Could a corporation retroactively elect alternative Florida apportionment for 2005 after the return deadline?

Plain-English summary

The corporation amended its 2005 Florida return after an audit and replaced the standard property-payroll-sales formula with a single sales factor. It argued that a Texas real-property installment payoff and out-of-state rent and royalties distorted the standard result.

Florida did not decide whether those receipts justified alternative apportionment or whether the proposed sales-only method was equitable. The governing rule required the taxpayer to petition by the due date of the return, including extensions.

Because the compliant advisement request was not submitted until March 2009, the Department denied alternative apportionment for the year ending December 31, 2005 as untimely.

What this means for you

Alternative apportionment is not merely an amended-return calculation. A taxpayer seeking a departure from the standard formula must follow the petition procedure within the prescribed filing deadline.

Common questions

Was the request denied on its merits? No. It was denied as late.

Did the Department approve or reject a sales-only factor? Neither; it did not reach that issue.

What was the deadline described in the ruling? The return's due date, including extensions.

Citations and references

• Fla. Stat. § 220.152 and Fla. Admin. Code r. 12C-1.0152, as discussed in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 09C1-002

Original ruling text

TAA Summary
QUESTION: Is the Taxpayer’s request for alternative apportionment timely? If so, does the
standard apportionment factor, which includes the payroll, property, and sales of the Taxpayer
represent the extent of a taxpayer’s tax base attributable to Florida, given that some of its
receipts are installment sale receipts from the sale of Texas real property, and some of its
receipts are from royalties, generated outside Florida? If alternative apportionment is
appropriate, is the Taxpayer’s alternative apportionment methodology of just using the receipts
or sales factor appropriate in this situation?
ANSWER: The Taxpayer’s request for alternative apportionment for tax year ending December
31, 2005, was not filed in accordance with Rule 12C-1.0152, F.A.C. The Taxpayer’s request for
alternative apportionment was not made timely and, therefore, was denied.
June 12, 2009

XXX

Re:

Technical Assistance Advisement 09C1-002
Corporate Income Tax - Apportionment - Other Methods
Section 220.152, F.S.
XXX “Taxpayer”

Dear XXX:
Your letter dated March 30, 2009, requests a Technical Assistance Advisement concerning
whether the Taxpayer may use an alternative apportionment factor for its tax year ending
December 31, 2005. 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
The Taxpayer was incorporated in Texas and since at least the 1998 tax year, it has been

Technical Assistance Advisement 06C1-002
Page 2

commercially domiciled in Madison, Florida. The Taxpayer was audited by the Department of
Revenue for tax years ending 12/31/2003 to 12/31/2005. The audit disallowed the Taxpayer’s
net operating loss deductions from its 2000 through 2002 tax years. 1 The Taxpayer did not
timely challenge the audit results.
After the audit protest rights expired, the Taxpayer filed an amended corporate income tax return
for tax year ending 12/31/2005, claiming an overpayment of $30,203. The Taxpayer changed
the calculation of its apportionment factor from the standard three factors of property, payroll,
and sales (.25 property, .25 payroll, and .027308 sales totaling .527308) to a single factor of only
sales (.054616 sales). 2 The Taxpayer claims that alternative apportionment is necessary because
the standard apportionment does not accurately portray the financial situation of the Taxpayer.
In 2005, an installment sale of Texas real property was paid off, triggering a capital gain of
$1,756,934 and interest income of $31,189. The Texas property was originally sold in 1996 on
an installment contract basis. This sale occurred prior to the Taxpayer purchasing its property in
Madison, Florida. The Taxpayer paid taxes in Texas for tax year ending December 31, 2005.
The first Texas tax is tax on net taxable capital and the second is a surtax on net taxable earned
surplus. The surtax is based on income and resulted in a tax due of $45,330.89 using a gross
receipts formula that resulted in an apportionment percentage of .9454.
The Taxpayer asserts that the income from the installment sale (interest and installment
payment) should be allocated to Texas. In addition, the Taxpayer received rent and royalties in
the amount of $131,306, which were all from property located outside Florida. Again, the
Taxpayer asserts that this income should be allocated outside Florida.
On June 2, 2009, a refund of $18,544.21 was issued to the Taxpayer on its amended return for
tax year ending December 31, 2005.
QUESTIONS
Is the Taxpayer’s request for alternative apportionment timely? If so, does the standard
apportionment factor, which includes the payroll, property, and sales of the Taxpayer represent
the extent of a taxpayer’s tax base attributable to Florida, given that some of its receipts are
installment sale receipts from the sale of Texas real property, and some of its receipts are from
royalties, generated outside Florida? If alternative apportionment is appropriate, is the

1

Taxpayer’s subtractions on its 2000 through 2002 corporate income tax returns may not create Florida
losses.
2
The amended return weights the sales factor at 100%, while the original return weights the sales factor at
50% and includes the payroll and property factors weighted at 25%.

Technical Assistance Advisement 06C1-002
Page 3

Taxpayer’s alternative apportionment methodology of just using the receipts or sales factor
appropriate in this situation?
LAW
Section 220.152, F.S., states:
If the apportionment methods of ss. 220.15 and 220.151 do not fairly represent
the extent of a taxpayer’s tax base attributable to this state, the taxpayer may
petition for, or the department may require, in respect to all or any part of the
taxpayer’s tax base, if reasonable:
(1) Separate accounting;
(2) The exclusion of any one or more factors;
(3) The inclusion of one or more additional factors which will fairly represent the
taxpayer's tax base attributable to this state; or
(4) The employment of any other method which will produce an equitable
apportionment.
Rule 12C-1.0152, F.A.C., states in part:
…(4) A taxpayer shall petition the Department for a departure from the
required apportionment method by filing, on or before the due date for filing
of the return for the taxable year, with extension, either: a written request
for a technical assistance advisement under s. 213.22, F.S., and Department
of Revenue Rule Chapter 12-11, F.A.C.; or, a petition for a declaratory
statement under s. 120.565, F.S. … (Emphasis Supplied)
DISCUSSION
The Taxpayer is requesting the retroactive use of an alternative apportionment factor for tax year
ending December 31, 2005, because it believes the standard apportionment factor, which
includes ratios of the Taxpayer’s payroll, property, and sales, in Florida over its payroll,
property, and sales, everywhere, respectively, produces a grossly distorted result. The Taxpayer
asserts that income generated from an installment sale of Texas real estate should not be taxed by
Florida. The Taxpayer believes that use of a single sales factor produces an apportioned amount
closer to the Taxpayer’s actual Florida income.
Rule 12C-1.0152, F.A.C., requires a taxpayer seeking alternative apportionment to petition the
Department on or before the due date for filing of the return for the taxable year, with extension.
In this case, the request for alternative apportionment was not provided in accordance with the
instructions contained in Rule 12-11, F.A.C., until the Taxpayer sent a letter dated March 30,

Technical Assistance Advisement 06C1-002
Page 4

2009, to Technical Assistance & Dispute Resolution.
Given the date of the Taxpayer’s request for this Technical Assistance Advisement and the plain
requirement in Rule 12C-1.0152, F.A.C., that the request occur prior to the due date, or extended
due date of the return for which alternative apportionment is requested, the Taxpayer’s request
for alternative apportionment for tax year ending December 31, 2005, is not timely.
CONCLUSION
The Taxpayer’s request for alternative apportionment for tax year ending December 31, 2005, is
denied. The Taxpayer’s request was not filed in accordance with Rule 12C-1.0152, F.A.C.
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

RCD/bb
Control No.: 62623