1. (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.

   1. (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.

   2. (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.

   3. (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.
   4. (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.
   5. (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. (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. (3) General Method.

   1. (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.
   2. (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. (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:

1. (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.
2. (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.

3. (7) Consolidated Returns.

   1. (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.
   2. (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.

   3. (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.

   4. (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.

   5. (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.

4. (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.
5. (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.
6. (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.
7. (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.
8. (12) Cross references: Rule 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, 220.44 FS. History–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.