Could a parent and its subsidiaries stop filing consolidated Florida corporate income tax returns when the parent lacked Florida nexus?

Plain-English summary

A parent corporation and two subsidiaries had elected to file consolidated Florida corporate income tax returns. The parent had no Florida nexus during the consolidated years, had no Florida property or income-producing activity, and did not expect Florida nexus in the near future.

Florida granted permission to end the consolidated filing election. Section 220.131 generally requires continued consolidated returns after an election unless the Department consents to separate filing, and the parent's lack of eligibility to file a Florida return supported consent here.

The approval had three conditions: deconsolidation had to begin with the specified redacted period, the parent could not join another Florida consolidated return before a specified redacted tax year, and all realized deferred income or loss items had to be recognized on the last consolidated return. The subsidiaries would then file separate Florida F-1120 returns as required.

What this means for you

A Florida consolidated-return election does not end automatically when a group's nexus facts change. The group needs Department consent, and the approval can impose timing and deferred-item conditions.

Common questions

Was the group allowed to stop filing consolidated returns? Yes.

Why did Florida approve the request? The parent lacked Florida nexus and was not eligible to file a Florida corporate income tax return.

Could the group ignore deferred items? No. Realized deferred income or loss items had to be recognized on the final consolidated return.

Citations and references

• Fla. Stat. § 220.131(1) and (3) (consolidated corporate income tax returns and Department consent)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 08C1-003

Original ruling text

SUMMARY
QUESTION: May a parent/subsidiary consolidated filing group be granted permission to cease
filing Florida consolidated corporate tax returns if the parent didn’t have nexus for corporate
income tax in Florida during any of the years consolidated Florida F-1120 corporate income tax
returns were filed and is not anticipating nexus in Florida for corporate income tax for the
current year or future years?
ANSWER: Yes. The parent/subsidiary consolidated filing group was granted permission to
cease filing Florida consolidated tax returns based on provisions of the F.A.C., which addresses
changes in business circumstances.

April 2, 2008

Re:

Technical Assistance Advisement 08C1-003
Corporate Income Tax - Request for Authority to Discontinue Consolidated Filing
Section 220.131, Florida Statutes (F.S.)
XXX (FEIN XXX)
(hereinafter referred to as “Parent”)
XXX (FEIN XXX) (hereinafter referred to as “Subsidiary 1”)
XXX (FEIN XXX)
(hereinafter referred to as “Subsidiary 2”)

Dear XXX:
Your letter of XXX, states that Parent requests permission to discontinue filing consolidated
returns 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 authority of section 213.22, Florida Statutes.
FACTS SUPPLIED BY TAXPAYER
Parent is the parent corporation of Subsidiary 1 and Subsidiary 2. Although Parent and the
subsidiaries elected to file a consolidated F-1120 corporate income tax return for calendar years
XXX – XXX. Parent did not have nexus in Florida for corporate income tax for those years, did
not have nexus in Florida for corporate income tax in XXX, and does not expect to have nexus in
Florida in the near future. Parent did not engage in income producing activities in Florida, owns
no property in Florida, is domiciled in XXX, and is incorporated in XXX.

Technical Assistance Advisement 08C1-003
Page 2

LEGAL AUTHORITY
Section 220.131(1), F.S., provides in pertinent part:
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: . . . . (e.s.)
Section 220.131(3), F.S., provides:
(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.
ISSUE PRESENTED
May Parent, Subsidiary 1, and Subsidiary 2 stop filing consolidated Florida corporate income tax
returns as of the calendar year XXX F-1120 corporate income tax return?
DISCUSSION AND ANALYSIS
Parent does not have nexus in Florida and is not eligible to file a Florida corporate income tax
return. Therefore, based on the following three conditions, the Department grants Parent
permission to discontinue filing consolidated Florida corporate income tax returns beginning
with the period ending XXX:

1. That the deconsolidation is effective for the income tax returns beginning with
   period ending XXX; and
2. That Parent does not become part of a consolidated Florida corporate income
   tax return prior to the tax year ending XXX.
3. All realized deferred income on loss items must be recognized on the last
   consolidated return.

Technical Assistance Advisement 08C1-003
Page 3

CONCLUSION
Parent is granted permission to discontinue the Florida corporate income tax consolidated filing
election, beginning with the period ending XXX, subject to the provisions in the preceding
paragraph. Subsidiary 1 and/or Subsidiary 2 will be responsible for filing separate
F-1120 returns in Florida.
This response constitutes a Technical Assistance Advisement under section 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 section 213.22, F.S. Our response is based on those facts and specific
situation summarized above. You are advised that subsequent statutory or administrative rule
changes or judicial interpretations of the statutes or rules upon this advice is based may subject
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 section 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,

Kathleen Marsh, CPA
Technical Assistance and Dispute Resolution

Record ID: 37964