Could a Florida capital project use an equally weighted new-jobs and project-property factor to calculate project income?

Plain-English summary

Florida approved a two-factor method for determining income generated by a new Capital Investment Tax Credit project.

The first factor divided the project's new jobs by all professionals employed by the taxpayer and its subsidiaries in Florida, including the new jobs. The second divided project property by the group's total Florida property. The two factors were weighted equally.

The combined factor would be calculated once at commencement of operations and used for the credit term. It would be multiplied by the taxpayer's Florida portion of adjusted federal income from line 7 of Form F-1120, and the applicable tax rate would then determine project liability.

Investment and net-new Florida jobs created through the taxpayer's partnership also counted toward the project. The taxpayer had to attach a schedule showing the two-factor calculation, project liability, and allowable credit.

What this means for you

Partnership-based projects

Florida allowed qualifying investment and jobs made through the partnership to count as part of the owner's project on the stated facts.

Corporate tax teams

Because the factor was fixed at commencement, the underlying job and property measurements needed careful documentation at that date.

Common questions

What were the two factors? New Florida jobs and project property.

How were they weighted? Equally.

Did partnership investment and jobs count? Yes, under the approved project structure.

Citations and references

• Fla. Stat. Sec. 220.191
• Fla. Stat. Sec. 220.13
• Fla. Admin. Code R. 12C-1.0191

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 21C1-007

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: 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: 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.

July 28, 2021
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
Re:

Technical Assistance Advisement – 21C1-007
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

Technical Assistance Advisement
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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. 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.
ISSUE 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.
FACTS SUPPLIED BY TAXPAYER
Taxpayer is XXXXX. Taxpayer is headquartered in New York. Taxpayer’s subsidiary XXXXX
(“Partnership”) employs Taxpayer’s U.S. employees and engages with certain advisors and
vendors of Taxpayer. Taxpayer indirectly owns XXXXX of Partnership. The remaining XXXXX of
Partnership is owned by XXXXX.
The qualifying project (“Project”) involves the creation of a new XXXXX in XXXXX, Florida and
the creation of approximately 100 net new-to-Florida jobs, with an average annual wage of at

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least XXXXX. Taxpayer anticipates XXXXX. Partnership, and possibly other affiliates, will be the
entity that hires the employees.
Taxpayer states there are two investment scenarios being considered. Under scenario 1,
Taxpayer would make a capital investment of $50 million which consist of investments in
leasehold improvements, furniture and fixtures, and equipment to build out a permanent office
space. Under scenario 2, Taxpayer would purchase a building for more than $100 million.
Under this scenario, the building would be owned by Partnership or a new partnership
subsidiary that would be XXXXX indirectly owned by Taxpayer.
Commencement of operations is expected to be December 31, 2023.
Taxpayer has proposed using a two-factor method to determine the income generated by or
arising out of the Project. The two factors would be a jobs-change factor and a property factor.
The jobs-change factor would be determined by dividing the Project’s new jobs by all
professionals, including the Project’s new jobs, currently employed by Taxpayer and its
subsidiaries in Florida.
The property factor would be determined by dividing the Project’s property by Taxpayer’s and
its subsidiaries total Florida property.1
The two factors would be equally weighted in determining the overall factor. The
determination of the factor would occur once at the commencement of operations and would
apply to the term of the credit. The overall factor would be multiplied by Taxpayer’s Florida
portion of adjusted federal income (line 7 of the Florida Corporate Income Tax return, F-1120)
to determine the Project’s taxable income. The Project’s taxable income would then be
multiplied by the applicable tax rate.
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….

1

XXXXX. Taxpayer reserves the right to discuss with the Department an adjustment to the property factor calculation of the
income determination method.

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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.

(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:

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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.

(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
between $50 million and more than $100 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 of Taxpayer prior to the
application of this credit that includes the income generated by or arising out of the
qualifying project.
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

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deemed to occur unless Taxpayer has provided DEO with evidence that it has met the following
criteria:

1. Capital investment of at least $25 million has been made at the project’s location in
   XXXXX, Florida; and
2. Creation of at least 100 net new-to-Florida full-time equivalent jobs paying at least
   the project wage at the project’s location in XXXXX, Florida.
   No annual CITC may be claimed without a letter from DEO stating that the appropriate annual
   requirements have been satisfied or maintained.
   The Department agrees with Taxpayer’s proposed method to use a two-factor method to
   determine the income generated by or arising out of the Project. The two factors would be a
   jobs-change factor and a property factor. The jobs-change factor would be determined by
   dividing the Project’s new jobs by all professionals, including the Project’s new jobs, currently
   employed by Taxpayer and its subsidiaries in Florida. The property factor would be determined
   by dividing the Project’s property by Taxpayer’s and its subsidiaries total Florida property.
   The two factors would be equally weighted in determining the overall factor. The
   determination of the factor would occur once at the commencement of operations and would
   apply to the term of the credit. The overall factor would be multiplied by Taxpayer’s Florida
   portion of adjusted federal income (line 7 of the Florida Corporate Income Tax return, F-1120)
   to determine the Project’s taxable income. The Project’s taxable income would then be
   multiplied by the applicable tax rate. 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 qualifying project. Taxpayer will be required to provide
   with its Florida corporate income tax return a schedule of the computation of the two-factor
   method and calculation of the project’s tax liability and allowable CITC.
   Both the investment made and net-new to Florida jobs created by Partnership will be
   considered a part of the Project.
   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

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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.

CONCLUSION
Given the specific circumstances involved in this case, and based on the representation of the
Taxpayer, the Department concurs with Taxpayer’s suggested calculation for the income
generated by or arising out of the qualifying project based upon s. 220.191, F.S., and Rule 12C1.0191, F.A.C. However, Taxpayer is reminded that should the 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 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
Susan R Coxwell
Tax Law Specialist
Technical Assistance and Dispute Resolution
CC: XXXXX