Did a foreign corporate parent have Florida nexus allowing a 2007 consolidated-return election when an assistant secretary worked from Florida?

Plain-English summary

A foreign corporation acquired an unrelated affiliated group that had previously filed Florida consolidated returns. After the stock acquisition, the buyer became the group's new common parent and wanted to elect a Florida consolidated return for the tax year ending December 31, 2007.

The parent needed to be subject to Florida corporate income tax when making the initial election. Florida found the required nexus because one of the parent's assistant secretaries lived and worked in Florida and made management decisions there. The officer prepared acquisition-related litigation updates, participated in debt-covenant certification discussions, managed legal claims involving directly and indirectly owned companies, and reported those matters to management.

Rule 12C-1.011(1)(n) treats a corporation as conducting business in Florida when corporate officers have permanent or sufficiently extended Florida residence and make management decisions while in the state. The officer's activities satisfied that rule.

The parent could therefore make the consolidated election by the extended return due date, subject to the ordinary section 220.131 requirements: each member's written consent, a federal consolidated return for the same year, and identical component members in the federal and Florida groups.

What this means for you

A single officer's Florida management activity can create nexus

The key was not merely residence. The assistant secretary exercised real management responsibility from Florida on financing, acquisition, and group legal matters.

Parent nexus is necessary for the initial election

Florida requires the common parent to be subject to the state Income Tax Code when an affiliated group first elects consolidated filing.

The election deadline includes valid extensions

The group had timely extended its return and could elect consolidated filing no later than the common parent's extended due date.

Consolidated membership must mirror the federal return

The Florida filing must include the same component members as the affiliated group's federal consolidated return; a subgroup cannot make a separate Florida election.

Common questions

Q: What created Florida nexus for the parent?
A: Its Florida-resident assistant secretary made management decisions in the state.

Q: Did that allow consolidated filing?
A: Yes. It made the common parent subject to Florida tax for the initial election.

Q: What year did the ruling address?
A: The tax year ending December 31, 2007.

Q: Could only part of the federal group file together in Florida?
A: No. The rule required identical component members and did not permit a subgroup return.

Citations and references

• Fla. Stat. § 220.131(1) and (3) (initial election and continuation of consolidated filing)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)
• Fla. Admin. Code r. 12C-1.0131(1) and (3) (consolidated election requirements)
• Fla. Admin. Code r. 12C-1.011(1)(n) (resident officers making management decisions)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 08C1-009

Original ruling text

SUMMARY
QUESTION: Does the Taxpayer have nexus with Florida for tax year ending December 31,
2007?
ANSWER: Yes, the Taxpayer had nexus in Florida during tax year ending December 31, 2007. As
a result, the Taxpayer may timely elect to file on a consolidated basis in Florida for tax year ending
December 31, 2007, in accordance with section 220.131, F.S., and Rule 12C-1.0131, F.A.C.

September 29, 2008

Re:

Technical Assistance Advisement 08C1-009
Corporate Income Tax – Consolidation Election
Section 220.131, Florida Statutes (F.S.)
Rule 12C-1.0131, Florida Administrative Code (F.A.C.)
XXX, hereinafter referred to as “Taxpayer”

Dear :
Your letter dated XXX, requests a Technical Assistance Advisement concerning whether the
Taxpayer has nexus for tax year ending XXX, so that it may elect to file a consolidated corporate
income tax return with the rest of its affiliated group. 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 PROVIDED BY TAXPAYER
The Taxpayer is a foreign corporation incorporated on XXX. On XXX, the Taxpayer acquired,
through a 100% stock purchase, an unrelated affiliated group of entities. Prior to the acquisition,
the group of entities filed consolidated returns in Florida. Immediately after the acquisition, the
group of entities’ new common parent is the Taxpayer. The Taxpayer wishes to file a
consolidated corporate income tax return with the group of entities it acquired for tax year
ending XXX.
Beginning XXX, XXX held the position of Assistant Secretary of the Taxpayer. Payroll records
show this officer resided in Florida and worked in Florida during XXX. This officer has a
residence in Florida and is claiming homestead exemption on that residence. The Taxpayer
states that this officer was a concurrent employee with other members of the affiliated group. In
XXX, the officer’s Florida activities included preparing a litigation issues update related to the
debt offering by the Taxpayer. This information was needed to purchase the group of entities.
The officer participated in discussions with other officers of the Taxpayer on certifications
required in regard to debt covenants of the Taxpayer. The officer also managed all legal claims

Technical Assistance Advisement 08C1-009
Page 2

against all companies owned directly or indirectly by the Taxpayer and reported activity on these
claims to the management and officers of the Taxpayer.
The Taxpayer and its subsidiaries (group of entities) have timely filed an extension of time to file
their corporate income tax return(s) for tax year ending XXX.
On XXX, the Taxpayer filed an amended and restated certificate of incorporation, changing its
name from XXX.
QUESTION
Does the Taxpayer have nexus with Florida for tax year ending XXX?
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.
… (Emphasis Supplied)
Rule 12C-1.0131, F.A.C., states in part:
(1) Unless otherwise distinctly expressed, the terms used in this section shall have
the same meaning as when used in a comparable context in the federal income tax

Technical Assistance Advisement 08C1-009
Page 3

regulations for consolidated returns. The term "common parent" as used in the
federal regulations shall have the same meaning for Florida corporate tax
purposes, and all references to the "Commissioner" or "District Director" in the
federal regulations shall be construed to mean "the Executive Director or the
Executive Director's designee" for purposes of these rules.
(a)1. An affiliated group of corporations, as defined in these rules, which did
not file a Florida consolidated return for the immediately preceding taxable
year, may file a consolidated return in lieu of separate returns for the taxable
year, provided the common parent is subject to the Florida Income Tax Code
and each corporation which has been a member during any part of the
taxable year for which the consolidated return is to be filed consents, in the
manner provided in paragraph (e) of this subsection, to be bound by the
provisions of these requirements and all applicable sections of the federal
consolidated returns regulations.

2. A subgroup of the affiliated group may not file a consolidated return.
   (b) If a group wishes to exercise its privilege of filing a consolidated return,
   such consolidated return must be filed not later than the date prescribed,
   including extensions of time, for the filing of the common parent's return.
   Such consolidated return may not be withdrawn after such last day but the group
   may change the basis of its return at any time prior to such last day.
   …
   (3)(a)1. A group which filed, or was required to file, a consolidated return for the
   immediately preceding taxable year is required to file a consolidated return for the
   taxable year unless it has permission to discontinue filing consolidated returns
   under paragraph (b) or (c) of this subsection; or as long as a federal consolidated
   return is filed.
3. The requirement set forth in s. 220.131(1), F.S., that the parent company
   of an affiliated group must be subject to the Florida Income Tax Code is a
   condition that is necessary for an affiliated group to make an election to file a
   Florida consolidated return. There is no requirement in s. 220.131, F.S., that the
   parent be subject to the Florida Income Tax Code in each subsequent year.
   Therefore, the affiliated group may not break its consolidated election because the
   parent company no longer has nexus with Florida.
   … (Emphasis Supplied)
   Rule 12C-1.011, states in part:
   (1) The following activities, notwithstanding others within the meaning of
   taxable privileges described in s. 220.02, F.S., will be construed as conducting
   business, earning or receiving income in this state, or constitute those
   activities of a resident or citizen of this state for purposes of this tax, and
   corporations participating therein are subject to taxation unless exempted by
   the constitution or the laws of the United States or this state.
   …

Technical Assistance Advisement 08C1-009
Page 4

(n) Having corporate officers who have permanent or extended temporary
residency (3 months in the aggregate of a 12 month period) within the state
who make management decisions while residing in the state. If the only officer
of the corporation or a key officer of the corporation is residing within the state,
management of the corporation is presumed to be occurring within the state.
… (Emphasis Supplied)
DISCUSSION
Section 220.131, F.S., requires the parent corporation (the Taxpayer) to have nexus with Florida
in order to initially elect to file Florida consolidated corporate income tax returns for the parent
corporation’s entire affiliated group. The question in this Advisement is whether or not the
Taxpayer had nexus in Florida during tax year ending XXX.
The Taxpayer appointed a Florida resident as an assistant secretary on XXX. As an assistant
secretary of the Taxpayer, the employee makes management decisions for the Taxpayer.
Pursuant to Rule 12C-1.011(1)(n), F.A.C., having corporate officers who have permanent or
extended temporary residency (3 months in the aggregate of a 12 month period) within the state
who make management decisions while residing in the state creates nexus with Florida.
CONCLUSION
Based on the facts provided by the Taxpayer and the discussion above, the Taxpayer had nexus
in Florida during tax year ending XXX. As a result, the Taxpayer may timely elect to file on a
consolidated basis in Florida for tax year ending XXX, in accordance with section 220.131, F.S.,
and Rule 12C-1.0131, F.A.C.
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 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 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,

Technical Assistance Advisement 08C1-009
Page 5

Robert DuCasse
Technical Assistance and Dispute Resolution
Record ID 47661