How did Florida calculate income and tax from the taxpayer's qualifying Capital Investment Tax Credit project?

Plain-English summary

The Florida Department of Revenue approved the taxpayer's treatment of the Florida portion of adjusted federal taxable income as income generated by its certified Capital Investment Tax Credit project.

The taxpayer had to apply generally accepted accounting principles and Florida's adjusted-income and apportionment rules. It would multiply the Florida income amount by the then-stated 5.5% corporate tax rate to determine project tax liability.

The credit remained limited to the lesser of three measures described in the ruling: 5% of eligible capital costs, the investment-tier percentage of project tax liability, or tax due on the Florida return before the credit. A project with at least $100 million of cumulative investment could use qualifying unused amounts only in years 21 through 30 after operations began.

What this means for you

Businesses with certified capital projects

The project-income agreement must align accounting income, Florida apportionment, the certification's investment tier, and return-level tax due.

Tax directors and credit teams

Track the commencement-of-operations date and cumulative investment. Those facts control both the annual percentage and the special carryover window.

Common questions

Q: What income did the Department accept as project income?
A: The Florida portion of adjusted federal taxable income reported on the corporate return.

Q: How was project tax liability computed?
A: By applying the 5.5% Florida corporate tax rate to that Florida income amount.

Q: Could the full computed credit always be claimed?
A: No. The ruling applied the lesser of three statutory limitations.

Q: When could qualifying unused credit be used?
A: For an investment meeting section 220.191(2)(d), in years 21 through 30 after commencement of operations.

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 17C1-010

Original ruling text

Executive
Director
Leon M. Biegalski

QUESTION: TAXPAYER REQUESTS A WRITTEN AGREEMENT BETWEEN THEMSELVES 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: TO DETERMINE THE QUALIFYING PROJECT’S ANNUAL FLORIDA CORPORATE
TAXABLE INCOME, AND THE ASSOCIATED CITC, TAXPAYER MUST APPLY GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES (GAAP) AND THE PROVISIONS OF SS. 220.13 AND 220.15,
F.S. THE FLORIDA PORTION OF ADJUSTED FEDERAL TAXABLE INCOME WILL THEN BE
MULTIPLIED BY THE FLORIDA TAX RATE OF 5.5 PERCENT TO ARRIVE AT THE TAX LIABILITY
GENERATED BY OR ARISING OUT OF THE QUALIFYING PROJECT.
November 3, 2017

XXXXX
XXXXX
XXXXX
XXXXX

Re:

Technical Assistance Advisement 17C1-010
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.”)
XXXXX (“Taxpayer”)
FEIN: XXXXX
Project ID: XXXXX
Florida Department of Economic Opportunity (“DEO”)
Enterprise Florida, Inc. (“EFI”)

Dear XXXXX:
This is in response to your request dated XXXXX, 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
Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director  Information Services – Damu Kuttikrishnan, Director

www.floridarevenue.com
Florida Department of Revenue
Tallahassee, Florida 32399-0100

Technical Assistance Advisement
Page 2
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. 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 XXXXX, 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 an XXXXX. Through its affiliates, Taxpayer also owns, operates and/or licenses XXXXX.
Taxpayer and its subsidiaries are headquartered in XXXXX, with additional subsidiaries (“XXXXX”)
located throughout the United States. Each XXXXX maintains separate books and records. Florida
corporate income tax returns are filed by Taxpayer as two separate filing groups.
Taxpayer is a XXXXX. Taxpayer is XXXXX. It is XXXXX for both federal and Florida purposes.
Taxpayer’s income XXXXX. Taxpayer files XXXXX. Taxpayer files a Form F-1120 XXXXX apportioned
to Florida per s. 220.131(5), F.S.
XXXXX, is a subsidiary of Taxpayer. XXXXX. XXXXX files a separate federal consolidated Form 1120.
XXXXX elected to file a consolidated Florida corporate income tax return.
The qualifying project is XXXXX. This will allow Taxpayer to XXXXX. The project will also include
XXXXX. The project will allow XXXXX.

Technical Assistance Advisement
Page 3
Taxpayer intends to make a capital investment of over $XXXXX million and will create at least 100 net
new-to-Florida full-time equivalent jobs paying an estimated average annual wage of $XXXXX, in
connection with the project. Once the project is complete, Taxpayer projects it will add over XXXXX new
employees.
Taxpayer states that since XXXXX and Taxpayer’s tax return will be filed in the state in which the project
is located, it proposes that all of its income should be considered income generated by or arising out of the
qualifying project.
ISSUES PRESENTED
In its letter dated XXXXX, 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 12C-1.0191, F.A.C.
Additionally, Taxpayer requests a determination that it is eligible to carry over any unused portion of its
annual credit to years 21 through 30 after the commencement of operations pursuant to s. 220.191(2)(d),
F.S., as long as the unused portion results from an insufficient tax liability on the part of the qualifying
business.
LEGAL AUTHORITY
Section 220.11, F.S., states in part:
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:
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:

Technical Assistance Advisement
Page 4

(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.

(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.

(d) If the credit granted under subparagraph (a)1. is not fully used in any one year because of
insufficient tax liability on the part of the qualifying business, the unused amounts may be used in
any one year or years beginning with the 21st year after the commencement of operations of the
project and ending the 30th year after the commencement of operations of the project. (Emphasis
supplied.)

Technical Assistance Advisement
Page 5
(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 XXXXX, 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. 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 over $XXXXX
   million, 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 corporate income tax return prior to application of this credit 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 requirements for credit
   carryovers provided in s. 220.191(2)(d), F.S.
   DEO has required that 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 Taxpayer
   has provided DEO with evidence that it has met the following criteria:
4. A cumulative capital investment (as defined in s. 220.191, F.S.) of at least $25 million at the
   qualifying project’s location in XXXXX has been made; and
5. At least 100 net new-to-Florida full-time equivalent jobs paying an average annualized wage of at
   least $XXXX have been created in connection with the qualifying project.
   No annual CITC may be claimed without a Letter of Certification from DEO stating that the appropriate
   annual requirements have been met and/or maintained.

Technical Assistance Advisement
Page 6
According to DEO’s certification letter, Taxpayer is expected to make a cumulative capital investment of
$XXXXX million in connection with the project. If Taxpayer makes a cumulative capital investment of at
least $XXXXX million prior to commencement of operations, Taxpayer will be eligible to receive CITCs
equal to up to XXXXX% of its annual corporate income tax liability generated by or arising out of the
qualifying project.
Taxpayer stated in its TAA request that it expects to make a cumulative capital investment of over $XXXXX
million in connection with the qualifying project. If Taxpayer makes at least a $XXXXX million cumulative
capital investment prior to commencement of operations, it will be eligible to receive CITCs equal to up to
XXXXX% of its annual corporate tax liability generated by or arising out of the qualifying project.
Taxpayer has proposed that the Florida portion of adjusted federal taxable income reported on its Florida
corporate income tax return is income generated by or arising out of the qualifying project. The Department
concurs with Taxpayer’s determination of project income.
To determine the qualifying project’s annual Florida corporate taxable income, and the associated CITC,
Taxpayer must apply Generally Accepted Accounting Principles (GAAP) and the provisions of ss. 220.13,
and 220.15, F.S. The Florida portion of adjusted federal taxable income will then be multiplied by the
Florida tax rate of 5.5 percent to arrive at the tax liability generated by or arising out of the qualifying
project. Depending on the level of cumulative capital investment, the CITC would be either XXXXX% or
XXXXX% of the tax liability computed on the Florida corporate income tax return. The amount of the
CITC that could be claimed by Taxpayer on its return would be the lesser of the three limitations listed
above.
Pursuant to s. 220.191(2)(d), F.S., when the capital investment is at least $100 million, 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 qualifying project.
The amount of carryover from any one taxable year is five (5) percent of the cumulative capital investment
that is at least $100 million less the amount of capital investment tax credit that could be used on the tax
return for the taxable year. The amount of carryover from a taxable year may not exceed five (5) percent
of the cumulative capital investment that is at least $100 million.
In this case, Taxpayer states its tax due on the income generated by or arising out of the qualifying project
will be the same as the tax due on the tax return that includes the project. Assuming Taxpayer makes a
cumulative capital investment of exactly $XXXXX million and assuming its tax liability on a particular
taxable year’s tax return is $XXXXX, its carryover from that taxable year would be $XXXXX (XXXXX).
CONCLUSION
Given the specific circumstances involved in this case, and based on the representation of 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

Technical Assistance Advisement
Page 7
facts provided in its request of XXXXX, be determined to be incorrect or changed, the computation for the
income generated by or arising out of the Qualifying 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,

George C. Hamm
Deputy General Counsel
Office of General Counsel

Record ID: XXXXX
CC: XXXXX