Could an expanded Capital Investment Tax Credit project treat all of the taxpayer's income apportioned to Florida as project income?

Plain-English summary

The Florida Department of Revenue approved a revised method for calculating income generated by an expanded Capital Investment Tax Credit project.

The qualifying project had been expanded to include a new facility and renovations of existing Florida buildings. Based on the taxpayer's representation that the vast majority of its Florida income was generated at the project location, the Department agreed that the taxpayer's entire Florida portion of adjusted federal income reported on line 7 of Form F-1120 would be project income.

The taxpayer still had to apply generally accepted accounting principles and section 220.13, provide annual certification that project requirements were met or maintained, and apply the statutory limits on the credit. This TAA superseded TAA 12C1-013 for the same taxpayer.

What this means for you

Businesses with expanded certified projects

A project-income method can be revised when the certified project changes, but the method remains tied to the Department of Economic Opportunity's certification and the taxpayer's represented facts.

Tax directors and credit teams

The annual credit was limited to the least of the investment-based annual amount, the applicable percentage of project tax liability, or tax due on the consolidated Florida return before the credit.

Accountants and tax professionals

For the carryforward described in the ruling, an unused amount existed only when the consolidated-return tax limit restricted the credit—not when the project-liability limit or 5% annual cap controlled.

Common questions

Q: What amount did the Department accept as project income?
A: The taxpayer's entire Florida portion of adjusted federal income on line 7 of Form F-1120.

Q: Could the taxpayer claim the credit without annual project certification?
A: No.

Q: Did this ruling replace an earlier project-income agreement?
A: Yes. It superseded TAA 12C1-013 for this taxpayer.

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 15C1-004

Original ruling text

Executive
Director
Marshall Stranburg

QUESTION: TAXPAYER WANTS TO CLARIFY THE DEFINITION OF THE PROJECT, PROJECT
INCOME, AND CAPITAL INVESTMENT. 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: TAXPAYER’S ADDITIONS TO THE DEFINITION OF THE PROJECT, PROJECT
INCOME, AND CAPITAL INVESTMENT HAVE BEEN INCORPORATED INTO THE TAA.
TAXPAYER’S FLORIDA PORTION OF ADJUSTED FEDERAL INCOME WILL BE CONSIDERED
PROJECT INCOME.
July 2, 2015
Re:

Technical Assistance Advisement – 15C1-004
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.”)
XXXXXX (“Taxpayer”)
FEIN: XXXXXX
Project ID: XXXXXX
Florida Department of Economic Opportunity (“DEO”)
Enterprise Florida, Inc. (“EFI”)

Dear XXXXXX:

This is in response to your request dated XXXXXX, 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 clarification
and 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:
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
1

Taxpayer’s request, exhibits and email dated XXXXXX, are attached to and incorporated into this TAA.
Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Sue Harlan, Interim Director  Information Services – Damu Kuttikrishnan, Director

http://dor.myflorida.com/dor/
Florida Department of Revenue
Tallahassee, Florida 32399-0100

Technical Assistance Advisement
Page 2

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 XXXXXX, after receiving certification from the Department of Economic Opportunity (“DEO”) that it
was eligible to receive tax credits under s. 220.191, F.S., Taxpayer requested from the Florida Department
of Revenue a Technical Assistance Advisement seeking a written agreement specifying how income
generated by or arising out of the Project would be determined. On XXXXXX, Taxpayer was issued a TAA
by the Department specifying the method by which income generated by or arising out of the Project was to
be determined for purposes of applying the CITC. Subsequently, in a letter dated XXXXXX, Taxpayer
requested a Technical Assistance Advisement seeking clarification of the guidance provided in TAA 12C1013.
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.2
FACTS SUPPLIED BY TAXPAYER
Taxpayer is a XXXXXX servicing XXXXXX and XXXXXX markets in over XXXXXX countries.
Headquartered in XXXXXX, the company generates over $XXXXXX in annual revenue and has more than
XXXXXX employees.
Taxpayer is creating a new XXXXXX at its Florida XXXXXX that will become the XXXXXX for some of
the company’s XXXXXX. The XXXXXX will expand its XXXXXX and XXXXXX located on the
XXXXXX, Florida XXXXXX. In addition to the XXXXXX, the project also includes a refurbishment of
up to XXXXXX of existing building structures at the company’s XXXXXX. The Project will result in the
creation of XXXXX new-to-Florida jobs. Taxpayer expects its total cumulative capital investment to be at
least $XXXXXX million.
ISSUES PRESENTED
In its letter dated XXXXXX, Taxpayer requests clarification of the guidance provided in XXXXXX,
specifically the Project description and the method by which income generated by or arising out of the
qualifying project will be determined, given the expansion of the project.
2

This Technical Assistance Advisement supersedes Technical Assistance Advisement No. 12C1-013, issued on November 29,
2012, to the Taxpayer.

Technical Assistance Advisement
Page 3

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.

Technical Assistance Advisement
Page 4

(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.

(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 XXXXXX, DEO issued a letter approving Taxpayer’s project for participation in Florida’s CITC
program and indicated in its letter that the “Qualifying Project” would be located in a High Impact
Performance Incentive Sector pursuant to s. 288.108, F.S. A Second Corrected Certification letter was
issued on XXXXXX. In an email dated XXXXXX, DEO confirmed the Project will consist of the new
XXXXXX facility at the XXXXXXX and the renovation of XXXXXX of existing buildings located at the
XXXXXX.3
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:

3

DEO’s certification and confirmation letters/email are attached to and incorporated into this TAA.

Technical Assistance Advisement
Page 5

1. Five (5) percent of the cumulative capital investment, which is expected to exceed $XXXXXX
   million;
2. XXXXXX of the annual corporate income tax liability generated by or arising out of the
   Qualifying Project, assuming a cumulative capital investment of XXXXXX; 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.
   DEO requires the Qualifying Project to 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:
4. Capital investment of XXXXXX in XXXXXX facilities;
5. Creation of XXXXXX new jobs in XXXXXX (the base period for this project’s jobs
   will be the twelve full months September 1, 2013, through August 31, 2014); and
6. Obtaining a certificate of occupancy for one new building constructed in XXXXXX.
   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 asserts that the vast majority of income
   reported to Florida is generated at the XXXXXX. With the addition of the renovation of the XXXXXX
   facilities to the Project, Taxpayer proposes that all income apportioned to the state of Florida for
   Taxpayer will be project income.
   The Department basically concurs with Taxpayer’s methodology. Taxpayer’s Florida portion of adjusted
   federal income (line 7 of the Florida Corporate Income Tax return, F-1120) will be considered Project
   income. The allowable CITC will be limited to the lesser of the limitations stated above. Taxpayer must
   apply generally accepted accounting principles and the provisions of s. 220.13, F.S., in computing the
   income of the Project. Taxpayer will also provide a copy of the letter from DEO certifying the annual
   requirements have been satisfied or maintained.
   Pursuant to s. 220.191(2)(d), F.S., when the capital investment is XXXXXX, credit amounts not fully
   used in any one year because of insufficient tax liability on the part of the qualifying business may be
   used in any one year or years beginning with the 21st year after the commencement of operations of the
   Project and ending with the 30th year after the commencement of operations of the Project.
   To determine the amount of unused credit that can be carried forward, the Taxpayer must first determine
   the tax liability generated by or arising out of the qualifying project. If the credit is limited to the tax
   liability generated by or arising out of the Project, not the tax liability on the consolidated return, or by
   the 5% annual credit cap, then there will not be a carryforward. If the credit is limited by the tax liability
   on the consolidated Florida return, not the tax liability generated by or arising out of the Project and not
   by the 5% annual credit cap, then there will be a carryforward that can be claimed beginning with the
   21st year after the commencement of operations.

Technical Assistance Advisement
Page 6

CONCLUSION
Given the specific circumstances involved in this case, and based on the representations 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 is reminded that
should the facts provided in its requests 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 198357