How did Florida correct the final consolidated and first separate filing periods after an acquisition ended the taxpayer's old group?

Plain-English summary

Florida corrected the filing periods stated in an earlier deconsolidation ruling after an acquisition ended the taxpayer's former affiliated group.

The taxpayer and its affiliates had to file two short-period sets of returns: first, a final consolidated return consistent with the old election; then separate returns for the taxpayer and affiliates for a short period ending on the acquiring parent's 52/53-week year end.

The Department also restated four conditions using the corrected periods. They addressed the effective date, realized-but-unrecognized items, a waiting period before joining another Florida consolidated return, and recognition of deferred gains in the specified return.

What this means for you

Corporate tax departments

After a midyear deconsolidation, determine whether short-period returns are needed to close the old group and align members with the new parent's year end.

M&A teams

This ruling corrected TAA 20C1-004's periods; it did not create a general rule that every acquisition uses the same short-year pattern.

Common questions

Was deconsolidation newly granted here? No. An earlier TAA had granted it; this ruling corrected the filing periods.

How many short-period filings were described? Two: one consolidated period and one separate-return period.

Did the conditions change? Their dates and periods were modified to match the correction.

Citations and references

• Fla. Admin. Code R. 12C-1.0131

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 20C1-006

Original ruling text

Florida Department of Revenue
Technical Assistance and Dispute Resolution
5050 West Tennessee Street Tallahassee FL 32399

Jim Zingale
Executive Director

floridarevenue.com

QUESTION: May the taxpayer be granted permission to cease filing Florida consolidated tax
returns based upon changes in business circumstances?
ANSWER: The taxpayer’s affiliated group ceased to exist by operation of law and therefore was
granted permission to cease filing Florida consolidated tax returns.

April 24, 2020
XXXXX
XXXXX
XXXXX
XXXXX
Re:

Technical Assistance Advisement 20C1-006
Corporate Income Tax
XXXXXX (FEIN XXXXX) (hereinafter “Taxpayer”)
XXXXX (FEIN XXXXX) (hereinafter “Parent Corporation”)

Dear XXXXX,
This is in response to your request dated XXXXX, for a Technical Assistance Advisement (“TAA”)
pursuant to s. 213.22, F.S., and Rule Chapter 12-11, F.A.C., regarding the proper filing periods
for Florida corporate income tax returns after deconsolidation.
FACTS SUPPLIED BY TAXPAYER
On XXXXX, Taxpayer and its affiliates were acquired by Parent Corporation. Prior to the
acquisition, Taxpayer and Parent Corporation were unrelated entities.
On XXXXX, Taxpayer requested permission to deconsolidate its return for Florida corporate
income tax filing purposes. The Department allowed Taxpayer’s request for deconsolidation
and issued TAA 20C1-004 on March 5, 2020.
ISSUE PRESENTED
On XXXXX, Taxpayer requested correction of the filing periods for it and its affiliated entities’
final consolidated and first separate Florida corporate income tax returns listed in TAA 20C1004.

Technical Assistance Advisement
Page 2

LEGAL AUTHORITY
Rule 12C-1.0131, F.A.C, provides further information on when an affiliated group of
corporations may stop filing a consolidated corporate income tax return. Specifically, Rule 12C1.0131, F.A.C, provides, in pertinent part:
(1) Unless otherwise distinctly expressed, the terms used in this section shall have
the same meaning as when used in a comparable context in the federal income
tax regulations for consolidated returns. The term "common parent" as used in
the federal regulations shall have the same meaning for Florida corporate tax
purposes, and all references to the "Commissioner" or "District Director" in the
federal regulations shall be construed to mean "the Executive Director or the
Executive Director's designee" for purposes of these rules.
(a)1. An affiliated group of corporations, as defined in these rules, which did not
file a Florida consolidated return for the immediately preceding taxable year, may
file a consolidated return in lieu of separate returns for the taxable year, provided
the common parent is subject to the Florida Income Tax Code and each
corporation which has been a member during any part of the taxable year for
which the consolidated return is to be filed consents, in the manner provided in
paragraph (e) of this subsection, to be bound by the provisions of these
requirements and all applicable sections of the federal consolidated returns
regulations.

2. A subgroup of the affiliated group may not file a consolidated return. (e.s.)

(3)(b)1. Notwithstanding that a consolidated return is required for a taxable year,
the Executive Director or the Executive Director's designee is authorized to grant
permission to a group to discontinue filing consolidated returns. Any such
application shall be made to Technical Assistance and Dispute Resolution, P. O.
Box 7443, Tallahassee, Florida 32314-7443, and shall be made not later than the
90th day before the due date for the filing of the consolidated return, including
extensions of time. Permission to revoke will be contingent upon an agreement
between the taxpayer and the Executive Director or the Executive Director's
designee to the terms, conditions, and adjustment under which the change will be
effected.
2. The Executive Director or the Executive Director's designee is authorized to
grant permission to a group to discontinue filing consolidated returns if the net
result of all amendments to the Florida Income Tax Code or the Internal Revenue
Code or regulations with effective dates commencing within the taxable year has
a substantial adverse effect on the consolidated tax liability of the group for such

Technical Assistance Advisement
Page 3

year relative to what the aggregate tax liability would be if the members of the
group filed separate returns for such year. Other factors which will be taken into
account in determining whether good cause exists for granting permission to
discontinue filing consolidated returns beginning with the taxable year include:
a. Changes in law or circumstances, including changes which do not affect income
tax liability;
b. Changes in law which are first effective in the taxable year and which result in
a substantial reduction in the consolidated net operating loss for such year relative
to what the aggregate net operating losses would be if the members of the group
filed separate returns for such year; and
c. Changes in the Florida Income Tax Code or the Internal Revenue Code or
regulations which are effective prior to the taxable year but which first have a
substantial adverse effect on the filing of a consolidated return relative to the filing
of separate returns by members of the group in such year.

3. Permission to revoke may be contingent upon an agreement between the
   taxpayer and the Executive Director or the Executive Director's designee to the
   terms, conditions, and adjustment under which the change will be effected.
   (c) The Executive Director or the Executive Director's designee may grant all
   groups or a particular class of groups permission to discontinue filing consolidated
   returns if any provision of the Florida Income Tax Code or the Internal Revenue
   Code or regulations has been amended and such amendment is of the type which
   could have a substantial adverse effect on the filing of consolidated returns by
   substantially all groups or all such groups, as the case may be, relative to the filing
   of separate returns. Ordinarily, the permission to discontinue shall apply to the
   taxable year which includes the effective date of such amendment.
   (d) If a group has permission under paragraph (b) or (c) of this subsection to
   discontinue filing consolidated returns for any taxable year and such group wishes
   to exercise such election, then the common parent must file a separate return for
   such year on or before the last day prescribed by law including extensions of time
   for the filing of the consolidated return for such year.
   (e) A group shall be considered as remaining in existence, for the purposes of
   these rules, in accordance with the rules prescribed in s. 1.1502-75(d) of the
   Federal Income Tax Regulations. (e.s.)

Technical Assistance Advisement
Page 4

(h) The taxable year of members of the group, including rules for changing to the
parent's taxable year, income to be included in the consolidated return, income
to be included in and the time for making separate returns for periods not
included in a consolidated return for the purposes of these rules shall be in
accordance with the rules prescribed in the federal income tax regulations. (e.s.)
DISCUSSION
As stated in TAA 20C1-004, reasonable cause was established for the Executive Director to
grant Taxpayer permission to cease filing consolidated Florida corporate income tax returns.
Subsequent to the acquisition, Taxpayer and its affiliated entities will file separate Florida
corporate income tax returns for the short taxable year beginning XXXXX, and ending on
XXXXX, to conform to Parent Corporation’s 52/53-week year end.
CONCLUSION
On XXXXX, Taxpayer's affiliated group ceased to exist, and Taxpayer was no longer the parent
corporation of an affiliated group. As a result, Taxpayer and Taxpayer's affiliated entities (a
subgroup of Parent Corporation's affiliated group) are not eligible to file Florida consolidated
corporate income tax returns for tax years ending after XXXXX. Taxpayer plans to file two short
year returns for XXXXX: the first for taxable year ending XXXXX (consolidated, consistent with
the existing election); the second for taxable year ending XXXXX (separate returns for Taxpayer
and its affiliated entities).
The conditions set forth in TAA 20C1-004 have been modified to reflect the correction to the
filing periods. Conditions of deconsolidation are as follows:

1. That the deconsolidation is effective for the tax year beginning on or after XXXXX,
2. That Taxpayer has no realized but unrecognized income or expense items that may be
   recognized at a later date,
3. That Taxpayer’s group does not become part of a consolidated Florida corporate income tax
   return prior to the tax year ending XXXXX, and
4. That any deferred gains which are realized for federal purposes, but which have not yet
   been recognized, must be reported in total, on the income tax return filed by Taxpayer’s
   group for tax year ending XXXXX.
   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.

Technical Assistance Advisement
Page 5

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

Susan R. Coxwell
Tax Law Specialist
Technical Assistance and Dispute Resolution
CC: XXXXX