Sunny Disposition, R&D in the Sunshine State

Sunny Disposition, R&D in the Sunshine State

Further reform to Florida’s R&D tax credit is met with warm welcome following the challenges faced in claiming the credit in previous years. New legislation, which became effective on July 1, 2015, raises the state’s annual research and development credit limit to $23 million. Applicants for the 2015 tax year may begin making their submissions on March 20, 2016, with the application window closing on March 27, 2016.

Prior to these changes, Florida capped the R&D credit at $9 million, meaning the total amount of tax credits granted to all business enterprises in the state could not exceed $9 million. Furthermore, the first-come-first-serve online application process meant that once the $9 million cap was reached, the application window was closed. In 2014 the cap was reached within six minutes of the application being made available, leaving numerous Florida applications unconsidered, regardless of merit. (See here for original article.)

In addition to the significant increase in credit limit, Florida’s new R&D application structure will allow for credits to be allocated on a prorated basis, should the total for all applicants exceed the allotted $23 million. To participate in the state’s R&D credit program a corporation must claim and be allowed the federal credit as described under IRC § 41. The corporation must also meet the definition of a target industry business as determined by § 288.106 of the Florida Statutes.

In coming years, research and development programs will only grow in importance as a stimulant to economic growth and global competitiveness. Florida’s acknowledgement of the R&D credit’s role in the private sector and national and global economies reflects the overarching support for the credit on both state and federal levels. Continued improvements to the R&D credit, including making the federal credit permanent, are essential to encouraging businesses to invest in innovations in order to maximize productivity. Corporate taxpayers may find it helpful to have an R&D expert on their team to help them navigate the complicated tax landscape.

More information regarding the Florida tax credit and its requirements may be found here: http://dor.myflorida.com/dor/tips/tip15c01-05.html.

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