Did transferring Florida assets to a single-member disregarded LLC terminate the corporate parent's consolidated filing election?

Plain-English summary

Florida said the parent's consolidated filing election remained in effect after assets moved to its single-member disregarded LLC. For federal tax purposes, the LLC was treated as a division, so its income and apportionment factors were attributed to the parent.

The result assumed a valid original election: the parent had Florida nexus when it elected, each affiliated member consented, and the Florida consolidated group had the same members as the federal consolidated return. Those requirements had to continue.

The ruling noted that a consolidated election generally continued even if the parent later lost Florida nexus, although the Department could deconsolidate a group if the substance of the election was questionable.

What this means for you

An internal asset transfer to a federally disregarded LLC did not itself change the consolidated group. The continuing election still depended on nexus at the election date, member consents, and identical federal and Florida membership.

Common questions

Q: Did the disregarded LLC become a separate consolidated member? No.

Q: Did the asset transfer automatically end the election? No.

Citations and references

• Fla. Stat. § 220.131 — consolidated corporate income tax returns
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99C1-005

Original ruling text

SUMMARY

QUESTION: Will the transfer of assets from a corporation to
its limited liability company (LLC) nullify a consolidated
filing election made by the corporation, when the LLC is
treated as a division of the corporation for federal income
tax purposes?

ANSWER - Based on Facts Below: As long as the corporation
had nexus at the time the consolidated filing election was
made, all members included in the consolidated return
consented to being included, and the same members are
included in both the consolidated federal income tax return
and the consolidated Florida corporate income tax return,
the Florida consolidated filing election would remain in
effect even though the corporation transferred assets to
its LLC, which is treated as a division of the corporation
for federal income tax purposes.

Nov 10, 1999

Re: Technical Assistance Advisement 99(C)1-005
Corporate Income Tax - Consolidated Filing Election
Section 220.131, F.S.
XXX, hereinafter referred to as "A"

Dear :

Your letter dated XX, requested a Technical Assistance
Advisement concerning the effect of the referenced taxpayer's
business activities on its consolidated filing election, for
Florida corporate income tax purposes. 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

"A" has previously established nexus in Florida for corporate
income tax purposes through its business activities and
ownership of property in Florida. "A's" subsidiaries are
presently doing business in Florida and will continue to do so.
"A" will make a consolidated filing election for Florida
corporate income tax purposes with the filing of its XXX,
return.

In XXX "A" intends to form a single member limited liability
company (LLC) and transfer assets, including those located in
Florida, to the LLC. This LLC will be disregarded for federal
income tax purposes.

QUESTION

Will "A's" consolidated filing election remain in effect after
it transfers assets, including those located in Florida, to the
LLC?

DISCUSSION AND ANALYSIS OF LAW

Section 220.131, F.S., states in part:

(1) Notwithstanding any prior election made with respect to
consolidated returns, and subject to subsection (5), for
taxable years beginning on or after September 1, 1984, any
corporation subject to tax under this code which
corporation is the parent company of an affiliated group of
corporations may elect, not later than the due date for
filing its return for the taxable year, including any
extensions thereof, to consolidate its taxable income with
that of all other members of the group, regardless of
whether such member is subject to tax under this code, and
to return such consolidated taxable income hereunder, in
which case all such other members must consent thereto in
such manner as the department may by rule prescribe,
provided:

(a) Each member of the group consents to such filing by
specific written authorization at the time the consolidated
return is filed;

(b) The affiliated group so filing under this code has
filed a consolidated return for federal income tax purposes
for the same taxable year; and

(c) The affiliated group so filing under this code is
composed of the identical component members as those which
have consolidated their taxable incomes in such federal
return.

(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.

Subsection 220.131(1), F.S., requires that the parent of an
affiliated group have nexus, for Florida corporate income tax
purposes, at the time it makes a consolidated filing election.
Additionally, each member of the affiliated group must consent
to being included in the consolidated Florida corporate income
tax return, and the same members must be included in both the
consolidated federal income tax return and the consolidated
Florida corporate income tax return.

Generally, as long as these requirements are met, the Florida
consolidated filing election remains in effect even if the
parent corporation which made the election does not retain
Florida nexus. However, if upon review, the substance of the
consolidated filing election is found to be in question, the
Department may deconsolidate the taxpayer.

As the LLC is disregarded for federal income tax purposes, its
income and apportionment factors are attributed to "A", and will
be reported in "A's" tax return. Therefore, based on the
information presented, the transfer of assets from "A" to its
LLC would not nullify "A's" Florida consolidated filing election
to the extent that a valid consolidated filing election had been

made, and the ongoing statutory requirements continued to be
met.

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, 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 s. 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,

Suzanne C. Paul
Technical Assistance and
Dispute Resolution

SCP/
Control No.: 38892