Florida Revamps State R&D Tax Credit Process
Since the first federal legislation enacting research and development (R&D) tax credits in 1981, many U.S. states have begun taking advantage of the copious benefits afforded by a tax credit program. Although Florida first began an R&D tax credit program in 2013, the state’s unorthodox system of processing applicants, coupled with a comparatively low cap on credits, has left some taxpayers longing for change. Now the program has been significantly revised.
Prior to 2016, claimants applied for the tax credit beginning on March 20 of the given year at 8:00 a.m. local time. Applications were processed in the order they were submitted, leading to the inaugural year’s entire allocation of credits being distributed in around six hours. Two years later, the program granted all tax credits in under six minutes with only a fraction of those eligible receiving any credits. As such, Florida has deemed these issues as necessitating a great deal of change to the R&D tax credit program. Perhaps most significantly, the total credit cap has been raised from $9 million to $23 million, allowing a greater number of qualified applicants to receive credits.
These changes carry significant ramifications for those planning to apply in 2016. In order to take advantage of the new benefits offered by Florida’s revamped R&D tax credit system, applicants should pay close attention to certain factors and deadlines. Firstly, taxpayers must request a letter from the Department of Economic Opportunity certifying that the applicant is an eligible target industry business. This includes those businesses in the manufacturing, biological and marine sciences, general and cloud information technology, aviation and aerospace, homeland security and defense, and nanotechnology industries. Secondly, the application period has been extended to seven days, spanning March 20 to March 26. Finally, understand that while the total credit cap has been raised from $9 million to $23 million, if the total amount of credits for all applicants exceeds the new $23 million cap, the credits will be distributed on a prorated basis.
Credit availability is subject to legislative changes. Swanson Reed’s R&D tax professionals are available to discuss the R&D tax credit – contact us today if you would like to know if your company qualifies.