Florida Research and Development Tax Credit Summary
Florida offers Research and Development (R&D) Tax Credit for qualified activities within the state. Additionally, the credit is only available to certain target industries.
- 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 tax credit shall be 10 percent (10%) of the excess qualified research expenses over the base amount. However, the maximum tax credit for a business enterprise that has not been in existence for at least 4 taxable years immediately preceding the taxable year is reduced by 25% for each taxable year for which the business enterprise, or predecessor corporation that was a business enterprise, did not exist.
- A company must claim a federal credit in order to claim a Florida credit.
- The base amount is calculated as the average of the previous four tax years' QREs.
- The credit is limited to 50% of a company's tax liability after all other credits have been applied.
- For 2018 only, the credit amount is capped at $16.5 million for the entire state, reverting back to $9 million for future years. If the state credit cap is reached, the credits are allocated on a prorated basis.
- In order to qualify for the credit an application must be made on or after March 20th but before March 27th of the same year for QRES incurred in the prior calendar year.
- 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

Section 174 and R&E – Uncertainty and Questions
05/23/2023Section 174 and R&E – Uncertainty and Questions Thought Leadership by KBKG, 5/23/2023 Many businesses, small and large, rely on research and development to improve their offerings, compete with international markets, and increase profits. The implications of recent changes to section 174 and no movement from Congress have left many business owners unsure of how … Read More

IRC/Multistate Corporate Income Tax Comparison Guide
05/05/2023IRC/Multistate Corporate Income Tax Comparison Guide Friday, May 5, 2023 – Thought Leadership by R&D | KBKG Note: The data in the chart is only current as of the publish date of this blog. We expect this data to change. Research and experimental expenditures are essential to many businesses, especially in technology, manufacturing, and healthcare. … Read More

IRS Issues Revenue Ruling on the Deductibility of R&E Expenditures
04/18/2023IRS issues Revenue Ruling on the Deductibility of Research and Experimental Expenditures by Jonathan Tucker, Principal | KBKG, 4/18/2023 Revenue Ruling 58-74 No Longer Applicable – The IRS issued Revenue Ruling 2023-8, making obsolete Revenue Ruling 58-74 on a prospective basis as of July 31, 2023. This means that taxpayers can no longer file an amended … Read More

Mississippi Allows Businesses to Deduct Research or Experimental Expenditures
04/04/2023By Jon Tucker, Principal | Published Monday, April 3rd, 2023 On Monday, April 3, 2023, Mississippi passed H.B. 1733, a change in the Mississippi State Income Tax Law. The law allows businesses to elect to fully deduct research or experimental expenditures in the year they are incurred. It suggests changing the methods of depreciation used … Read More

American Innovation and Jobs Act Aims to Expand R&D Tax Credits and Address Confusion Over Section 174 Rules
03/23/2023American Innovation and Jobs Act Aims to Expand R&D Tax Credits and Address Confusion Over Section 174 Rules Thought Leadership by KBKG, 3/23/2023 On March 17, 2023, Senators Maggie Hassan (D-NH) and Todd Young (R-IN) reintroduced the American Innovation and Jobs Act (“The Act”). This act aims to expand the refundable R&D Credit and will extend … Read More

AICPA Pens Letter Urging Congress to Defer R&D Expense Capitalization (Sec 174) Provision Until 2026
02/22/2023On February 14, 2023, the American Institute of Certified Public Accountants (AICPA) sent a letter urging Congress to address expired and expiring tax provisions to avoid needless complexity and ambiguity. More specifically, the AICPA called on Congress to defer the Internal Revenue Code Section 174 amortization requirement for research and experimental expenditures until 2026. The … Read More

IRS Issued Additional Guidance on Section 174, Specified Research or Experimental Expenditures
12/15/2022This article has been updated from its original posting on Dec. 15, 2022. The Treasury Department and Internal Revenue Service (IRS) issued Revenue Procedure 2023-11 providing updated guidelines for accounting method changes for the treatment of specified research or experimental expenditures under Section 174 that changed with the Tax Cuts and Jobs Act of 2017 … Read More

KBKG Tax Insight: Tax Court Denies Construction Company R&D Credits
12/13/2022A summary judgment was recently granted when the government successfully argued that a construction company did not conduct qualified research activities during the tax year in question and was therefore not entitled to the $576,756 refund they were paid. In this case, the defendant was a shareholder of a civil construction company and the contested … Read More

An Introduction to the Reverse Plea to the U.S. Senate and House of Representatives to Extend Section 174
11/02/2022Over 150 U.S.-based businesses and trade associations recently issued a plea to the U.S. Senate and U.S. House of Representatives leadership urging Congress to extend Section 174 provisions allowing taxpayers to deduct 100% of Section 174 R&E expenditure in the year they were incurred. Historically, 100% of Section 174 R&E expenditures could be 1) deducted … Read More

This Month’s Webinars
11/01/2022Looking for CPE credit? We have several sessions available this month. Click the links below to register. If you have questions or need help registering, please email [email protected] Research & Development Tax Credits 11/1/2022 | 12:00 PM PT | 1 hour | 1 CPE credit This webinar will cover the fundamentals of the Research and … Read More