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.