Could an insurance group revoke its election to use Florida's alternative salary tax credit after audit changes affected the calculation?

Plain-English summary

An affiliated insurance group timely elected Florida's alternative salary tax credit calculation. The Department had explained how the calculation worked and warned that the tentative 2002 factor could change because of audit adjustments, premium changes, salary-credit adjustments, or federal income-tax adjustments.

After an audit disallowed salary credits claimed by one subsidiary and amended unemployment-tax filings affected the 2002 figures, the group sought to withdraw its election. Florida refused. Section 624.509(5)(a)2. expressly made the alternative method irrevocable and binding on the group's successors and assigns.

The Department also rejected equitable estoppel. It had not made a material representation contrary to its later position and had warned that the tentative factor could change, so the group had not established the elements required to prevent enforcement.

What this means for you

An election labeled irrevocable can remain binding even when later audits or corrected filings make the result less favorable than expected. A tentative calculation is not a promise that the underlying factor will remain unchanged.

Common questions

Could the insurance group revoke the election after the 2002 factor changed? No.

Why was the election binding? The statute expressly called the alternative-method election irrevocable and binding on successors and assigns.

Did the Department promise that the tentative factor would remain fixed? No. The ruling says the Department warned that audit and other adjustments could change it.

Why did equitable estoppel fail? The taxpayer did not show a contrary material representation by the Department, and it made the election with notice of how the factor worked and could change.

Citations and references

• Fla. Stat. § 624.509(5)(a)1. and 2. (regular and alternative salary tax credits)
• Fla. Admin. Code rr. 12B-8.001 and 12B-8.003 (insurance premium tax administration and returns)
• Department of Revenue v. Anderson, 403 So. 2d 397 (Fla. 1981) (elements and limited use of estoppel against the state)
• State v. Hadden, 370 So. 2d 849 (Fla. 3d DCA 1979) (burden of proving estoppel)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 08B8-001

Original ruling text

SUMMARY
QUESTION: Is the Taxpayer’s request to be allowed out of its irrevocable election for the
alternative salary tax credit provided for in section 624.509(5)(a)2., F.S., approved by the
Department of Revenue?
ANSWER: The Taxpayer has made an irrevocable election to use the alternative salary tax
credit calculation. The Taxpayer is bound by this election and cannot now revoke it. The
Department of Revenue cannot be estopped from enforcing the Taxpayer’s alternative salary tax
credit election that was timely made by the Taxpayer, with full knowledge of how the election
operated and how it would be computed.
January 18, 2008
Re:

Technical Assistance Advisement 08B8-001
Insurance Premium Tax – Alternative Salary Tax Credit Election
Subparagraph 624.509(5)(a)2., Florida Statutes (F.S.)
Rules 12B-8.001 and 12B-8.003, Florida Administrative Code (F.A.C.)
XXX (hereinafter referred to as “Taxpayer”)

Dear :
Your letter dated XXX, requests a Technical Assistance Advisement allowing the Taxpayer out of
its irrevocable election for the alternative salary tax credit provided for in section 624.509(5)(a)2.,
F.S. 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 section 213.22,
Florida Statutes.
FACTS
XXX, the Taxpayer’s treasurer, made a timely election for the Taxpayer to participate in the
alternative salary tax credit provided for in section 624.509(5)(a)2., F.S. On XXX, I contacted
XXX for additional information. XXX called me back, and I explained how the alternative
salary tax credit computation would work. Since XXX wanted to continue with the Taxpayer’s
election for the alternative salary tax credit, I requested additional information necessary to
complete the processing of the Taxpayer’s election. XXX provided some of the information in a
fax dated XXX, and the rest of the information in a fax dated XXX. On XXX, I sent XXX,
confirming the Taxpayer’s alternative salary tax credit election and providing tentative
information on the Taxpayer’s alternative salary tax credit calculation. The confirmation letter
informed the Taxpayer about possible changes to the tentative information that was provided:
Please note that the 2002 factor is a tentative figure that is subject to change in a
number of situations; including 1) an audit adjustment that affects either the 2002
salary credit allowed under the law, or the 2002 taxable premiums, and/or 2) an
I.R.S. adjustment to corporate income tax that affects the 2002 salary credit.

Technical Assistance Advisement 08B8-001
Page 2

The Taxpayer called to make a correction to the 2002 taxable premiums. The Taxpayer’s
correction was made to our data.
When the Taxpayer made its election for the alternative salary tax credit, neither the Taxpayer
nor the insurance subsidiaries had been audited in years. The XXX tax year was the latest year
audited for any insurer within the Taxpayer’s affiliated group. 1 However, subsidiary XXX
(Company A) was under audit for the XXX - XXX tax years at the time the Taxpayer made its
election for the alternative salary tax credit. On XXX, a Notice of Intent to Make Audit Changes
was issued to subsidiary Company A. Several adjustments were made by the auditor, including
disallowing subsidiary Company A’s salary tax credits originally claimed on the XXX through
XXX insurance premium tax returns. The auditor based the disallowance of subsidiary
Company A’s salary tax credits on the fact that subsidiary Company A had not filed
unemployment compensation tax returns and that the salaries of individuals being claimed by
subsidiary Company A were reported as the employees of XXX (“Parent”) for unemployment
compensation tax purposes.
In XXX of XXX, Parent filed amended unemployment compensation returns, and each of its
subsidiaries filed original unemployment compensation returns to allocate the employees of the
affiliated group amongst the members of the affiliated group. These unemployment
compensation returns included the 2002 tax year. Subsidiary Company A filed an amended
insurance premium tax return for the 2002 tax year. The Taxpayer and its other insurance
subsidiaries were not able to file amended 2002 insurance premium tax returns, because the 2002
tax year was out of statute for assessment and/or refund.
On XXX, via telephone, and on XXX, via letter, I requested the Taxpayer’s legal arguments on
how the Department of Revenue could allow the Taxpayer out of its irrevocable alternative
salary tax credit election. On XXX, XXX provided arguments that the State was estopped from
enforcing the Taxpayer’s election for the alternative salary tax credit.
Since making its election, the Taxpayer, including its insurance affiliates, has not utilized the
alternative salary tax credit computation when determining the amount of salary tax credit that
its insurance affiliates are entitled to. The Taxpayer and its insurance affiliates have not attached
alternative salary tax credit calculations to their insurance premium tax returns. The Taxpayer is
unsure what its 2002 factor will be as a result of the ongoing protest of the audit of subsidiary
Company A and the effect of the Taxpayer amending its unemployment compensation returns.
QUESTION
Is the Taxpayer’s request to be allowed out of its irrevocable election for the alternative salary tax
credit provided for in section 624.509(5)(a)2., F.S., approved by the Department of Revenue?
LAW
1

The XXX tax year was the first year that a concurrent common paymaster filing for unemployment tax
could have been filed. Prior to XXX, each individual entity that had employees in Florida was required to
file its own unemployment tax returns.

Technical Assistance Advisement 08B8-001
Page 3

Section 624.509(5)(a), F.S., states:
(5)(a)1. There shall be allowed a credit against the net tax imposed by this section
equal to 15 percent of the amount paid by an insurer in salaries to employees
located or based within this state and who are covered by the provisions of
chapter 443.

2. As an alternative to the credit allowed in subparagraph 1., an affiliated
   group of corporations which includes at least one insurance company writing
   premiums in Florida may elect to take a credit against the net tax imposed by
   this section in an amount that may not exceed 15 percent of the salary of the
   employees of the affiliated group of corporations who perform insurancerelated activities, are located or based within this state, and are covered by
   chapter 443. For purposes of this subparagraph, the term “affiliated group of
   corporations” means two or more corporations that are entirely owned directly or
   indirectly by a single corporation and that constitute an affiliated group as defined
   in s. 1504(a) of the Internal Revenue Code. The amount of credit allowed
   under this subparagraph is limited to the combined Florida salary tax credits
   allowed for all insurance companies that were members of the affiliated
   group of corporations for the tax year ending December 31, 2002, divided by
   the combined Florida taxable premiums written by all insurance companies
   that were members of the affiliated group of corporations for the tax year
   ending December 31, 2002, multiplied by the combined Florida taxable
   premiums of the affiliated group of corporations for the current year. An
   affiliated group of corporations electing this alternative calculation method
   must make such election on or before August 1, 2005. The election of this
   alternative calculation method is irrevocable and binding upon successors
   and assigns of the affiliated group of corporations electing this alternative.
   However, if a member of an affiliated group of corporations acquires or merges
   with another insurance company after the date of the irrevocable election, the
   acquired or merged company is not entitled to the affiliated group election and
   shall only be entitled to calculate the tax credit under subparagraph 1.
   In no event shall the salary paid to an employee by an affiliated group of
   corporations be claimed as a credit by more than one insurer or be counted more
   than once in an insurer’s calculation of the credit as described in subparagraph 1.
   or subparagraph 2. Only the portion of an employee's salary paid for the
   performance of insurance-related activities may be included in the calculation of
   the premium tax credit in this subsection. (emphasis supplied)
   Rule 12B-8.003, F.A.C., states in part:
   (1) Tax returns and reports shall be made by insurers on forms prescribed by the
   Department. These forms are hereby incorporated by reference in this rule.
   ...

Technical Assistance Advisement 08B8-001
Page 4

DISCUSSION AND ANALYSIS OF LAW
The Taxpayer clearly made an election to calculate its salary tax credits based on the alternative
contained in section 624.509(5)(a)2., F.S. Per section 624.509(5)(a)2., F.S., the Taxpayer’s
election is irrevocable and even binding upon successors and assigns of the affiliated group of
corporations. Since the Legislature used the term “irrevocable,” the Taxpayer is bound by its
election, and the election cannot be revoked.
The Taxpayer argues that the Department of Revenue is estopped from enforcing its election,
because the Taxpayer made the election with the belief that it would have a certain 2002 factor
going forward to all future years. However, as noted in the facts, the Taxpayer was informed
prior to the Department of Revenue’s acceptance of the Taxpayer’s election that the tentative
2002 factor could go up or down to reflect the proper amount of 2002 premiums and the amount
of salary tax credit allowed under the law for the 2002 tax year. Even with this understanding,
and the knowledge that subsidiary Company A was under audit for insurance premium tax, the
Taxpayer still chose to make the election.
In reviewing and reversing the decision in Department of Revenue v. Anderson, 403 So.2d 397,
400, 401 (Fla. 1981), the Florida Supreme Court held:
As a general rule, equitable estoppel will be applied against the state only in rare
instances and under exceptional circumstances. North American Co. v. Green,
120 So.2d 603 (Fla. 1959). . . . In order to demonstrate estoppel, the following
elements must be shown: (1) a representation as to a material fact that is contrary
to a later-asserted position; (2) reliance on that representation; and (3) a change in
position detrimental to the party claiming estoppel, caused by the representation
and reliance thereon. Greenhut Construction Co. v. Henry A. Knott, Inc., 247
So.2d 517 (Fla. 1st DCA 1971). Anderson failed to show the existence of these
elements. . . . We therefore disapprove the district court’s decision and remand
this case for issuance of orders consistent with this opinion.
In State of Florida v. Hadden, 370 So.2d 849, 852 (Fla. 3d DCA 1979) the Court held, “[t]he
burden of proving an estoppel rests on the party invoking it, and every fact essential to estoppel
must be proved.” In Lawrence Nali Construction Company, Inc. v. Department of Revenue, 366
So.2d 27 (Fla. 1st DCA 1978), cert. denied, 368 So.2d 1365 (Fla. 1979), the Court held that
estoppel cannot be based on the omission, through oversight, to tax an otherwise taxable
transaction [by audit] at an earlier time.
The Taxpayer has not established that its situation meets the criteria for estoppel. There is no
representation by the Department of Revenue as to a material fact that is contrary to a later
asserted position. The Department of Revenue has steadfastly held its position that the 2002
factor is computed by taking the combined salary tax credits allowed for the members of the
affiliated group under the law for the 2002 tax year divided by the combined Florida taxable
premiums written by all insurance companies in the affiliated group for the 2002 tax year. This

Technical Assistance Advisement 08B8-001
Page 5

position has not changed, even though the Taxpayer’s 2002 figure has changed as a result of the
subsidiary Company A audit and the Taxpayer filing amended unemployment compensation tax
returns for the 2002 tax year.
Taxpayer, including its insurance subsidiaries, had not been audited since XXX. The
Department of Revenue did not approve or disapprove the Taxpayer’s tentative 2002 factor. To
the contrary, the Department of Revenue explained how the 2002 factor should be calculated and
put the Taxpayer on notice that the tentative 2002 figure was subject to change in a number of
ways, including during an audit. Therefore, the Department of Revenue cannot be estopped from
enforcing the election that was timely made by the Taxpayer, with full knowledge of how the
election operated and would be computed for future tax years.
CONCLUSION
The Taxpayer has made an irrevocable election to use the alternative salary tax credit
calculation. The Taxpayer is bound by this election and cannot now revoke it. The Department
of Revenue cannot be estopped from enforcing the Taxpayer’s alternative salary tax credit
election that was timely made by the Taxpayer, with full knowledge of how the election operated
and how it would be computed.
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,

Robert DuCasse
Technical Assistance and Dispute Resolution
Record ID: 37406