For tax years beginning on or after January 1, 2012, the State of Florida allows a qualified "business enterprise" to claim a state R&D credit of 10% for qualified research expenses ("QREs") incurred in Florida (2012 Florida Statute §220.196).
Is there an application process?
Yes. An application process must be completed in order to be considered for the credit. Applications may be filed with the department on or after March 20th for the QREs incurred in the preceding calendar year.
The total annual R&D tax credits available for all taxpayers is limited to $9 million and is granted on a first come first serve basis (determined by the date the "completed applications are received").
So who can qualify for the credit?
First, the "business enterprise", must be a corporation as defined under section 220.03. Section 220.03(e) specifically provides partnerships of any type, including LLC’s taxed as a partnership for federal purposes, are not included. Second, the business enterprise must be in a "target industry business" as defined in section 288.106. A target industry business is generally one which has potential for future growth, is not subject to periodic layoffs or sensitive to seasonality, pays relatively high wages, the industry contributes to the state’s or an area’s economic base, and is expected to have a strong positive economic impact.
Specifically excluded from the "target industry business" definition are any retail industry activities; any electrical utility company; any phosphate or other solid mineral severance, mining or processing operations; oil & gas exploration or production; or businesses in the hotel and restaurant industry.
How much is the credit worth? How is it calculated?
The credit is equal to 10% of the excess current year QREs over the base amount (the average of the immediately prior 4 years QREs).
If a business enterprise, or its predecessor, has not been in existence for at least the immediately prior 4 taxable years, then the maximum credit is reduced by 25% per year for which the company did not exist.
Is the credit limited in how much can be used each year?
Yes. The credit amount which may be used in any one year is limited and may not exceed 50% of the business enterprise’s remaining net income tax liability after all other credits have been applied as provided under §220.02(8). Any unused credit is only allowed to be carried forward and claimed for up to 5 years.