Current through Reg. 50, No. 187; September 24, 2024
(1) The Executive
Director or the Executive Director's designee is authorized to make adjustments
to clearly reflect income in order to arrive at a proper and accurate tax. The
Executive Director or the Executive Director's designee is authorized to
exercise such discretion when any agreement, understanding, arrangement, or
device, whether by inadvertence or design, improperly or inaccurately reflects
Florida income. Adjustments are authorized to be made, but are not limited to,
any item or items of income, loss, deduction, apportionment factor, or
exclusion and can be made to all or part of any such item or items to the
extent required to properly and accurately reflect income. Utilization of this
authority by the Executive Director or the Executive Director's designee shall
not be limited to circumstances where the improper or inaccurate reflection of
income results from efforts to reduce, avoid, or escape tax.
(2) Examples when such adjustments are
authorized to be made include, but are not limited to:
(a) Transactions at more or less than a fair
price, which include, but are not limited to:
1. Transfers of property.
2. Loans and advances.
3. Services.
4. Transfers or use of intangible
property.
(b)
Transactions, arrangements, or agreements with little or no business purpose
other than the reduction or avoidance of tax;
(c) Methods of accounting that fail to
properly and accurately reflect income such as the inconsistent treatment of
items of income, loss, or expense; or
(d) Acquisitions requiring substantial
capital investment in Florida resulting in substantial changes in
organizational structure and increases in the Florida apportionment fraction of
the newly acquired corporation or group of corporations due to increases in the
property and payroll factors.
(3)
(a) If
a taxpayer requests an adjustment under section
220.44, F.S., pursuant to
paragraph (2)(d), such request shall be made by the taxpayer through submission
of a request for such adjustment to the Executive Director or the Executive
Director's designee. Whether such adjustment shall be allowed and the amount of
any adjustment shall be determined through an analysis that takes into account
and balances the factors listed in this rule against the net tax effect of the
amount of the adjustment. The taxpayer shall provide information requested by
the Executive Director or the Executive Director's designee that shall be
utilized when making the analysis and the determination of whether and to what
extent an adjustment is appropriate under section
220.44, F.S.
(b) When an affiliated group of corporations
that is necessitated by regulatory and market requirements to create different
legal entities and has never elected to file a Florida consolidated return
acquires a separate group of affiliated corporations and:
1. The acquired group of corporations:
a. Is or will continue to be headquartered in
Florida;
b. Was properly filing
Florida consolidated returns prior to acquisition; and,
c. Has substantial debt prior to acquisition,
which is paid directly or indirectly by the purchaser as part of the purchase
price;
2. The purchaser
or its existing affiliates incurred substantial debt in order to effect the
acquisition; and
3. The taxpayer
demonstrates that substantial net operating losses will occur upon the filing
of separate Florida returns by members of the affiliated group, the Executive
Director or the Executive Director's designee is authorized to enter into an
agreement with the parent company of the affiliated group for an adjustment to
accelerate the deduction of current year net operating losses within the
affiliated group for a period not to exceed 5 years. The Executive Director or
the Executive Director's designee is authorized to impose other conditions so
that the adjustment is limited to the acceleration of current year net
operating losses. Under no circumstances shall a taxpayer be allowed to use
more tax preference items than it would have been entitled to use without the
acceleration effects of this rule. The tax effect of the acceleration of
current year net operating losses in each of the years under the agreement
shall not exceed the lesser of ten percent (10%) of the additional Florida
investments made in the first three tax years after the acquisition that
contribute to the increased payroll and property factor related to the acquired
companies, or $2 million.
(c) The agreement shall include provisions
for the recapture of any tax benefits resulting from such adjustments should
the conditions set forth in this rule or the agreement no longer be
met.
(d)
1. A taxpayer, any successor entities, or
other members of an affiliated group of corporations that includes the taxpayer
or any successor entities that have entered into an agreement with the
Department under this rule shall not submit a request to revise, amend, or
modify the existing agreement unless the taxpayer presents information showing
that unforeseen circumstances have arisen with respect to the transaction that
is the subject of the agreement.
2.
A taxpayer, any successor entities, or other members of an affiliated group of
corporations that includes the taxpayer or any successor entities that has
entered into an agreement with the Department under this rule shall not submit
a request for another agreement under this subsection for a period of 10 years
from the date of the existing agreement unless the taxpayer presents
information regarding a new transaction that involves a different acquired
corporation or group of corporations from those included in the existing
agreement.
(e) Should a
taxpayer disagree with a decision made by the Executive Director or the
Executive Director's designee on a request for an adjustment made pursuant to
this subsection, the taxpayer may request review of the decision by the
Governor and Cabinet acting as the head of the Department of
Revenue.
(4) A taxpayer
shall be required to submit information under oath or affirmation and shall
permit examination of books and records as necessary to allow the Executive
Director or the Executive Director's designee to determine whether and to what
extent an adjustment is appropriate.
Rulemaking Authority
213.06(1),
220.51 FS. Law Implemented
92.525,
213.35,
213.37,
213.755(2)(b),
220.21,
220.44
FS.
New 10-4-04.
