What project-income method did Florida approve for a consolidated filer's Capital Investment Tax Credit?

Plain-English summary

The Florida Department of Revenue approved a method for calculating income generated by a certified Capital Investment Tax Credit project undertaken by a consolidated corporate filer.

The taxpayer would maintain the project's financial and tax records in a separate general ledger and prepare pro forma federal and Florida returns. It would calculate project annual taxable income under generally accepted accounting principles and section 220.13, apply the project's Florida apportionment factor under section 220.15, and apply the 5.5 percent corporate income tax rate to determine project tax liability and the associated credit.

The usable credit was the least of the statutory investment-based amount, the permitted percentage of project tax liability, or the tax due on the consolidated Florida return before the credit. Annual Department of Economic Opportunity certification of the investment and employment requirements was required. Under the represented investment level, unused credits could not be carried forward.

What this means for you

Certified capital-investment projects

Build project-level books that can support income, expenses, Schedule M adjustments, apportionment, and a stand-alone pro forma return inside the consolidated filing.

Corporate tax teams

The project calculation does not itself guarantee the credit. Annual certification and each statutory limitation still apply.

Common questions

Q: What income method did the Department accept?
A: Separate project books and a pro forma return, followed by project apportionment and the corporate tax rate.

Q: Could unused credit be carried forward?
A: Not for this project under the investment facts represented in the ruling.

Citations and references

• Fla. Stat. §§ 220.11, 220.13, 220.15, 220.191, 288.108, and 213.22
• Fla. Admin. Code r. 12C-1.0191

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 14C1-006

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 THE FLORIDA CAPITAL
INVESTMENT TAX CREDIT UNDER S. 220.191, F.S.
ANSWER: WHEN FILING ITS CONSOLIDATED FLORIDA CORPORATE INCOME TAX
RETURN, IT SHALL BE NECESSARY FOR THE TAXPAYER TO USE A PRO-FORMA
FORMAT TO DETERMINE THE PROJECT’S ANNUAL TAXABLE INCOME. TAXPAYER
WILL APPLY ITS FLORIDA APPORTIONMENT FRACTION TO THE PROJECT’S ANNUAL
TAXABLE INCOME, AND APPLY THE FLORIDA CORPORATE INCOME RATE OF 5.5%
FOR THE DETERMINATION OF THE PROJECT’S FLORIDA TAXABLE INCOME AND
ASSOCIATED CAPITAL INVESTMENT TAX CREDIT.
June 19, 2014
Re:

Technical Assistance Advisement – TAA 14C1-006
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.”)
XXXXXXX (“Taxpayer”)
FEIN: XXXXXXX
Project ID: XXXXXXX
Florida Department of Economic Opportunity (“DEO”)
Enterprise Florida, Inc. (“EFI”)

Dear XXXXXXX:
This is in response to your request dated XXXXXXX, for a Technical Assistance Advisement
(“TAA”) pursuant to section 213.22, F.S., and Rule Chapter 12-11, F.A.C., regarding your request
for an agreement concerning how 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”). 1
Section 220.191(5), F.S., addresses applications for CITC. That statute provides:

1

Taxpayer’s request and exhibits are attached to and incorporated into this TAA.
Child Support Enforcement – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – James McAdams, Director  Information Services – Damu Kuttikrishnan, Director

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

Technical Assistance Advisement
Page 2 of 6

Applications shall be reviewed and certified pursuant to s. 288.061. The Department of
Economic Opportunity, upon 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.
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.
On XXXXXXX, DEO certified Taxpayer as 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 Department of Economic Opportunity. 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.
FACTS SUPPLIED BY TAXPAYER
Taxpayer is a global XXXXXXX and XXXXXXX company. It is engaged in the research,
design, development, manufacture, integration and sustainment of advanced technology systems,
products, and services. It employs about XXXXXXX people worldwide. Taxpayer files a
consolidated Florida and federal corporate income tax return.
Taxpayer intends to expand its facility located in XXXXXXX County, Florida. It will be
relocating employees from its facility in XXXXXXX, to this location. Taxpayer is consolidating
its XXXXXXX efforts, including but not limited to the XXXXXXX, XXXXXXX, and
XXXXXXX. Other XXXXXXX and XXXXXXX operations related to this XXXXXXX and
XXXXXXX business will be conducted at this location. The Project will create at least
XXXXXXX net new-to-Florida full-time equivalent jobs with an average annual wage of at least
XXXXXXX. The Taxpayer estimates its total cumulative capital investment to be at least
XXXXXXX. Taxpayer expects to begin claiming this credit on its tax year ended XXXXXXX,
corporate income tax return.
ISSUES PRESENTED
In its letter dated XXXXXXX, Taxpayer requests a written agreement to determine how the
Qualifying Project’s income will be computed, based upon s. 220.191, F.S., and Rule 12C1.0191, F.A.C.

Technical Assistance Advisement
Page 3 of 6

LEGAL AUTHORITY
Section 220.11, F.S., states in part:
(1) A tax measured by net income is hereby imposed on every taxpayer for each taxable year
commencing on or after January 1, 1972, and for each taxable year which begins before and ends
after January 1, 1972, for the privilege of conducting business, earning or receiving income in this
state, or being a resident or citizen of this state. Such tax shall be in addition to all other
occupation, excise, privilege, and property taxes imposed by this state or by any political
subdivision thereof, including any municipality or other district, jurisdiction, or authority of this
state….
Section 220.13, F.S., states in part:
(1) The term “adjusted federal income” means an amount equal to the taxpayer’s taxable income
as defined in subsection (2), or such taxable income of more than one taxpayer as provided in s.
220.131, for the taxable year, adjusted as follows: …
Section 220.15, F.S., states in part:
(1) Except as provided in ss. 220.151, 220.152, and 220.153, adjusted federal income as defined
in s. 220.13 shall be apportioned to this state by taxpayers doing business within and without this
state by multiplying it by an apportionment fraction composed of a sales factor representing 50
percent of the fraction, a property factor representing 25 percent of the fraction, and a payroll
factor representing 25 percent of the fraction. …
Section 220.191, F.S., states in part:
(1) DEFINITIONS.—For purposes of this section:
(a) “Commencement of operations” means the beginning of active operations by a qualifying
business of the principal function for which a qualifying project was constructed.
(b) “Cumulative capital investment” means the total capital investment in land, buildings, and
equipment made in connection with a qualifying project during the period from the beginning of
construction of the project to the commencement of operations.
(c) “Eligible capital costs” means all expenses incurred by a qualifying business in connection
with the acquisition, construction, installation, and equipping of a qualifying project during the
period from the beginning of construction of the project to the commencement of operations,
including, but not limited to: …
(d) “Income generated by or arising out of the qualifying project” means the qualifying project’s
annual taxable income as determined by generally accepted accounting principles and under s.
220.13.

(f) “Qualifying business” means a business which establishes a qualifying project in this state and
which is certified by the Department of Economic Opportunity to receive tax credits pursuant to
this section.

Technical Assistance Advisement
Page 4 of 6

(2)(a) An annual credit against the tax imposed by this chapter shall be granted to any qualifying
business in an amount equal to 5 percent of the eligible capital costs generated by a qualifying
project, for a period not to exceed 20 years beginning with the commencement of operations of
the project. …The annual tax credit granted under this section shall not exceed the following
percentages of the annual corporate income tax liability or the premium tax liability generated by
or arising out of a qualifying project:

1. One hundred percent for a qualifying project which results in a cumulative capital investment
   of at least $100 million.
2. Seventy-five percent for a qualifying project which results in a cumulative capital investment
   of at least $50 million but less than $100 million.
3. Fifty percent for a qualifying project which results in a cumulative capital investment of at
   least $25 million but less than $50 million.

(4) Prior to receiving tax credits pursuant to this section, a qualifying business must achieve and
maintain the minimum employment goals beginning with the commencement of operations at a
qualifying project and continuing each year thereafter during which tax credits are available
pursuant to this section.

(8) The Department of Revenue may specify by rule the methods by which a project’s pro forma
annual taxable income is determined.
DISCUSSION
On XXXXXXX, DEO issued a letter approving Taxpayer’s project for participation in Florida’s
CITC program, and indicated in its letter that the “Qualifying Project” will be located in a High
Impact Performance Incentive Sector pursuant to s. 288.108, F.S. 2 The certification approval
entitles the project to eligibility for an annual tax credit against the corporate income tax imposed
if certain criteria are met, 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 cumulative capital investment, which is estimated to be XXXXXXX,
but must be at least $25 million;

2.

Fifty (50%), seventy-five (75%), or one hundred percent (100%) of the annual corporate
income tax liability generated by or arising out of the Qualifying Project, depending on the
level of cumulative capital investment; or

3.

The tax due on the Florida consolidated corporate income tax return prior to application of
this credit that includes the income generated by or arising out of the qualifying project.

2

DEO’s certification letter is attached to and incorporated into this TAA.

Technical Assistance Advisement
Page 5 of 6

Unused credits cannot be carried forward unless the qualifying Project meets the requirements for
credit carryovers provided in s. 220.191(2)(d), F.S. Taxpayer’s Project does not meet the
requirements of s. 220.191(2)(d), F.S.; therefore, unused credits cannot be carried forward. 3
DEO has required the Qualifying Project meet certain criteria by the commencement of
operations. The “commencement of operations” (as defined in s. 220.191, F.S.) will not be
deemed to occur unless the Taxpayer has provided DEO with evidence that it has met the
following criteria:
1.

Cumulative capital investment of at least XXXXXXX million has been made at the Project
location; and

2.

Creation of at least XXXXXXX net new-to-Florida full-time equivalent jobs at the Project
location paying an average annualized wage of at least XXXXXXX.

No annual CITC may be claimed without a letter from DEO stating that the appropriate annual
requirements have been satisfied or maintained.
The Taxpayer proposes a methodology to compute the income generated by or arising out of the
qualifying project and the corresponding CITC. Taxpayer states the Project’s financial and tax
records will be complied using a separate general ledger. The Taxpayer will prepare a pro forma
return for the Project. As illustrated in Taxpayer’s Exhibit 2 and 3, the pro forma return will
include categories of income and expense that the Taxpayer will incorporate into computing the
annual taxable income generated by or arising out of the Project. Taxpayer must apply generally
accepted accounting principles and the provisions of s. 220.13, F.S., in computing the income of
the Project.
After the Project’s taxable income is determined using the method described above, the Florida
apportionment factor for the Project, as determined under section 220.15, F.S., will be applied to
the Project’s taxable income to determine the Project’s Florida taxable income and the associated
CITC. The allowable CITC will be limited to the lesser of the limitations stated above. The
Taxpayer will provide a pro forma Florida and federal return for the Project. Taxpayer will also
provide a copy of the letter from DEO certifying the annual requirements have been satisfied or
maintained.
CONCLUSION
Given the specific circumstances involved in this case, and based on the representation of the
Taxpayer, the computation above properly computes the income generated by or arising out of the
qualifying project based upon s. 220.191, F.S., and Rule 12C-1.0191, F.A.C. However, Taxpayer

3

If the cumulative capital investment is at least $100 million, Taxpayer would be eligible to carry forward certain
unused credits.

Technical Assistance Advisement
Page 6 of 6

is reminded that should the facts provided in its request of XXXXXXX, be determined to be
incorrect or changed, the computation for the income generated by or arising out of the project
could be substantially different from what has been agreed upon in this TAA.
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,

Susan R. Coxwell
Tax Law Specialist
Technical Assistance and Dispute Resolution
(850) 717-6478
Record ID 169547