12C-1.013: Adjusted Federal Income Defined
12C-1.068: Intangible Tax Credit; Additional Tax Due
PURPOSE AND EFFECT: The purpose of the proposed amendments to Rule 12C-1.013, F.A.C. (Adjusted Federal Income Defined), is to remove provisions that were held invalid by the First District Court of Appeal in Golden West Financial Corp. et al. v. Fla. Dept. of Revenue, 975 So. 2d 567 (1st Fla. DCA Feb. 19, 2008). Pursuant to this decision, corporations are permitted to share Florida net operating loss carryovers on a consolidated return.
Section 220.68, F.S., previously allowed financial organizations to take a credit for the amount of intangible tax paid against the amount of the franchise tax due. Section 8, Chapter 98-132, L.O.F., provides that the tax credit is no longer available for tax years beginning after December 31, 1999. The repeal of Rule 12C-1.068, F.A.C. (Intangible Tax Credit; Additional Tax Due), will remove the rule provisions regarding this tax credit.
SUMMARY: The proposed amendments to Rule 12C-1.013, F.A.C. (Adjusted Federal Income Defined), remove paragraphs (14)(j) and (k). Under these paragraphs, corporations that incurred losses when filing on a separate Florida return basis were prohibited from sharing those losses with members of their affiliated group when electing to file on a Florida consolidated basis.
The proposed repeal of Rule 12C-1.068, F.A.C. (Intangible Tax Credit; Additional Tax Due), removes the provisions regarding the tax credit previously authorized under Section 220.68, F.S., for tax years beginning on or before December 31, 1999.
SUMMARY OF STATEMENT OF ESTIMATED REGULATORY COSTS: No Statement of Estimated Regulatory Cost was prepared.
Any person who wishes to provide information regarding a statement of estimated regulatory costs, or provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice.
SPECIFIC AUTHORITY: 213.06(1), 220.51 FS.
LAW IMPLEMENTED: 220.02(3), 220.03(5), 220.13, 220.131(1), 220.43(1), (3), 220.68 FS, s. 127, Chapter 91-112, s. 8, Chapter 98-132, L.O.F.
A HEARING WILL BE HELD AT THE DATE, TIME AND PLACE SHOWN BELOW:
DATE AND TIME: January 15, 2009, 10:30 a.m.
PLACE: Room 118, Carlton Building, 501 S. Calhoun Street, Tallahassee, Florida
Pursuant to the provisions of the Americans with Disabilities Act, any person requiring special accommodations to participate in this workshop/meeting is asked to advise the agency at least 48 hours before the workshop/meeting by contacting: Larry Green at (850)922-4830. If you are hearing or speech impaired, please contact the agency using the Florida Relay Service, 1(800)955-8771 (TDD) or 1(800)955-8770 (Voice).
THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE IS: Gary Moreland, Senior Attorney, Technical Assistance and Dispute Resolution, Department of Revenue, P.O. Box 7443, Tallahassee, Florida 32314-7443, telephone (850)922-4831
THE FULL TEXT OF THE PROPOSED RULE IS:
12C-1.013 Adjusted Federal Income Defined.
(1) through (13) No change.
(14) Net Operating Losses.
(a) through (i) No change.
(j) Under Treas. Reg. 1.1502-1(f)(2)(ii), the term “separate return limitation year” (SRLY) does not include a separate return year of any corporation which was a member of the affiliated group for each day of such year. The exception in Treas. Reg. 1.1502-1(f)(2)(ii), to the term “separate return limitation year” contemplates an affiliated group which remains in existence, and is, therefore, eligible to file a consolidated return for each year. If the affiliated group does not elect to file a consolidated return, each corporation must file a separate federal return. The Florida Corporate Income Tax Code generally embraces concepts of law which have been developed in connection with the income tax law of the United States. Section 220.43(1), F.S., provides that to the extent not inconsistent with the provisions of the Florida Income Tax Code or forms or regulations developed by the Department, a taxpayer will, for Florida tax purposes, take into account the items of income, deduction, and exclusion in the same manner as they are reflected for federal purposes. The requirements to file a Florida consolidated return, as well as the benefits and costs associated with filing a Florida consolidated return, are not the same as the requirements, benefits, and costs of filing a federal consolidated return. Florida allows federal net operating loss carryovers as a subtraction pursuant to Section 220.13(1)(b)1., F.S. However, the underlying federal concepts must be applied in a manner consistent with Florida law. Where members of a federal affiliated group have not elected, or are not eligible to elect, under the provisions of Section 220.131, F.S., to file a Florida consolidated return, SRLY concepts will be applied. SRLY concepts are applicable when a NOL carryover exists from a prior taxable year for which a Florida consolidated return was not filed and Florida corporate income tax returns were not filed for all members. The NOL carryover deduction from a subsidiary included in a consolidated NOL deduction is limited to that subsidiary’s taxable income included in the consolidated taxable income for that year. Where all members of the federal affiliated group filed Florida corporate income tax returns for all years from which a NOL carryover is available, SRLY concepts will not be imposed.
(k) An example illustrating how SRLY NOL carryovers are utilized in consolidated tax returns when the members of the consolidated group apportion their income within and without Florida is as follows: Example: In 1992, A, a foreign (non-Florida) corporation, which is the parent of corporation B, began doing business in Florida. Previously, A was not considered to be doing business in Florida, and therefore, the affiliated group of A and B was not eligible to file consolidated returns. B, a Florida corporation, incorporated in 1986, had filed separate Florida corporate income tax returns. The total Florida portion of Be’s federal net operating losses from 1986 through 1991 is $90,000. In the 1992 computation of consolidated taxable income, no intercompany adjustments were necessary.
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The net operating loss deduction for Florida in 1992 is limited to B’s Florida income. That is, B’s adjusted federal taxable income before NOLD times the current year’s apportionment factor. Therefore, the net operating loss deduction for 1992 for the A-B consolidated return is $5,000. The balance of B’s net operating loss carryover ($90,000 - $5,000) is carried over to subsequent years to be utilized in a similar manner.
(l) through (o) renumbered (j) through (m) No change.
(15) through (20) No change.
Specific Authority 213.06(1), 220.51 FS. Law Implemented 220.02(3), 220.03(5), 220.13, 220.131(1), 220.43(1), (3) FS. History– New 10-20-72, Amended 1-19-73, 10-20-73, 10-8-74, 4-21-75, 5-10-78, 11-13-78, 12-18-83, Formerly 12C-1.13, Amended 12-21-88, 12-7-92, 5-17-94, 10-19-94, 3-18-96, 10-2-01,________.
12C-1.068 Intangible Tax Credit; Additional Tax Due.
(1) For tax years ending prior to July 1, 1990, the credit banks and savings associations could take against the franchise tax was the lesser of:
(a) The intangible tax imposed upon, and paid by, any bank or savings association which is subject to Section 199.032, F.S.; or
(b) 40 percent of the sum of the emergency excise tax due under Chapter 221, F.S., and the franchise tax due, before this credit, under Chapter 220, F.S.
(2) S. 127, Chapter 91-112, L.O.F., provides that it was the intent of the Florida Legislature that the change in the credit only apply to taxable years beginning after December 31, 1990. Therefore, an additional tax to banks and savings associations was created by Section 127, Chapter 91-112, L.O.F., The additional tax will be equal to any increased credit a bank or savings association received because of the amendment to Section 220.68, F.S. The additional tax will apply to taxable years beginning on or after July 1, 1990, but not later than June 30, 1991. In addition to this tax, banks and savings associations will pay an amount equal to 12 percent of the additional tax.
(3) Banks and savings associations that elected for taxable years beginning on or after July 1, 1989, but not later than June 30, 1990, not to take the increased credit, will not be subject to the additional tax. However, they must complete Schedule B, Form F-1120, for the taxable year beginning on or after July 1, 1990, but not later than June 30, 1991.
(4) The credit provided by Section 220.68, F.S., is only allowable to the extent of the franchise tax. Any excess credit above the amount of franchise tax may not be used against the emergency excise tax.
Specific Authority 213.06(1), 220.51 FS. Law Implemented 220.68 FS., s. 127, Chapter 91-112, s. 8, Chapter 98-132, L.O.F. History– New 12-21-88, Amended 4-8-92, 5-17-94, 3-18-96, Repealed ________.