How could the consolidated taxpayer calculate income and tax generated by its qualified project for the Capital Investment Tax Credit?

Plain-English summary

The Department approved the taxpayer's proposal to calculate project income and tax through a pro forma Florida corporate income tax return.

The taxpayer filed consolidated federal and Florida returns, so the project did not have its own standalone return. The pro forma calculation would separately account for the project's taxable income, the Florida corporate income tax liability generated by the project after apportionment, and the related Capital Investment Tax Credit.

The taxpayer had to apply GAAP and section 220.13 and submit the pro forma return and a schedule of project income, tax liability, and allowable credit with its annual Florida return.

What this means for you

A project inside a broader consolidated group can require a separate project-level computation even though the group files one return. The approved method isolated the project's economics without changing the taxpayer's actual consolidated filing status.

The credit remained subject to the statutory capital-investment, employment, annual-certification, percentage, and tax-liability limits described in the ruling.

Common questions

Did the project use the group's entire taxable income? No. The approved pro forma return separately computed the income generated by the project.

What had to be filed with the Florida return? The project pro forma and a schedule showing income, tax liability, and allowable CITC.

Was the credit automatic after the agreement? No. The ruling required the project to satisfy the certified investment and employment criteria and obtain the annual agency letter.

Could changed facts alter the method? Yes. The Department expressly conditioned the agreement on the facts represented.

Citations and references

• Fla. Stat. §§ 220.11, 220.13, and 220.15.
• Fla. Stat. § 220.191.
• Fla. Admin. Code r. 12C-1.0191.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 23C1-011

Original ruling text

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.
September 20, 2023

Via email:
Re:

Technical Assistance Advisement – 23C1-011
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.”)
(“Taxpayer”)
FEIN:
Project ID:
Florida Department of Economic Opportunity (“DEO”)

Dear
This is in response to your request dated
, 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 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:

Technical Assistance Advisement
September 20, 2023
Page 2

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
, 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 DEO. 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
, Taxpayer requested 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 an
. Taxpayer files consolidated Florida and
federal corporate income tax returns.
The qualifying project (“Project”) consists of

.
Taxpayer intends to create at least 100 net new-to-Florida full-time equivalent jobs in connection
with the project in
paying an average annualized wage of at least $6
(“project wage”). Taxpayer estimates that its cumulative capital investment will be $

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September 20, 2023
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Taxpayer will prepare a pro forma return to separately account for the taxable income generated by
the project; the annual Florida corporate income tax liability generated by or arising out of the
project to the extent apportioned to the State of Florida in accordance with the F-1120; and the
associated CITC.
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: …

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September 20, 2023
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(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.

(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
, 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

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September 20, 2023
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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 $
   , 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 consolidated 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 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
   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
   .
   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 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 project’s income, tax
   liability and allowable CITC.
   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.

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September 20, 2023
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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 12C-1.0191, F.A.C.
However, Taxpayer is reminded that should the facts provided in its request of
, 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,

Denise L. Smith
Denise Smith
Tax Law Specialist
Technical Assistance and Dispute Resolution
(850) 717-6326

e:

Technical Assistance Advisement
September 20, 2023
Page 7

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