R&D Tax Credits in Florida

It makes sense to claim the R&D credit in Florida because much of the work done on a Federal return applies to the Florida Return. So you can get two credits for essentially one tax workup. 

The prerequisites for claiming the R&D credit in Florida are the following:

• The company must be a corporation
• The company must have claimed and received a Federal R&D credit
• The company must be in a target industry

Target Industries

Fortunately, the descriptions of these target industries are broad and quite inclusive. The industries include: 

• Clean tech
• Life sciences
• Info tech
• Aviation and aerospace
• Homeland security and defense
• Financial and professional services
• Emerging technologies
• Other manufacturing industries

Claiming the Credit

The application must be filed by March 20th of the filing year. For example, for tax year 2014, applications must be filed by March 20, 2015. The application process can be competitive. 

Florida’s budget allocates $9 million per year for R&D credits. Once that budget is gone, then that is it. Credits are appointed in the order in which the applications were received, in other words, first come first served. Beginning April 1st, the state notifies the recipients of the amounts they may claim.  

Basics of Claiming the Credit: 

• The credit rate is 10% of the amount of qualified research expenses.
• The credit is applied against the Florida corporate income tax liability, but it cannot exceed 50% of that liability after all other credits and liabilities have been applied.
• To preclude a duplicate benefit, the amount of the credit must be added back to taxable income.
• For those occasions where the credits exceed 50% of the income tax liability and the cap takes effect, the excess can be carried forward for up to 5 years.
• Florida does not have a carry-back provision since the amount of credits allowed is legislated (capped at $9 million) & fully expended each year. No more credits are allowed after that cap figure is surpassed.  

Case Study

A software and data solutions company in Orlando spent 2013-2016 developing new products. It claimed the labor of its software engineers for all four years. The company had never claimed the credit prior to 2013. After 3 years of claiming the credit, the company was able to receive the 14% federal credit rate, rather than 6% credit rate. Although the company was able to claim the federal credit for all four years, it was only eligible for the state credit in 2016.

Summary of credits:

Florida R&D Tax Credit Forms

Florida Form F-1196 will be used to file the credit. The tax preparer  must also attach Federal Form 6765 and Federal Form 3800 to Florida Form 1120, the Florida Corporate Income Tax Return.