How could the manufacturer calculate income from its qualified project for Florida's Capital Investment Tax Credit?

Plain-English summary

The Department approved the manufacturer's proposed method for measuring income generated by its qualified capital investment project.

The manufacturer would file a separate Florida corporate income tax return, have no operations outside Florida, and conduct no activities unrelated to the project. On those facts, it could use the taxable income on that separate Florida return as the project's income and use 100% Florida apportionment. The resulting project tax liability would determine how much Capital Investment Tax Credit could be used, subject to the statutory limits.

The agreement was expressly conditional. If the represented facts were incorrect or changed, the Department said the project-income computation could be substantially different.

What this means for you

For a qualifying project housed in its own corporate entity, Florida's rule can allow the entity's return to serve as the project-income calculation. That shortcut depended here on every activity being project-related. If the same entity reported other activities, the rule described in the advisement would require a pro forma attachment separating project income and tax.

The annual credit remains limited to the lesser of the applicable capital-cost amount, the permitted percentage of project-generated corporate income tax liability, or the tax due on the separate Florida return before the credit.

Common questions

Did the Department accept 100% Florida apportionment? Yes, because the represented factories and operations were all in Florida.

What income counted as project income? The taxable income reported on the manufacturer's separate Florida corporate income tax return, under the facts presented.

Could the company use this method if it had unrelated activities on the same return? The cited rule says a pro forma attachment would then be required to separately account for project income, tax, and available credit.

Was credit eligibility automatic? No. The advisement states that the project had to meet the required capital-investment and employment criteria and obtain the annual certification described in the ruling.

Citations and references

• Fla. Stat. §§ 220.11, 220.13, and 220.15.
• Fla. Stat. § 220.191, including the project-income definition and credit limitations quoted in the advisement.
• Fla. Admin. Code r. 12C-1.0191(1)(a)1.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 24C1-001

Original ruling text

QUESTION: Taxpayer requests a written agreement between themselves 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 concurs with Taxpayer’s suggested calculation for the income generated
by or arising out of the qualifying project. However, Taxpayer is 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 inappropriate.
March 29, 2024

Via email to:
Re:

Dear

Technical Assistance Advisement – 24C1-001
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:
BP#:
Department of Economic Opportunity’s (“DEO”) presently known as Florida Department
of Commerce’s Division of Economic Development (“Florida Commerce”)
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

Technical Assistance Advisement
March 29, 2024
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:
(5) Applications shall be reviewed and certified pursuant to s. 288.061. The Department of
Commerce 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 Taxpayer’s
letter and has established that Taxpayer has complied with the statutory and regulatory
requirements for issuance of a TAA. Therefore, the Department of Revenue is hereby granting
Taxpayer’s 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 1211, F.A.C., and is issued to you under authority of s. 213.22, F.S.

ISSUE PRESENTED
In Taxpayer’s 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 12C1.0191, F.A.C.

FACTS SUPPLIED BY TAXPAYER
Taxpayer will be a manufacturer of
. Taxpayer is a wholly owned subsidiary of
(“Parent”). Taxpayer
will file its federal tax returns as a subsidiary under Parent. Taxpayer will file its Florida corporate
income tax returns on a standalone basis. Taxpayer will start filing corporate income tax returns
in Florida for the tax year
.

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The qualifying project (“Project”) involves

.
The qualifying project is required 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 employs approximately
people.
Taxpayer estimates that its cumulative capital investment will be $
. The investment
includes
in Florida. Taxpayer will commence
operations of the project by
.
Since Taxpayer files separately in Florida and all the activities in Florida are related to the project,
Taxpayer proposes using the separate taxable income it generates as project income. This
amount will then be used to determine the amount of tax due and the subsequent amount of
the credit that is available for use, as provided in Rule 12C-1.0191(1)(a)1., F.A.C.
Taxpayer has proposed using 100% Apportionment in Florida. Taxpayer will have no operations
other than those situated in Florida. The factories will be built on and operated from the site in
. All the products referenced above will be manufactured by Taxpayer in
Florida.
The financial statements and tax returns of Taxpayer will report 100% of the investment in
Florida. The financial statements and tax returns of Taxpayer will report 100% of the income
arising from the Qualifying Project, that is, income generated in Florida.
Taxpayer will use a three-factor formula (Property, Payroll, & Sales) to measure Florida's share of
adjusted federal income. In the event that one of the apportionment factors is zero, then the
weighted percentage of the other factor will be 33-1/3% and the Sales factor will be 66-2/3%. In
the event that the Sales factor is zero, then the Property and Payroll factors be 50% each. If any
of the two factors are zero, then the weighted average of the remaining factor will be 100%.

LEGAL AUTHORITY
Section 220.11(1), F.S., states:
(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

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March 29, 2024
Page 4

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. . . .
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:

(b) “Commencement of operations” means the beginning of active operations by a
qualifying business of the principal function for which a qualifying project was constructed.
(c) “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.
(d) “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 …
(e) “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.

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March 29, 2024
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(g) “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.

(8) The Department of Revenue may specify by rule the methods by which a project’s pro
forma annual taxable income is determined.

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March 29, 2024
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Rule 12C-1.0191(1)(a)1., F.A.C., states:
In situations where the applicant is using a separate corporate entity to account for the
activities of the qualifying project, the taxable income generated by that entity as reported
on the return filed pursuant to section 220.22(1), F.S., will be used to determine the amount
of income tax due and the subsequent amount of the credit that will be available for use. If
the applicant has other activities not related to the project reported on this return, a pro
forma attachment will be required to separately account for the taxable income generated
by the project, the resulting amount of tax due, and the subsequent amount of the credit that
will be available for use.

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 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.
   Unused credits cannot be carried forward unless the qualifying project meets the requirements
   for credit carryovers provided in s. 220.191(2)(d), F.S.
   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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March 29, 2024
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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 100% apportionment in Florida.
   The Project’s taxable income would then be multiplied by the applicable tax rate. The allowable
   CITC will be limited to the lesser of the limitations stated above.
   Since all the activities in Florida are related to the project, Taxpayer has proposed using the
   taxable income determined on the separately filed Florida corporate income tax return as the
   income generated by or arising out of the qualifying project. This amount would be used to
   determine the tax liability of the project and the corresponding CITC. The Department concurs
   with Taxpayer’s methodology.
   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
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 12C1.0191, 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

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March 29, 2024
Page 8

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 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,

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

Record ID: 7001035067

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March 29, 2024
Page 9

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