In a move that is largely unprecedented in the state, the Florida Department of Revenue (the Department) permitted a taxpayer which had been filing as part of a consolidated group to discontinue filing consolidated returns. If your business is already a consolidated filer in Florida or is about to become one, Technical Assistance Advisement 13C1-008 (the Advisement) is perhaps the best non-binding precedent for ceasing to file as a consolidated group.
Under Florida Statutes § 220.131(3), once a consolidated return is filed for any taxable year, the affiliated group of taxpayers is required to file consolidated returns for all subsequent tax years. This law applies so long as the taxpayers remain members of such affiliated group or, in the case of a group having members not subject to the Florida tax code, so long as a consolidated return is filed by such group for federal tax purpose, unless the Director of the Department otherwise consents to the filing of separate returns.
Under Florida Administrative Code Rule 12C-1.0131(3), the first step to discontinue the requirement of filing a consolidated return (unless qualified to do so as discussed above pursuant to Florida Statutes § 220.131(3)) is to file an application with the Executive Director of the Department or his or her designee (the Director). The Director is authorized to grant permission to discontinue filing a consolidated return if the net result of all amendments to the Florida Income Tax Code or the Internal Revenue Code or regulations has a substantial adverse effect on the consolidated tax liability of the group for such year relative to what the liability would otherwise be for the members of the consolidated group if they were able to file separate returns. Additionally, the Director may find good cause for ceasing to require a group to file as a consolidated group if a change in law or circumstances exist, including changes not affecting income tax liability.
In the Advisement, the taxpayer showed the Director that a change in circumstances existed due to the continued growth of the consolidated group since the time the group initially filed a consolidated return. It was not disclosed in the Advisement what kind of business(es) the taxpayer was in, what business(es) each member of the consolidated group conducted or what growth occurred over which period. However, it is clear that the taxpayer showed the following:
- Growth in total employees;
- Growth in total income;
- Growth in total assets; and
- The addition of new services to the taxpayer’s business, including online and mobile services.
As a result, the Director found that the taxpayer showed a sufficient basis for deconsolidation. If you believe your business could benefit from deconsolidating, please feel free to call us to discuss this potential option.