Florida Research and Development Tax Credit Summary

Florida offers a Research and Development (R&D) Tax Credit for qualified activities within the state, as long as the corporation qualifies for and claims the federal R&D credit under IRC §41. Only corporations in the following targeted industries may claim the Florida research credit:

    • Life Sciences
    • Information Technology
    • Aviation/Aerospace
    • Homeland Security/Defense
    • Cloud Information Technology
    • Marine Sciences
    • Materials Science
    • Nanotechnology Industries
    • Manufacturing
  • Credit is limited to C Corporations only.
  • "Qualified research expenses" (QREs) have the same meaning as in IRC § 41, except that such expenses must be for research conducted within Florida.
  • The Florida R&D credit is equal to 10% of the QREs in Florida that exceed a base amount. The base amount is the average of the QREs in Florida for the 4 tax years before the tax year for which the credit is being calculated.
  • For a corporation that has not been in existence for at least 4 years before it claims the credit, the credit is reduced by 25% for each year that the corporation did not exist.
  • A company must claim a federal credit in order to claim a Florida credit.
  • The credit is limited to 50% of a corporation’s net income tax liability after all other credits have been applied in the priority order set by Florida law.
  • The annual credit cap for all taxpayers is $9 million. If the state credit cap is reached, the credits are allocated to each qualified applicant on a prorated basis.
  • To claim the Florida research credit, corporations must apply for an allocation of the Florida R&D credit. The application form must be completed and submitted electronically to the Florida Department of Revenue (DOR) between March 20 and March 26 each calendar year the credit is available. The application must include a letter from the Department of Commerce (DOC) certifying that the corporation is an eligible qualified target industry business.
  • Excess credits may be carried forward up to 5 years.
  • A company must be certified by the Department of Economic Opportunity as a qualified target business industry, including:
    • Life Sciences
    • Information Technology
    • Aviation/Aerospace
    • Homeland Security/Defense
    • Emerging Technologies
    • Cloud Information Technology
    • Marine Sciences
    • Materials Science
    •  Nanotechnology Industries
    • Manufacturing

Florida R&D Tax Credit Case Study

An Orlando company designs and develops component parts for the aviation industry, a qualified target business industry for Florida's R&D tax credit. The Company started R&D in 2017 and claims R&D credits each year for the development activities of its engineers. The company submits its application and is awarded an R&D credit for the 2021 tax year. Prior year Florida QREs for 2017, 2018, 2019, and 2020 are as follows: $600,000, $700,000, $800,000, and $900,000, respectively. The Federal credit calculated below is utilizing the Alternative Simplified Method.

FEDERAL
FLORIDA
Year
Total QREs
Credit
Total QREs
Credit
2021
$1,000,000
$84,000
$1,000,000
$25,000


You can read more about this Florida tax credit case study here.

Four-Part Test

Qualified research activities are defined by the four-part test outlined below

  • Technological in Nature
    Activities must fundamentally rely on the principles of physical or biological science, engineering, or computer science.

  • Permitted Purpose
    Activities must be performed in an attempt to improve the functionality, performance, reliability, or quality of a new or existing business component.

  • Eliminate Uncertainty
    Activities intended to discover information that could eliminate technical uncertainty concerning the development or improvement of a product.

  • Experimentation
    All activities must include a process of experimentation including testing, modeling, simulating, and systematic trial and error.

Research and Development Tax Insights

Have Questions? We're here to help.

Our team of experts are well-versed in their respective fields and are able to answer most any question.

CONTACT US