Could an acquired Florida affiliated group stop filing consolidated corporate income tax returns after it became part of a new federal group?

Plain-English summary

Florida allowed the former affiliated group to discontinue consolidated corporate income tax returns beginning with 1995.

The group had filed federal and Florida consolidated returns through 1994. A new parent acquired all of its stock on December 6, 1994, causing the former group and its subsidiaries to become part of a different affiliated group.

Section 220.131(3) normally requires continued consolidated filing while the filing taxpayers remain members of the affiliated group or while that group files federally. Here, the former group no longer existed as a separate affiliated group for federal or Florida purposes and would not file a federal consolidated return after 1994.

The Department therefore granted the request to stop the old Florida consolidated filing. The ruling also stated that the only affiliate with Florida nexus would include its income and expense in a separate final Florida corporate return.

What this means for you

• A consolidated filing election generally continues while the same affiliated group remains in existence.
• A stock acquisition that ends the former group and places it in a new federal group can change that obligation.
• Ending the group return did not eliminate the Florida member's separate final-return responsibility.

Common questions

Q: When could the former group stop filing consolidated Florida returns? A: For tax years beginning in 1995.

Q: Why did Florida allow the change? A: The former affiliated group ceased to exist after the acquisition and no longer filed federally as that group.

Q: Was the Florida affiliate excused from all filing? A: No. The facts provided for a separate final Florida corporate return.

Citations and references

• Fla. Stat. § 220.131(3) — continuing consolidated-return requirement
• Fla. Admin. Code r. 12C-1.0131(3)(e) — continued existence of affiliated groups
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C1-003

Original ruling text

Aug 08, 1996

Re: TAA 96(C)1-003
XXX ("Corporation A")
XXX ("Parent")
Request to Discontinue Filing Consolidated Return s. 220.131(3), F.S. Rule 12C-1.0131(3)(b), F.A.C.

Dear :

Your letter of December 27, 1995, requested a Technical Assistance Advisement on the application of the corporate income tax to the above referenced matter. 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.

In your letter you request that "Corporation A" be permitted to discontinue the filing of consolidated Florida corporate income tax returns for taxable years beginning after December 31, 1994. We have also reviewed your letter dated March 5, 1996 providing additional information requested in my letter to you dated January 31, 1996. The determination made herein is based on the information provided in both of your letters.

FACTS

You have provided the following facts: A complete list of the subsidiaries included in Corporation A's federal affiliated group for calendar year 1994 along with their respective Federal Identification Numbers is included as an attachment to the request. There are eight subsidiaries included in Corporation A's affiliated group. The entire Corporation A affiliated group was acquired by Parent on December 6, 1994. You have provided a complete list of the subsidiaries included in Parent's federal affiliated group as of December 31, 1994 consisting of Parent and nine subsidiaries. Parent conducts no business in the State of Florida. You also state in your letter dated March 5, 1996

that there are no intercompany unrealized or unrecognized or deferred income or expenses between Corporation A and its subsidiaries. Additionally, all items of income and expense for Corporation A which is included in Parent's 1995 federal consolidated return, will also be included in a separate final Florida corporate return. Corporation A is the only affiliate with Florida nexus, and its activity in Florida ceased to exist after March 31, 1995.

DISCUSSION AND LAW

After reviewing the additional information which you provided, the following determination has been made. Section 220.131(3), F.S., states:

(3) The filing of a consolidated return for any taxable year shall require the filing of consolidated returns for all subsequent taxable years so long as the filing taxpayers remain members of the affiliated group or, in the case of a group having component members not subject to tax under this code, so long as a consolidated return is filed by such group for federal income tax purposes, unless the director consents to the filing of separate returns. (emphasis supplied)

The affiliated group consisting of Corporation A and its subsidiaries filed federal and Florida consolidated returns for calendar years prior to and including 1994. This affiliated group would be required to continue filing Florida consolidated returns, pursuant to Subsection 220.131(3), F.S., as long as such group continued in existence.

CONCLUSION

On December 6, 1994, Parent purchased the common stock of those corporations comprising the Corporation A affiliated group. The affiliated group consisting of Corporation A and its subsidiaries became part of a new affiliated group on December 6, 1994. See Rule 12C-1.0131(3)(e), F.A.C. ("A group shall be considered as remaining in existence, for the purposes of these rules, in accordance with the rules prescribed in Section

1.1502-75(d) of the Federal Income Tax Regulations."). Since the affiliated group consisting of Corporation A, as the common parent, no longer exists for either federal or Florida corporate income tax purposes, a consolidated return will not be filed "by such group for federal income tax purposes" after 1994. Accordingly, a consolidated Florida corporate income tax return would likewise not be permitted for such group after 1994. We grant your request to discontinue filing Florida consolidated returns starting with tax years beginning in 1995.

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,

Harry A. Baucom
Tax Law Specialist
Tax Policy and Dispute Resolution

HAB/hb
Control No: 25154