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Florida Research and Development Tax Credit Explained

Reduced income tax liability for your business can mean the difference between a good and a terrific year. Are you considering R&D tax credits? If so, the state of Florida can help. This article will discuss calculating your company’s potential Florida R&D tax credit.

For certain QREs incurred in Florida, the state offers an R&D tax credit. The credit equals 10% of the extra eligible research costs over a certain base amount.

How to Apply

You can claim the Florida research and development tax credit with Form F-1120. However, you must submit it online during the application window in March.

Only corporations, as defined by section 220.03 of the Florida Statutes, and QTIBs, as defined by section 288.106(2)(n) of the same statute, can apply. QTIBs that qualify include the following industries:

  • nanotechnology

  • materials science

  • marine sciences

  • cloud information technology

  • homeland security and defense

  • aviation and aerospace

  • IT

  • life sciences

  • manufacturing

When applying, you must also provide a letter from the Department of Economic Opportunity confirming that your business is a qualified QTIB.

Partnerships

Is your company a partnership, LLC taxed as a partnership, or a disregarded single-member LLC? If so, it’s not considered a corporation and is not eligible for a credit allocation. However, if the partner is a qualifying target industry firm, every corporate partner can submit a separate application for a portion of credit based on the corporation’s unique research costs, including allotted partnership research costs.

If the corporate owner is also a QTIB, the corporation that owns the single-member LLC may separately request an allocation of credit based on the separate corporate research costs. That applies to the disregarded single-member LLC as well. You can download all the forms you’ll need to fill out here.

How to Calculate an R&D Tax Credit in Florida

Option 1: 10% of the excess of Florida QREs above the base amount.

Option 2: Determine the base amount by taking the average of Florida QREs for the previous four taxable years.

Florida’s R&D Tax Credits: Summary

Corporations that fulfill the qualifying target industry business criterion as described in Section 288.106(2)(n) can apply for Florida R&D tax credit. However, the credit in Florida is restricted to 50% of a taxpayer’s tax liability.

There is also a $9 million maximum on the credit amount. That means the credits are distributed proportionately to the corporations that submitted a valid application if the state credit maximum is met.

For instance, 127 companies got the Florida research tax credit in 2019 (the 2020 application window). Each company received a portion of the available $9 million credit maximum, more precisely, around 8.8% of the credit amount calculated in their application. In total, they asked Florida for $101,741,648 in credits.

The taxpayer must first obtain a federal R&D credit to claim Florida’s credit. Along with an application, they must attach a letter from the Department of Economic Opportunity stating that it is an eligible QTIB.

FAQs (Frequently Asked Questions)

What kind of companies can apply in Florida?

Only C-Corporations.

What is the deadline for applying in Florida?

You must submit an online application between March 20 – March 26. However, dates can change by the year.

What data do I need to calculate credit in Florida?

Claim period QREs (Qualified R&D Expenses)

What information do I need to provide?

QREs for the past four years.

Is credit carryforward an option in Florida?

Yes, up to five years.

R&D Tax Credits by State: