FIRST DISTRICT COURT OF APPEAL

STATE OF FLORIDA

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No. 1D2022-2096

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FLORIDA DEPARTMENT OF 

REVENUE,

Appellant,

v.

VERIZON COMMUNICATIONS INC.

& AFFILIATES,

Appellee.

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On appeal from the Circuit Court for Leon County.

J. Layne Smith, Judge.

February 28, 2024

OSTERHAUS, C.J.

The Florida Department of Revenue appeals the circuit court’s 

entry of partial summary judgment in favor of Appellee Verizon 

Communications Inc. The Department argues that the circuit 

court erred in its interpretation of section 220.13(1)(b)1., Florida 

Statutes, affecting the calculation of certain income tax deductions 

in Verizon’s favor. We agree with the circuit court and affirm.
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I.

This dispute deals with complex corporate income tax issues. 

In 1971, the Florida Legislature added Chapter 220 to the Florida 

Statutes imposing a corporate income tax in Florida. Ch. 71-984, 

Laws of Fla. This income tax was designed to heavily mirror the 

federal income tax laws. See § 220.02(3), Fla. Stat. (1972); Dep’t of

Revenue v. Am. Tel. & Tel. Co., 431 So. 2d 1025, 1027 (Fla. 1st DCA 

1983) (chapter 220 “enabl[es] Florida taxpayers to ‘piggyback’ on 

the provisions of the IRC”). Simply described, Florida calculates 

corporate income taxes beginning with a company’s federal income 

and makes certain adjustments to determine the “adjusted federal 

income.” See §§ 220.12-.13, Fla. Stat. The taxpayer and the 

Department then determine what portion of this adjusted federal 

income is taxable as income earned from activity in Florida. See § 

220.15, Fla. Stat.

Sometimes, a company incurs more losses in a given year than 

its operating income. These losses are known as net operating 

losses (NOLs).1 These operating losses (whether federal or Florida 

specific) may be used to lower the amount of tax owed on certain 

years’ tax returns. See 26 U.S.C. § 172; § 220.13(1)(b)1.a., Fla. Stat.

Relevant in this case, federal and state law treat NOLs a little 

differently when a major company acquires smaller companies 

that have high losses and thus a high amount of NOLs. Both 

federal and Florida law limit the amount of NOLs the acquiring 

company can deduct from its tax return each year. And this case 

involves a disagreement as to how the Florida-specific NOL 

limitation should be calculated. 

II.

This case arose from the Department’s audit of Verizon’s 

2011-2013 corporate income tax returns. In 2017, the Department 

issued Verizon a Notice of Proposed Assessment indicating that, 

based on its audit, Verizon was due a refund for certain taxes over1 A net operating loss is formally defined as the excess of 

deductions allowed under the Internal Revenue Code over gross 

income. 26 U.S.C. § 172.
3

paid between 2005 and 2013. Verizon agreed it was due a refund, 

but disputed the amount it was owed. It filed a protest raising two 

issues. This appeal involves one of those issues, the Department’s 

method for calculating NOL limitations for state tax purposes.

Relevant background facts here are that Verizon acquired 

MCI, Inc. in 2006 and Terremark Worldwide, Inc. in 2011. The 

parties stipulate that when Verizon acquired MCI, MCI had 

accumulated over $15 billion in federal NOLs and $267 million in 

Florida NOLs. When Terremark was acquired, it had accumulated 

over $308 million in federal NOLs and over $238 million in Florida 

NOLs. The parties agreed that the annual deduction limit for 

using these companies’ NOLs each year on Verizon’s federal tax 

returns is $241 million for MCI and about $128 million for 

Terremark. They do not agree, however, on the annual deduction 

limit for state tax purposes. The Department rejected Verizon’s 

request to utilize the same deduction limit as the federal amount 

for state tax purposes in favor of a Department-created 

methodology for calculating NOL deduction limits.

Verizon filed a complaint in circuit court on the issue. It 

contended that the proper reading of section 220.13(1)(b)1., Florida 

Statutes, is that the Florida NOL limitation is the equivalent 

amount of the federal NOL limitation. The Department countered 

that limiting language within the statute restricts the Florida 

NOL deduction limitation under a proportional calculation 

methodology that it created. The circuit court agreed with 

Verizon’s interpretation and the Department now appeals.

III.

“A trial court’s order granting final summary judgment is 

reviewed de novo.” Crapo v. Univ. Cove Partners, Ltd., 298 So. 3d 

697, 700 (Fla. 1st DCA 2020). “An issue of statutory interpretation 

is also reviewed de novo.” Id. (citing Coastal Creek Condo. Ass’n v. 

Fla. Tr. Servs. LLC, 275 So. 3d 836, 838 (Fla. 1st DCA 2019)). This 

court also reviews de novo an administrative agency’s 

interpretation of a statute. Art. V, § 21, Fla. Const.
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The parties dispute the interpretation of § 220.13(1)(b)1. as to 

how deductions for net operating loss are determined under 

Florida law. This section reads in relevant part:

1. There shall be subtracted from such taxable income:

a. The net operating loss deduction allowable for 

federal income tax purposes under s. 172 of the 

Internal Revenue Code for the taxable year, . . .

However, a net operating loss . . . shall never be carried 

back as a deduction to a prior taxable year, but all 

deductions attributable to such losses shall be deemed net 

operating loss carryovers . . . and treated in the same 

manner, to the same extent, and for the same time periods 

as are prescribed for such carryovers in ss. 172 . . . of the 

Internal Revenue Code.

§ 220.13(1)(b)1., Fla. Stat. (2013). 

“In interpreting the statutes, we follow the ‘supremacy-of-text 

principle’—namely, the principle that ‘[t]he words of a governing 

text are of paramount concern, and what they convey, in their 

context, is what the text means.’” Dozier v. Duval Cnty. Sch. Bd., 

312 So. 3d 187, 192 (Fla. 1st DCA 2021) (quoting Ham v. Portfolio 

Recovery Assocs., LLC, 308 So. 3d 942, 946 (Fla. 2020)). “A statute 

that is clear and unambiguous on its face requires no construction 

and should be applied in a manner consistent with its plain 

meaning.” Id. (quoting Geico Indem. Co. v. Accident & Inj. Clinic, 

Inc., 290 So. 3d 980, 983 (Fla. 5th DCA 2019)). Additionally, 

“judges must ‘exhaust all the textual and structural clues’ that 

bear on the meaning of a disputed text.” Conage v. United States, 

346 So. 3d 594, 598 (Fla. 2022) (quoting Alachua Cnty. v. Watson, 

333 So. 3d 162, 169 (Fla. 2022)).

Verizon’s argument relies upon a straight-forward reading of 

the statute and we agree with it. Section 220.13(1)(b)1. establishes 

a NOL-deduction methodology that subtracts from taxable income 

“[t]he net operating loss deduction allowable for federal income tax 

purposes under s. 172 of the Internal Revenue Code for the taxable 

year. . . . treated in the same manner, to the same extent, and for 
5

the same time periods as are prescribed for such carryovers.” Since 

the annual NOL deduction “allowable for federal income tax 

purposes” is $241 million in the case of the MCI NOLs, so is the 

deduction limit corresponding to these NOLs for state tax 

purposes. The Department’s rule confirms the mirror federal and 

state deduction amounts:

Florida piggybacks the federal provisions in s. 382, I.R.C., 

which is incorporated by reference in Rule 12C-1.0511, 

F.A.C., concerning the limitation on the use of any NOL 

carryforward of an acquired corporation. In computing 

the Florida corporate income tax, a deduction for the NOL 

carryover will be allowed to the extent of the amount 

allowed for federal purposes, provided that the deduction 

does not exceed the total amount of the Florida NOL 

carryover available in such taxable year.

Fla. Admin. Code R. 12C-1.013(15)(j) (emphasis added). And so,

both the statute’s text and the rule support the circuit court’s 

conclusion that the annual NOL deduction limit amount for state 

tax purposes is the same amount as under federal law.

Conversely, we decline the Department’s invitation to accept 

its more attenuated interpretation of § 220.13(1)(b)1. that annual 

NOL deductions must utilize a calculation that divides the federal 

limitation by the total federal NOLs for a company, then multiplies

this number by the total Florida NOLs for that company. The 

upshot here is that the Department would limit Verizon’s 

deduction in the case of the MCI NOLs, for example, to about $4 

million annually. Under this approach, similar to the federal tax 

outcome, Verizon would not be able to obtain the full value of its 

MCI-related NOL deductions for state tax purposes before the 

twenty-year carryover period ends.2 The Department supports its 

2 The Department makes much of the difference between the 

parties’ methodologies by highlighting the limits of Verizon’s MCIrelated NOL usage for federal tax purposes. With an annual 

federal deduction limit for MCI’s NOLs of $241 million per year, it 

would take Verizon approximately 65 years to deduct the full 

amount of the MCI NOLs. And given the twenty-year legal limit 

on carryovers, Verizon wouldn’t come close to receiving the full 
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argument with the statutory language requiring that NOL 

carryovers be “treated in the same manner, to the same extent, 

and for the same time periods.” § 220.13(1)(b)1., Fla. Stat. But we 

read this language together with the rest of the provision to 

require and reinforce our conclusion that, except for the express 

rejection of carrybacks, Florida’s annual NOL deduction limit 

tracks the amount of the federal limit and can be similarly 

deducted each year. 

III.

For the foregoing reasons, the judgment of the circuit court is 

AFFIRMED.

KELSEY and M.K. THOMAS, JJ., concur.

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Not final until disposition of any timely and 

authorized motion under Fla. R. App. P. 9.330 or 

9.331.

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Ashley Moody, Attorney General, and Timothy E. Dennis, Chief 

Assistant Attorney General, and Clifton Cox, Office of the Attorney 

General, Revenue Litigation Bureau, Tallahassee, for Appellant.

Michael J. Bowen and Peter O. Larsen of Akerman LLP, 

Jacksonville; and Kristen M. Fiore of Akerman LLP, Tallahassee,

for Appellee.

value of these deductions on its federal taxes. Along the lines of 

this federal outcome, the Department advocates a proportional 

formula so that Verizon would similarly not be able to obtain the 

full value of its MCI-related NOL deductions for state tax 

purposes.