Current through Reg. 50, No. 187; September 24, 2024
(1) For taxable years beginning on or after
January 1, 1991, corporations will apportion their adjusted federal income in
accordance with section
220.15, F.S., only if they are
doing business within and without Florida. A taxpayer will be considered doing
business within and without this state if it has income from business activity
which is taxable both within and without Florida.
(a) In determining whether or not a taxpayer
is doing business within and without Florida, a taxpayer will be considered
doing business without this state if the corporation is taxable in another
state, provided:
1. That state subjects the
business to a net income tax, a franchise tax measured by net income, a
franchise tax for the privilege of doing business, or a corporate stock tax,
or,
2. That state has jurisdiction
to subject the taxpayer to a net income tax regardless of whether, in fact, the
state does or does not.
(b)
1.
States have the jurisdiction to impose an income tax on any corporation that
incorporates within their state. This is true regardless of whether the
corporation exists or conducts business within their state. Therefore,
corporations that have incorporated outside Florida may apportion income in
accordance with section
220.15, F.S.
2. In general, whether a state has
jurisdiction to subject a Florida corporation to a net income tax is dependent
on whether the activities within the state fall within or without the
limitations prescribed under the due process or commerce clauses.
3. The jurisdiction of a state to impose a
net income tax is further limited by P.L. 86-272 (15 U.S.C. ss.
381-384), which is incorporated by
reference in rule 12C-1.0511, F.A.C., P.L. 86-272
precludes a state from taxing income from interstate commerce if a
corporation's only business activity in the state is the solicitation of orders
for sales of tangible personal property and the orders are approved and filled
from outside the state.
4. The
taxation by another state may also be limited by a de minimis exception. If the
activity within a state is de minimis, or the activity that goes beyond the
mere solicitation of orders for sales of tangible personal property is de
minimis, a state is precluded from imposing an income tax. Whether a particular
activity is a de minimis deviation from a prescribed standard must be
determined with reference to the specific activity and all the facts of a
specific case.
5. If no other state
may tax a Florida corporation because of jurisdictional limitations due to the
due process or commerce clauses, Public Law 86-272, or de minimis exceptions,
the corporation will not be considered to be doing business within and without
Florida.
6. If another state
specifically rules that a Florida corporation is subject to a net income tax, a
franchise tax measured by net income, a franchise tax for the privilege of
doing business, or a corporate stock tax within that state, such ruling will be
prima facie evidence that the state does have jurisdiction to tax.
7. The fact that a corporation has
voluntarily filed a return and paid tax in another state will not be conclusive
proof that the state had jurisdiction to impose a corporate income
tax.
8. For purposes of determining
whether a corporation is doing business within and without the state when
engaged in foreign commerce, the state will determine taxability in a foreign
country as though the jurisdictional standards applicable to a state of the
United States applied to that country. Therefore, if a foreign country actually
imposes a tax measured by income on a corporation, the criteria of doing
business within and without the state will be met. The corporation will also
meet the criteria if when applying the standards of due process, the commerce
clause, and P.L. 86-272, which is incorporated by reference in rule
12C-1.0511, F.A.C., the foreign
country would have jurisdiction to tax if it were a state of the United
States.
(c) Once it is
determined that a corporation is subject to tax within another state or
country, the corporation may apportion income using the property, payroll, and
sales factors as prescribed in section
220.15, F.S. The denominators of
the apportionment factors will include the property, payroll, and sales
everywhere. The denominators of the factors are not limited to only including
the property, payroll, and sales in states which actually tax or have the
jurisdiction to tax.
(d) There is
no throwback rule in Florida. For a corporation that is doing business within
and without Florida, the sales are not considered to be Florida sales solely
because the corporation is not subject to tax within another state.
(e) Sales to the United States government are
not treated differently from sales to individuals, partnerships, or
corporations. If the sale is tangible personal property and the delivery is
within Florida, the sale will be considered a Florida sale. If the sale is
delivered outside Florida, it will not be considered a Florida
sale.
(2) If a taxpayer
is not considered to be doing business within and without Florida under
subsection (1), all of its adjusted federal income will be subject to Florida
corporate income/franchise tax.
(3)
General Method.
(a) All corporations doing
business within and without Florida, except insurance companies, transportation
services, and taxpayers who have been given prior permission to use an
alternate method of apportioning income, are required by section
220.15, F.S., to apportion their
business income to Florida based upon a three factor formula. Business income
is adjusted federal income.
(b) The
three factor formula measures Florida's share of adjusted federal income by
ratios of the taxpayer's property, payroll, and sales in Florida to total
property, payroll, and sales located or occurring everywhere. The general
method of apportionment is modified for financial organizations; that is, what
is included in the sales factor and property factor is modified for financial
organizations.
(4) Zero
in Numerator. In the event any of the factors has a numerator which is zero,
the Florida fraction for such factor shall be zero and the apportionment
fraction shall be the sum of the weighted fractions for the other factors.
Example: Corporation W had no property in Florida but the
average value of its property everywhere in 1986 was $275, 000. We's payroll in
Florida in 1986 amounted to $75, 000 and the total payroll everywhere was $125,
000. W reported sales in Florida in 1986 of $5, 000, 000 and sales everywhere
of $8, 000, 000. The apportionment fraction is computed as follows:
Property:
|
$0 | |
|
______ |
x.25 = 0 |
|
$275, 000 | |
Payroll:
|
$75, 000 | |
|
________ |
x.25 =.150000 |
|
$125, 000 | |
Sales:
|
$5,000,000 | |
|
________ |
x.50 =.312500 |
|
$8,000,000 | |
Apportionment fraction =.462500
(5) All amounts related to nonbusiness
income, income related to ss. 78 and 862, I.R.C., (which are incorporated by
reference in rule 12C-1.0511, F.A.C.), and any
other income which is not included in the adjusted federal income must be
excluded from the apportionment factors.
(6) Consistency in reporting. If the taxpayer
departs from or modifies the manner of valuing property, or of excluding or
including property in the property factor; departs from or modifies the
treatment of compensation paid used in returns for prior years; or modifies the
basis for excluding or including gross receipts in the sales factor used in
returns for prior years, the taxpayer shall disclose in the return for the
current year the nature and extent of the modification.
(7) Consolidated Returns.
(a) Section
220.131(5),
F.S., requires members of an affiliated group which file a Florida consolidated
income tax return to use the general apportionment method prescribed by section
220.15, F.S., unless an
alternative method is determined to be more appropriate by the
Department.
(b) In determining
whether members of a consolidated group are considered to be doing business
within and without Florida, the members will be considered as one "person."
Therefore, if any member of the group meets the criteria set in subsection (1)
of this rule for doing business within and without Florida, the group will be
entitled to use the apportionment provisions provided by section
220.15, F.S.
(c)
1. A
single consolidated apportionment factor is constructed for the group. The
property, payroll, and sales factors include the property, payroll, and sales
for all members of the consolidated group. The apportionment factors do not
just include the members that are doing business in Florida. The consolidated
apportionment factor constructed is then multiplied by the consolidated
adjusted federal income to determine the adjusted federal income apportioned to
Florida.
2. The members of the
affiliated group may not determine separate apportionment factors to apply to
their portion of the consolidated adjusted federal income.
(d) Where all members of the consolidated
group are subject to a special apportionment formula provided in section
220.151, F.S., the consolidated
group will determine a single consolidated apportionment factor using the
special formula. For example, where the affiliated group is composed only of
insurance companies, the apportionment factor will be insurance premiums
written in Florida for all members of the consolidated group divided by
insurance premiums written everywhere for all members of the group. Cross
reference: rule 12C-1.0151, F.A.C.
(e) Where an affiliated group includes one or
more members which are transportation companies or insurance companies
permitted to use the single-factor formula under section
220.151, F.S., together with
members which are not permitted to use the Section
220.151, F.S., formula, it is
necessary to give effect to the single-factor formula for the transportation or
insurance companies when determining the apportionment factor which will be
used by the affiliated group. Cross reference: rule
12C-1.0151, F.A.C.
1. In such cases, the denominators of the
property, payroll, and sales factors for transportation or insurance companies
shall be determined according to the general provisions for determining the
denominators.
2. However, to
determine the apportionment factor under the three-factor formula, it is
necessary that the transportation or insurance company construct a numerator
for each of the factors, as follows:
a. The
numerator of the property factor shall be the denominator of the property
factor for the company determined under sections
220.15(2) and
(3), F.S., and rule
12C-1.0153, F.A.C., multiplied
by the percentage derived from the appropriate single-factor prescribed in
Section 220.151, F.S., for such
company.
b. The numerator of the
payroll factor shall be the denominator of the payroll factor for the company
determined under section
220.15(4),
F.S., and rule 12C-1.0154, F.A.C., multiplied
by the percentage derived from the appropriate single-factor prescribed in
section 220.151, F.S., for such
company.
c. The numerator of the
sales factor shall be the denominator of the sales factor for the company
determined under section
220.15(5),
F.S., and rule 12C-1.0155, F.A.C., multiplied
by the percentage derived from the appropriate single-factor prescribed in
section 220.151, F.S., for such
company.
3. The
numerators constructed for each of the factors under subparagraph 2., should be
added with the numerators of the other members of the affiliated group when
determining the apportionment factor which will be used by the affiliated
group.
4. The resulting factors
shall be weighted as specified in section
220.15(1),
F.S., to determine the apportionment percentage to be used by the affiliated
group in determining the portion of the affiliated group's business income
apportioned to Florida.
(8) Method for Financial Organizations. When
apportioning the income of a financial organization, a taxpayer will use the
three factor apportionment formula described in section
220.15, F.S. The payroll factor
is identical to that applied to every industry. The requirements are set forth
in section 220.15(4), F.S.
However, the sales and property factors of a financial organization are
calculated differently from those of a corporation selling real or tangible
personal property.
(9) Any
corporation whose only activity consists of holding stock of corporations,
bonds, or other securities; earning interest on accounts maintained in banks,
savings and loan associations, credit unions, mutual funds, trusts; and holding
mortgages on real and tangible personal property will be required to modify the
apportionment factors for property and sales as if the corporation were a
financial organization.
(10)
Partnerships. The amounts of the property, payroll, and sales of a partnership
are attributable to the partners or members of the joint venture. A corporation
that is a partner in a partnership must add its share of the property, payroll,
and sales to its own apportionment factors, regardless of whether the
partnerships are Florida partnerships. Form F-1065 is used in part to
distribute to each partner subject to the tax its share of the apportionment
factors of the partnership or joint venture.
(11) If it appears to the Executive Director,
or the Executive Director's designee, that any agreement, understanding, or
arrangement exists between any taxpayers, or between any taxpayer and any other
person, which causes any taxpayer's income subject to tax to be reflected
improperly, or inaccurately, the Executive Director, or the Executive
Director's designee, is authorized to adjust the sales, property, and payroll
factors to properly reflect the net income of such taxpayer.
(12) Cross references: rules
12C-1.0151, F.A.C. (special
industries - transportation and insurance); rule
12C-1.0152, F.A.C. (other
methods of apportionment); rule
12C-1.0153, F.A.C. (property
factor); rule 12C-1.0154, F.A.C. (payroll
factor); rule 12C-1.0155, F.A.C. (sales
factor).
Rulemaking Authority
213.06(1),
220.131(5),
220.51 FS. Law Implemented
220.12,
220.13,
220.131,
220.15,
220.151,
220.152,
220.44
FS.
New 10-20-72, Amended 1-19-73, 10-20-73, 5-18-74, 10-8-74,
8-23-76, 8-22-78, 12-18-83, Formerly 12C-1.15, Amended 12-21-88, 1-30-90,
4-8-92, 5-17-94, 3-18-96.
