Could a headquarters CITC project calculate project income with a payroll-based share of the taxpayer's Florida taxable income?

Plain-English summary

The Florida Department of Revenue accepted a corporation's proposed payroll-based method for calculating income generated by a certified headquarters Capital Investment Tax Credit project.

The project moved overall management, strategic direction, accounting, reporting, legal, and other support functions to Florida. Because the headquarters function was integral to the operating company and its stand-alone income was not readily identifiable, the taxpayer proposed multiplying its Florida taxable income by a payroll factor tied to the project.

The approval was expressly fact-specific, especially as to existing Florida payroll and new payroll added by the project. Materially different facts could make the methodology inappropriate. The project also remained subject to the certification, investment, job, construction, and credit-limit requirements described in the advisement.

What this means for you

Headquarters CITC projects

A reasonable proxy may be accepted when project income cannot be separately identified, but the factual and economic link between the proxy and project must be documented.

Corporate tax teams

Preserve current and incremental payroll data and the assumptions incorporated into the written agreement.

Common questions

Q: Did Florida approve the payroll-based calculation?
A: Yes, for this project's represented facts.

Q: Was the method generally guaranteed for other headquarters projects?
A: No.

Citations and references

• Fla. Stat. §§ 220.11, 220.13, 220.15, 220.191, and 213.22
• Fla. Admin. Code r. 12C-1.0191

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 13C1-002

Original ruling text

Executive Director
Marshall Stranburg

QUESTION: Taxpayer requests a written agreement between itself and the Florida Department of
Revenue, concerning the method by which income generated by or arising out of a qualified capital
investment project shall be determined for purposes of applying the Florida Capital Investment Tax Credit.
ANSWER: The Department is inclined to concur with Taxpayer's suggested calculation for the income
generated by or arising out of the qualifying project. However, Taxpayer was reminded that should the facts
provided in its request be determined to be substantially different, this TAA would not apply and the
methodology may be deemed inappropriate.
April 30, 2013
XXX
XXX
XXX

Re: Technical Assistance Advisement 13C1-002
Request for Written Agreement for Determination of Income
Sections 220.11, 220.13, 220.15, 220.191, Florida Statutes (F.S.)
Rule 12C-1.0191, Florida Administrative Code (F.A.C.)
XXX FEIN# XXX (hereinafter referred to as “Taxpayer”)
Florida Department of Economic Opportunity (“DEO”)
Enterprise Florida, Inc. (hereinafter referred to as “EFI”)

Dear XXX:
This is in response to your request dated XXX, for a Technical Assistance Advisement (TAA) pursuant
to s. 213.22, F.S., and Rule Chapter 12-11, F.A.C., regarding your request for an agreement concerning
the method by which income generated by or arising out of Taxpayer’s qualified capital investment
project shall be determined for purposes of applying the Capital Investment Tax Credit (CITC).
Section 220.191(5), F.S., addresses applications for CITC. That statute provides:
Applications shall be reviewed and certified pursuant to s. 288.061. DEO, upon a recommendation by
Enterprise Florida, Inc., shall first certify a business as eligible to receive tax credits pursuant to this
section prior to the commencement of operations of a qualifying project, and such certification shall be
transmitted to the Department of Revenue. Upon receipt of the certification, the Department of Revenue
shall enter into a written agreement with the qualifying business specifying, at a minimum, the method
by which income generated by or arising out of the qualifying project will be determined.
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 13C1-002
Page 2

Pursuant to Rule 12C-1.0191, F.A.C., the Department of Revenue has adopted TAAs as the method for
entering into such written agreements.
DEO has certified that Taxpayer is eligible to receive tax credits under s. 220.191, F.S. The Department
of Revenue, having received said certification, has examined your letter and has established that you
have complied with the statutory and regulatory requirements for issuance of a TAA. Therefore, the
Department of Revenue is hereby granting your request for a TAA. The Department of Revenue, in
issuing this TAA, has relied on the representations of Taxpayer and the certification of the DEO. This
TAA specifies the method by which income generated by or arising out of the qualifying project will be
determined based on the facts as represented to the Department of Revenue. This response to your
request constitutes a Technical Assistance Advisement under Chapter 12-11, F.A.C., and is issued to
you under authority of s. 213.22, F.S.
ISSUES PRESENTED
May Taxpayer use the methodology described in its request for purposes of computing the income
generated by or arising out of its qualifying project?

DISCUSSION
On XXX, DEO issued a letter approving Taxpayer’s project for participation in Florida’s CITC
program, and indicated in its report that the “Qualifying Project” will be located in a High Impact
Performance Incentive Sector pursuant to s. 288.108, F.S. 1 This certification approval entitles the
project to eligibility for an annual tax credit against the corporate income tax imposed, in an amount
equal to the lesser of the following for up to twenty years, beginning with the commencement of
operations:

1. five (5) percent of the eligible capital costs which are estimated to be $XXX, but must be at least
   $50 million;
2. seventy-five percent (75%) of the annual corporate income tax liability generated by or arising
   out of the Qualifying Project; and
3. the income tax due on the Florida corporate income tax return that includes the income generated
   by or arising out of the Qualifying Project.
   Unused credits cannot be carried forward unless the Qualifying Project meets the requirement for credit
   carryovers provided in s. 220.19(2)(d), F.S. In addition, DEO has required the project to create at least
   100 jobs, have a capital investment of $50 million, and for complete construction of the facilities
   contemplated by the project and the receipt of certificates of occupancy before the commencement of
   operations will be deemed to occur.

1

DEO’s approval letter is attached to and incorporated into this Technical Assistance Advisement.

Technical Assistance Advisement 13C1-002
Page 3

Taxpayer’s letter of XXX, states that the overall management, oversight and strategic direction of the
Taxpayer and its affiliated group as well as various support services such as day to day accounting and
financial reporting, legal, etc., will move to Florida as part of the Qualifying Project. Taxpayer requests
that the income generated by or arising out of the qualifying project be determined using a payroll factor
multiplied by the Taxpayer’s taxable income apportioned to Florida (F-1120, line 10). Taxpayer asserts
this is reasonable, because the corporate headquarters function will generate material income in its
capacity described above, as an integral part of the main operating company. However, such income
will not be easily identifiable on a stand-alone basis. 2
Given the unique specific circumstances involved in this case, and based on the representations of the
Taxpayer, the Department concurs with Taxpayer’s suggested calculation for the income generated by or
arising out of the qualifying project. However, Taxpayer is reminded that should the facts provided in
its request of XXX, or the representations made in the meeting of XXX, especially in regards to the
Taxpayer’s current Florida payroll and the new Florida payroll to be added as a result of the Qualifying
Project, be determined to be substantially different than represented, then the facts and circumstances
may not apply and the methodology may not be deemed appropriate.
CLOSING LANGUAGE
This response constitutes a TAA 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 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 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 TAA,
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,
George C. Hamm
Deputy General Counsel
Florida Department of Revenue
Record ID 144261

2

Taxpayer’s request is attached to and incorporated into this TAA.