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