be applied to Taxpayer’s Florida net income after deducting First Income Amount (hereafter
“Second Income Amount”). The total income from the project will be the sum of First Income Amount
and Second Income Amount.
LEGAL AUTHORITY
Section 220.11(1), 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(1), 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(1), 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.

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July 6, 2023
Page 4

(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.

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July 6, 2023
Page 5

(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 Project for participation in Florida’s CITC
program, and indicated in its letter that 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 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.
   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
5. Creation of at least
   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 the cumulative impact of two
   calculations to determine the income generated by or arising out of the project. Once the income
   from the project is determined it will 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, a schedule of the computation of Project’s income, tax liability and
   allowable CITC related to Project.
   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

Technical Assistance Advisement
July 6, 2023
Page 6

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 Department concurs with Taxpayer’s suggested calculation for the income generated
by or arising out of 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 April 24, 2023, be determined
to be incorrect or changed, the computation for the income generated by or arising out of 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 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
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 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) 717-6326.
Sincerely,

Denise L. Smith
Denise Smith
Tax Law Specialist
Technical Assistance and Dispute Resolution
(850) 717-6326
Record ID: 7000978726

Technical Assistance Advisement
July 6, 2023
Page 7

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Notification number:

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Respondent code:

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Tax type:

Corporate Income Tax

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