Who could claim Florida enterprise-zone credits generated by a disregarded single-member LLC: the LLC or its owner?

Plain-English summary

For Florida corporate income tax, a single-member LLC disregarded for federal income tax purposes was not itself a statutory "business" because it was not separately subject to Chapter 220. It therefore could not claim enterprise-zone jobs or property tax credits against corporate income tax in its own name.

If the disregarded LLC otherwise generated a qualifying corporate-income-tax credit, the owner that included the LLC's tax information on its Florida corporate return could claim the credit, subject to the applicable statutory limits.

The treatment differed for sales and use tax. Florida treated the disregarded LLC as a separate legal entity for non-income-tax purposes, so an eligible LLC could claim the enterprise-zone jobs credit on its own sales and use tax return. Its owner could not move that credit to the owner's sales and use tax return.

What this means for you

Disregarded status does not produce the same claimant for every Florida tax. Determine which entity is legally eligible and which return reports the relevant tax before claiming an incentive.

Common questions

Could the LLC claim a corporate-income-tax enterprise-zone credit itself? No, because it was not a separate Chapter 220 business.

Could its owner claim qualifying corporate credits? Yes, on the corporate return that included the disregarded LLC, subject to statutory limits.

Who claimed the sales-tax jobs credit? The eligible disregarded LLC on its own sales and use tax return, not its owner.

Citations and references

• Fla. Stat. §§ 212.08(5)(g), (h), and (p), 212.08(15), 212.096, 220.181, 220.182, 220.183, and 608.471, as cited in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 12C1-009

Original ruling text

Interim
Executive
Director
Marshall Stranburg

QUESTIONS:

1. Is a disregarded single-member LLC a “business,” for purposes of the enterprise zone jobs credit
   against corporate income tax and the enterprise zone property tax credit against corporate income tax that,
   if all eligibility requirements are met, could claim the enterprise zone jobs credit and enterprise zone
   property tax credits against corporate income tax?
2. Is a disregarded single-member LLC a separate legal entity that, if all eligibility requirements are met,
   could claim the enterprise zone jobs credit against sales and use tax?
3. Is a disregarded single-member LLC a “business” that, if all eligibility requirements are met, could
   claim the enterprise zone jobs and property tax credits against corporate income tax?
4. May the enterprise zone jobs credit or the enterprise zone property tax credit for which a disregarded
   single-member LLC has qualified be claimed by the owner of the disregarded single-member LLC?
   ANSWER:
5. As provided in subsection 608.471(1), F.S., a disregarded single-member LLC is not a “business” for
   purposes of the enterprise zone jobs credit against corporate income tax and the enterprise zone property
   tax credit against corporate income tax.
6. As provided in subsection 608.471(3), a disregarded single-member LLC is a separate legal entity for
   non-income tax purposes and, if it met all eligibility requirements, could claim the enterprise zone jobs
   credit against sales and use tax.
7. A disregarded single-member LLC is not a “business” and cannot claim the enterprise zone jobs credit
   against corporate income tax or the enterprise zone property tax credit against corporate income tax.
8. The enterprise zone jobs credit against corporate income tax or the enterprise zone property tax credit
   against corporate income tax may be claimed by the owner of a disregarded single-member LLC on the
   owner’s Florida corporate income tax return that includes the disregarded single-member LLC that
   generated the credit. The enterprise zone jobs credit against sales and use tax cannot be claimed by the
   owner of a disregarded single-member LLC.
   September 07, 2012
   XXX
   XXX
   XXX
   Re:

Technical Assistance Advisement 12C1-009
XXX, hereinafter “the Taxpayer”
Tax: Sales and Use Tax and Corporate Income Tax
Issue: Claiming of Enterprise Zone Incentives
FEIN: XXX
Child Support Enforcement – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – James McAdams, Director  Information Services – Tony Powell, Director

www.myflorida.com/dor
Tallahassee, Florida 32399-0100

Technical Assistance Advisement 12C1-009
Page 2

Sections 212.08(5)(g) and (h),(p), 212.08(15), 212.096, 220.181, 220.182, 220.183, and 608.471,
Florida Statutes (F.S.)
Dear XXX:
This is in response to your request dated XXX, for a Technical Assistance Advisement (TAA) pursuant to
section 213.22, F.S., and Rule Chapter 12-11, F.A.C., regarding claiming of enterprise zone incentives
against sales and use tax and corporate income tax. An examination of your letter has established that you
have complied with the statutory and regulatory requirements for issuance of a TAA. Therefore, the
Department is hereby granting your request for a TAA.
FACTS
The taxpayer operates XXX stores in a number of states and is planning to expand its operations into
Florida. Each Florida XXX store will be formed and operated as a disregarded single-member Limited
Liability Company (LLC) and will be placed under the “umbrella” of another single-member LLC, which
will also be disregarded for federal tax purposes.
LEGAL AUTHORITY
Subparagraph 212.08(5)(g)1., F.S., states in part:
Building materials used in the rehabilitation of real property located in an enterprise zone are
exempt from the tax imposed by this chapter upon an affirmative showing to the satisfaction of
the department that the items have been used for the rehabilitation of real property located in an
enterprise zone. Except as provided in subparagraph 2., this exemption inures to the owner,
lessee, or lessor at the time the real property is rehabilitated, but only through a refund of
previously paid taxes. To receive a refund pursuant to this paragraph, the owner, lessee, or lessor
of the rehabilitated real property must file an application under oath with the governing body or
enterprise zone development agency having jurisdiction over the enterprise zone where the
business is located, as applicable. A single application for a refund may be submitted for
multiple, contiguous parcels that were part of a single parcel that was divided as part of the
rehabilitation of the property. . . .
Subparagraph 212.08(5)(h)1., F.S., states:
Business property purchased for use by businesses located in an enterprise zone which is
subsequently used in an enterprise zone shall be exempt from the tax imposed by this chapter.
This exemption inures to the business only through a refund of previously paid taxes. A refund
shall be authorized upon an affirmative showing by the taxpayer to the satisfaction of the
department that the requirements of this paragraph have been met.
Sub-subparagraph 212.08(5)(p)3.b., F.S., states:

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Page 3

Any person seeking to participate in this program must submit an application for tax credit to the
Department of Economic Opportunity which sets forth the name of the sponsor, a description of
the project, and the type, value, and purpose of the contribution. The sponsor shall verify the
terms of the application and indicate its receipt of the contribution, which verification must be in
writing and accompany the application for tax credit. The person must submit a separate tax
credit application to the Department of Economic Opportunity for each individual contribution
that it makes to each individual project.
Subsection 212.08(15), F.S., states in part:
(a) Beginning July 1, 1995, charges for electrical energy used by a qualified business at a fixed
location in an enterprise zone in a municipality which has enacted an ordinance pursuant to s.
166.231(8) which provides for exemption of municipal utility taxes on such businesses or in an
enterprise zone jointly authorized by a county and a municipality which has enacted an ordinance
pursuant to s. 166.231(8) which provides for exemption of municipal utility taxes on such
businesses shall receive an exemption equal to 50 percent of the tax imposed by this chapter, or,
if no less than 20 percent of the employees of the business are residents of an enterprise zone,
excluding temporary and part-time employees, the exemption shall be equal to 100 percent of the
tax imposed by this chapter. A qualified business may receive such exemption for a period of 5
years from the billing period beginning not more than 30 days following notification to the
applicable utility company by the department that an exemption has been authorized pursuant to
this subsection and s. 166.231(8).

(f) For the purpose of the exemption provided in this subsection, the term “qualified business”
means a business which is:

1. First occupying a new structure to which electrical service, other than that used for
   construction purposes, has not been previously provided or furnished;
2. Newly occupying an existing, remodeled, renovated, or rehabilitated structure to which
   electrical service, other than that used for remodeling, renovation, or rehabilitation of the
   structure, has not been provided or furnished in the three preceding billing periods; or
3. Occupying a new, remodeled, rebuilt, renovated, or rehabilitated structure for which a refund
   has been granted pursuant to paragraph (5)(g).
   Paragraph 212.096(1)(a), F.S., states:
   “Eligible business” means any sole proprietorship, firm, partnership, corporation, bank, savings
   association, estate, trust, business trust, receiver, syndicate, or other group or combination, or
   successor business, located in an enterprise zone. The business must demonstrate to the
   department that, on the date of application, the total number of full-time jobs defined under
   paragraph (d) is greater than the total was 12 months prior to that date. An eligible business does

Technical Assistance Advisement 12C1-009
Page 4

not include any business which has claimed the credit permitted under s. 220.181 for any new
business employee first beginning employment with the business after July 1, 1995.
Paragraph 212.096(2)(a), F.S., states:
Upon an affirmative showing by an eligible business to the satisfaction of the department that the
requirements of this section have been met, the business shall be allowed a credit against the tax
remitted under this chapter.
Subsection 220.03(1)(c), F.S., states:
“Business” or “business firm” means any business entity authorized to do business in this state
as defined in paragraph (e), and any bank or savings and loan association as defined in s. 220.62,
subject to the tax imposed by the provisions of this chapter. This paragraph expires on the date
specified in s. 290.016 for the expiration of the Florida Enterprise Zone Act.

Paragraph 220.181(1)(a), F.S., states:
There shall be allowed a credit against the tax imposed by this chapter to any business located in
an enterprise zone which demonstrates to the department that, on the date of application, the total
number of full-time jobs is greater than the total was 12 months before that date. The credit shall
be computed as 20 percent of the actual monthly wages paid in this state to each new employee
hired when a new job has been created, as defined under s. 220.03(1)(ee), unless the business is
located in a rural enterprise zone, pursuant to s. 290.004, in which case the credit shall be 30
percent of the actual monthly wages paid. If no less than 20 percent of the employees of the
business are residents of an enterprise zone, excluding temporary and part-time employees, the
credit shall be computed as 30 percent of the actual monthly wages paid in this state to each new
employee hired when a new job has been created, unless the business is located in a rural
enterprise zone, in which case the credit shall be 45 percent of the actual monthly wages paid, for
a period of up to 24 consecutive months. If the new employee hired when a new job is created is
a participant in the welfare transition program, the following credit shall be a percent of the
actual monthly wages paid: 40 percent for $4 above the hourly federal minimum wage rate; 41
percent for $5 above the hourly federal minimum wage rate; 42 percent for $6 above the hourly
federal minimum wage rate; 43 percent for $7 above the hourly federal minimum wage rate; and
44 percent for $8 above the hourly federal minimum wage rate.
Section 220.182(1), F.S., states:
(1)(a) Beginning July 1, 1995, there shall be allowed a credit against the tax imposed by this
chapter to any business which establishes a new business as defined in s. 220.03(1)(p), expands
an existing business as defined in s. 220.03(1)(k), or rebuilds an existing business as defined in s.
220.03(1)(u) in this state. The credit shall be computed annually as ad valorem taxes paid in this
state, in the case of a new business; the additional ad valorem tax paid in this state resulting from

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assessments on additional real or tangible personal property acquired to facilitate the expansion
of an existing business; or the ad valorem taxes paid in this state resulting from assessments on
property replaced or restored, in the case of a rebuilt business, including pollution and waste
control facilities, or any part thereof, and including one or more buildings or other structures,
machinery, fixtures, and equipment.
(b) If the credit granted pursuant to this section is not fully used in any one year, the unused
amount may be carried forward for a period not to exceed 5 years. The carryover credit may be
used in a subsequent year when the tax imposed by this chapter for such year exceeds the credit
for such year under this section after applying the other credits and unused credit carryovers in
the order provided in s. 220.02(8). The amount of credit taken under this section in any one year,
however, shall not exceed $25,000, or, if no less than 20 percent of the employees of the business
are residents of an enterprise zone, excluding temporary employees, the amount shall not exceed
$50,000.
Paragraph 220.183(3)(b), F.S., states:
Any business wishing to participate in this program must submit an application for tax credit to
the Department of Economic Opportunity, which application sets forth the sponsor; the project;
and the type, value, and purpose of the contribution. The sponsor shall verify the terms of the
application and indicate its receipt of the contribution, which verification must be in writing and
accompany the application for tax credit.
Subsection 608.471, F.S., states:
(1) A limited liability company classified as a partnership for federal income tax purposes, or a
single member limited liability company which is disregarded as an entity separate from its
owner for federal income tax purposes, and organized pursuant to this chapter or qualified to do
business in this state as a foreign limited liability company is not an “artificial entity” within the
purview of s. 220.02 and is not subject to the tax imposed under chapter 220. If a single member
limited liability company is disregarded as an entity separate from its owner for federal income
tax purposes, its activities are, for purposes of taxation under chapter 220, treated in the same
manner as a sole proprietorship, branch, or division of the owner.

(3) Single-member limited liability companies and other entities that are disregarded for federal
income tax purposes must be treated as separate legal entities for all non-income-tax purposes.
The Department of Revenue shall adopt rules to take into account that single-member
disregarded entities such as limited liability companies and qualified subchapter S corporations
may be disregarded as separate entities for federal tax purposes and therefore may report and
account for income, employment, and other taxes under the taxpayer identification number of the
owner of the single-member entity.

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ISSUE PRESENTED
For purposes of the Enterprise Zone Program incentives:

1. Is each disregarded single-member LLC a “business” that, if all eligibility requirements are met, could
   claim enterprise zone jobs and property tax credits?
2. Is each disregarded single-member LLC a separate legal entity that, if all eligibility requirements are
   met, could claim the enterprise zone jobs credit against sales and use tax?
3. Is each disregarded single-member LLC a “business” that, if all eligibility requirements are met, could
   claim the enterprise zone jobs and property tax credits against corporate income tax?
4. May the enterprise zone jobs credit or enterprise zone property tax credit for which a disregarded
   single-member LLC has qualified be claimed by the owners of the LLC’s?
   DISCUSSION AND ANALYSIS
   Subsection 608.471(1), F.S., specifically states that a single-member LLC that is disregarded as an entity
   separate from its owner for federal income tax purposes is not an “artificial entity” and is not subject to
   Florida corporate income tax, and that its activities are to be treated as those of a sole proprietorship,
   branch, or division of the owner would be treated. Therefore, a disregarded single-member LLC does not
   meet the definition of “business,” provided by paragraph 220.03(1)(c), F.S., which requires a “business”
   to be subject to tax under Chapter 220, F.S.
   Paragraph 220.181(1)(a), F.S., authorizes a business located in an enterprise zone to claim the enterprise
   zone jobs credit against corporate income tax, provided the business and the employees for whom it
   claims the credit meet the other eligibility requirements of section 220.181, F.S. Subparagraph
   220.182(1)(a), F.S., authorizes a business located in an enterprise zone to claim the enterprise zone
   property tax credit against corporate income tax, provided the business meets the other eligibility
   requirements of section 220.182, F.S. Similarly, paragraph 220.183(3)(b), F.S., authorizes a business that
   meets the other eligibility requirements of section 220.183, F.S, to claim the community contribution
   credit against corporate income tax. Therefore, all of the Enterprise Zone Program incentives available to
   be claimed against corporate income tax are only allowed to be claimed by a “business,” as that term is
   defined by paragraph 220.03(1)(c), F.S.
   Accordingly, entities formed as disregarded single-member LLC’s do not meet the definition of
   “business,” as it is defined for purposes of the enterprise zone incentives against corporate income tax, as
   they are not artificial entities for purposes of Florida corporate income tax and are not subject to tax under
   Chapter 220, F.S., as provided by subsection 608.471(1), F.S.
   It appears that questions number one, number three, and number four all relate to claiming the enterprise
   zone jobs credit against corporate income tax and the enterprise zone property tax credit against corporate
   income tax, and the answers to those questions will be combined herein.

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Based on the discussion presented above, a disregarded single-member LLC is not a “business” for
purposes of the enterprise zone tax incentives provided in sections 220.181, 220.182, or 220.183, F.S.
However, to the extent that a XXX store, organized by the taxpayer as a disregarded single-member LLC,
meets the requirements to claim the credit, the entity that owns the disregarded single-member LLC that is
eligible for the credit, and includes the tax information of the disregarded single-member LLC in its
return, may claim the credit on the Florida corporate income tax return it files. Although the only
limitation on the amount of enterprise zone jobs credit that may be claimed on such a return is the amount
of tax reported on the return, the enterprise zone property tax credit claimed on such a return is limited to a
maximum of $25,000, or a maximum of $50,000, per return as provided by paragraph 220.182(1)(b), F.S.
Similarly, the entity that owns a disregarded single-member LLC that qualifies for a community
contribution tax credit would be limited to claiming $200,000 in annual tax credit for approved
community contributions made in a single year.
Subparagraph 212.08(5)(g)1., F.S., authorizes the owner, lessee, or lessor, of real property located in an
enterprise zone, to claim a refund of sales tax paid on purchases of building materials used to improve
such real property. Therefore, to claim the refund under paragraph 212.08(5)(g), F.S., the applicant is not
required to be a business. Subparagraph 212.08(5)(h)1., F.S., authorizes businesses located in an
enterprise zone to claim a refund of sales tax paid on purchases of eligible business property for use at
their enterprise zone location. Sub-subparagraph 212.08(5)(p)3.b., F.S., authorizes persons, as that term is
defined in Chapter 212, F.S, that are approved for the community contribution credit, to claim a sales and
use tax refund under paragraph 212.08(5)(p), F.S. Subsection 212.08(15), F.S., provides for a “qualified
business,” as that term is defined in paragraph 212.08(15)(f), F.S., to be exempt from municipal utility
taxes on electrical energy used at its enterprise zone location. Paragraph 212.096(2)(a), F.S., authorizes an
“eligible business,” as that term is defined in paragraph 212.096(1)(a), F.S., to claim the enterprise zone
jobs credit against its sales and use tax.
In response to question number two, subsection 608.471(3), F.S., specifically states that single-member
LLC’s that are disregarded for federal income tax purposes are to be treated as separate legal entities for
all non-income tax purposes. Therefore, for the Enterprise Zone Program incentives against sales and use
tax, the eligibility requirements would be imposed at the disregarded single-member LLC entity level and,
for purposes of the enterprise zone jobs credit against sales and use tax, each disregarded single-member
LLC that meets the eligibility requirements may claim the credit against its sales and use tax liability on
the sales and use tax return it files. However, the owners of a disregarded single-member LLC would not
be eligible to claim the enterprise zone jobs credit of the disregarded single-member LLC on their own
sales and use tax returns.
CONCLUSION
As is stated above, single-member LLC’s that are disregarded for federal income tax purposes are not a
“business” that, if all eligibility requirements are met, could claim enterprise zone jobs credits against
corporate income tax and enterprise zone property tax credits against corporate income tax. However, the
entity that owns a disregarded single-member LLC that qualifies for the credits would be able to claim
such credits on the Florida corporate income tax return it files, subject to the statutory limitations.

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Each disregarded single-member LLC that meets the eligibility requirements may claim the enterprise
zone jobs credit against sales and use tax on the return it files. However, the entity that owns a
disregarded single-member LLC that qualifies for the credit would not be able to claim such credits on the
sales and use tax return it files.
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 predicated 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., which are subject to disclosure to the public under the conditions of s. 213.22,
F.S. Your name, address, and any other details, which might lead to identification of the taxpayer, must
be deleted before disclosure. In an effort to protect the confidentiality of such information, we request you
provide the undersigned with an edited copy of your request for Technical Assistance Advisement, backup
material and response within fifteen days of the date of this advisement.
Sincerely,

Suzanne C. Paul
Tax Law Specialist
Technical Assistance and
Dispute Resolution

SCP/tlf
Control No.:

125429