Could a corporate group stop filing consolidated Florida income-tax returns after the parent disposed of its Florida investment and withdrew from the state?

Plain-English summary

Florida allowed the group to stop filing consolidated returns beginning with its 1994 calendar-year return.

The group had properly elected consolidated filing for 1993. It did not show that continued consolidated filing would cause a substantial adverse tax effect, and the Department identified no relevant legal change. But the parent had disposed of its Florida limited-partnership investment, no longer had Florida nexus, and withdrew from the state. The Department treated that change in business circumstances as good cause.

What this means for you

A consolidated-return election was not automatically revocable. The ruling required Department permission and turned on the group's specific post-election change in business circumstances.

Common questions

Q: Did the group prove that consolidated filing caused a substantial adverse tax effect?
A: No.

Q: What supported permission to discontinue consolidated filing?
A: The parent no longer had Florida nexus and was no longer authorized to do business in Florida after disposing of its Florida investment and withdrawing from the state.

Q: When did separate filing begin?
A: With the 1994 calendar-year return.

Citations and references

• Fla. Admin. Code r. 12C-1.0131(3)(b) — permission to discontinue consolidated returns
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 95C1-001

Original ruling text

Feb 10, 1995

Re: TAA 95(C)1-001
Corporate Income Tax - Consolidated Return Requirements
XXX (Hereinafter referred to as Corporation)

Dear :

Your initial letter dated December 5, 1994, and your subsequent
letter of January 13, 1995, requested permission for Corporation
and its subsidiaries to cease filing consolidated Florida
corporate income tax returns. This response to your request
constitutes a Technical Assistance Advisement under Chapter
12-11, Florida Administrative Code, and is issued to you under
the authority of s. 213.22, Florida Statutes.

FACTS

Corporation and its subsidiaries properly elected to file
consolidated Florida corporate income tax returns beginning with
the 1993 tax year. In December 1993, Corporation disposed of
its investment in a Florida limited partnership, which resulted
in Corporation's no longer having Florida nexus. Corporation
then withdrew from the state.

The companies would like permission to discontinue filing on a
consolidated basis beginning with the 1994 return.

QUESTION

May Parent and its subsidiaries be granted permission to file
separate Florida corporate income tax returns beginning with
their December 31, 1994, returns?

DISCUSSION AND ANALYSIS OF LAW

Rule 12C-1.0131, F.A.C., states in part:

"(3)(b)1. Notwithstanding that a consolidated return is

required for a taxable year, the Executive Director or the
Executive Director's designee is authorized to grant
permission to a group to discontinue filing consolidated
returns. Any such application shall be made to the Chief,
Bureau of Technical Assistance and Training, P.O. Box 7443,
Tallahassee, Florida 32314-7443, and shall be made not
later than the 90th day before the due date for the filing
of the consolidated return, including extensions of time.
Permission to revoke will be contingent upon an agreement
between the taxpayer and the Executive Director or the
Executive Director's designee to the terms, conditions, and
adjustment under which the change will be effected.

"2. The Executive Director or the Executive Director's
designee is authorized to grant permission to a group to
discontinue filing consolidated returns if the net result
of all amendments to the Florida Income Tax Code or the
Internal Revenue Code or regulations with effective dates
commencing within the taxable year has a substantial
adverse effect on the consolidated tax liability of the
group for such year relative to what the aggregate tax
liability would be if the members of the group filed
separate returns for such year. Other factors which will be
taken into account in determining whether good cause exists
for granting permission to discontinue filing consolidated
returns beginning with the taxable year include:

"a. Changes in law or circumstances, including changes
which do not affect income tax liability;

"b. Changes in law which are first effective in the taxable
year and which result in a substantial reduction in the
consolidated net operating loss for such year relative to
what the aggregate net operating losses would be if the
members of the group filed separate returns for such year;
and

"c. Changes in the Florida Income Tax Code or the Internal
Revenue Code or regulations which are effective prior to
the taxable year but which first have a substantial adverse
effect on the filing of a consolidated return relative to

the filing of separate returns by members of the group in
such year.

"3. Permission to revoke may be contingent upon an
agreement between the taxpayer and the Executive Director
or the Executive Director's designee to the terms,
conditions, and adjustment under which the change will be
effected."

While the information submitted by Corporation fails to show
that continuing to file consolidated Florida corporate income
tax returns would have a substantial adverse effect on the
company, and we are unaware of any changes in law, or in the
Florida Income Tax Code or Internal Revenue Code or regulations
which would have a substantial adverse effect on Corporation,
there has been a change in business circumstances. That is,
Corporation is no longer authorized to do business in Florida.

Therefore, we believe good cause to discontinue filing
consolidated returns has been shown, and permission to
discontinue filing of consolidated returns is granted beginning
with the 1994 calendar year return.

This response constitutes a Technical Assistance Advisement
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
based 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 and your request are
public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details which might lead to
identification of the taxpayer must be deleted by the Department
before disclosure. In an effort to protect the confidentiality
of such information, we request you notify the undersigned in

writing within 15 days of any deletions you wish made to the
request or the response.

Sincerely,

Suzanne C. Paul
Statutory Compliance
Section

SCP/kk
Control No. 19192