Florida Corporate Question

[Corduroy Frog]

From everything I understand, Florida has an exemption on F-1120 of $50,000. This is a terrific tax break. Furthermore, if you are out-of-state, the $50,000 exemption applies even after you reduce income for allocations. Not sure about this but this is what I understand from the instructions.

My question involves a Florida NOL. Is a deduction for a Florida NOL allowed in addition to the $50,000 exemption? This sounds almost too good to be true. An example to illustrate:

Shmucko, Inc. is a GA corporation with $200,000 in taxable income, 30% of which is allocable to Florida. In the previous year, Schmucko had a NOL of ($30,000), 20% allocable to Florida. From the previous year, Shmucko thus has a ($6000) NOL for Florida purposes.

Question: How is the ($6000) NOL applied to current year Florida taxable income??
From the facts given, the unadjusted Florida income is $60,000, with a $50,000 exemption.
1. Florida taxable income is the difference of $10,000, but allows the NOL AFTER the exemption, so $4,000 is taxable.
2. The NOL is less than the exemption, so the $6K NOL is lost.
3. Same as 2. except since NOL yields no benefit, the NOL can be rolled forward to the next year.
4. None of the above.

Please help...FL instructions are not clear.

[Matt Sova]

Schedule IV

Page 4 of the F-1120 is where you figure out the portion of the FL taxable income. Once you have that you put in the NOL C/O on line 4 of that schedule. This will give you the amount to carry over to Page 1 Line 7. From there you will subtract the $50,000 exemption.

So in your case the 60k is reduced by the 6k NOL CO on Schedule IV. The remaining 54k is on Page 1 and 50k is subtracted via the exemption. Results in 4k in FL taxable income.

If, however, the FL income was only 53k, you'd do the same subtracting 6k NOL and 47k would go on page 1. Then your exemption would be 47k resulting in no NOL carryover to next year.

[Corduroy Frog]

Thanks Matt

...and good to have you back on the forum.

Thanks for working through the example. Nothing gives a more quantifiable answer than to pose and answer a hypothetical situation.

I've finally come to grips with the FL-1120. Essentially, NOL or any other items are worked through prior to using the $50,000 deduction.
If the $50,000 exceeds what is taxable, the deduction is reduced to the taxable amount, and NOLs (and everything else) is water over the dam at that point.