How could a company calculate and prorate Florida Capital Investment Tax Credits for two separately accountable projects?

Plain-English summary

Florida approved a method for a consolidated technology manufacturer with two separately identifiable Capital Investment Tax Credit projects.

The taxpayer could prepare a pro forma return for the new project location, separately accounting for revenue, direct and indirect costs, book-to-tax adjustments, and other items used to determine annual taxable income. It would then apply the location's Florida apportionment factor to calculate project Florida taxable income and the associated credit.

The annual credit available from the two projects would be combined but prorated by each project's investment as a share of total investment in both projects. The same investment ratio would apply to qualifying unused credit claimed in years 21 through 30.

The taxpayer had to file the project pro forma return, annual credit calculations, and the Department of Economic Opportunity letter confirming annual program requirements.

What this means for you

Businesses with multiple CITC projects

Maintain separate project accounting even when the same taxpayer owns both projects and claims both credits on one return.

Corporate tax teams

Document the investment-based proration consistently for current annual credits and any later qualifying unused credit.

Common questions

Did Florida allow separate project accounting? Yes.

How were the two credits prorated? By each project's investment divided by total investment in both projects.

What annual support was required? The pro forma project return, credit calculations, and the annual certification letter.

Citations and references

• Fla. Stat. Sec. 220.191
• Fla. Stat. Sec. 220.13
• Fla. Stat. Sec. 220.15
• Fla. Admin. Code R. 12C-1.0191

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 21C1-008

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.

August 20, 2021

XXXXX
XXXXX
XXXXX
XXXXX
XXXXX

Re:

Technical Assistance Advisement – 21C1-008
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 August 10, 2021, 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

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arising out of 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 August 10, 2021, 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.
FACTS SUPPLIED BY TAXPAYER
Taxpayer is XXXXX. It is engaged in the research, design, development, manufacture,
integration, and sustainment of advanced technology systems, products, and services. It
employs about XXXXX people worldwide. Taxpayer files consolidated Florida and federal
corporate income tax returns.
Taxpayer has two location for its XXXXX business segment, XXXXX. Taxpayer was awarded a
CITC for its XXXXX. The project consisted of upgrading its manufacturing facility and
constructing a XXXXX. On XXXXX, Taxpayer was awarded another CITC, XXXXX, for the

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expansion of XXXXX. The expansion of this project will allow Taxpayer to retain and expand
future program efforts related to XXXXX.
For the new project, Taxpayer intends to create at least 100 net new-to-Florida full-time
equivalent jobs at the project location in XXXXX, Florida paying an average annualized wage of
at least $XXXXX (“project wage”). Taxpayer estimates that its cumulative capital investment
will be $XXXXX million. Taxpayer states it commenced operations of the project by XXXXX.
Taxpayer states given the nature of its business, it has the ability to separate the two locations
(XXXXX) to derive each locations’ financial and taxable income. Taxpayer proposes using the
same method of project income determination as agreed to for XXXXX, and then prorating the
utilization of each project’s credit based on each project’s investment in the total project.
Taxpayer will prepare a pro forma return for the XXXXX location. The pro forma format will
separately account for all revenues, direct and indirect costs, book to tax adjustments and any
other adjustments made in determining the XXXXX location’s annual taxable income.
After the taxable income is determined using the method described above, the Florida
apportionment factor for the XXXXX location, as determined under section 220.15, F.S., will be
applied to taxable income to determine the Florida taxable income for the XXXXX location and
the associated CITC. The allowable CITC will be limited to the lesser of the limitations stated
above.
The annual amount of CITC that can be claimed in each taxable year will be a combination of
the two projects credits. The annual amount of credit for each project will be a prorated
amount based on each project’s investment to the total investment made for both projects.
The same proration will be used when applying any unused credit to the 21st through 30th year.
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:

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(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:

1. One hundred percent for a qualifying project which results in a cumulative capital
   investment of at least $100 million.

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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 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” would 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 expected to exceed
   $XXXXX 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.
   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. Capital investment of at least $25 million has been made at the project’s
   location in XXXXX, Florida; and
5. 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.

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No annual CITC may be claimed without a letter from DEO stating that the appropriate
annual requirements have been satisfied or maintained.
The Department concurs with Taxpayer’s proposal. With its annual Florida corporate income
tax filing, Taxpayer will provide a pro forma Florida corporate income tax return for the project
and calculations used in the determination of the annual CITC. 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 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.
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 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

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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