Everything You Need To Know About Florida R&D Tax Credit
The Florida state allows a qualified business to claim a state R&D credit of 10% for “Qualified Research Expenses” (QREs) incurred in Florida. The R&D tax credit for Florida is an annual tax, beginning on or after 1st January 2012. It is applicable based on qualified research expenses in Florida permissible under the internal revenue code.
We all know how crucial every saved dollar can be, especially during uncertain times. R&D Tax Credits in Florida can cut down your organization’s income tax liabilities. Above all, it helps you save thousands of dollars.
R&D Tax Credit is one of the incentives offered to businesses by the State of Florida. You may be eligible for this incentive if your business engages in research and development in Florida. The state spends up to $9 million to cover up qualified research expenses incurred during the last year. In 2020, around 127 businesses utilized and benefited from the Florida Tax credit program.
In this article, we summarize the Florida Research and Development Tax Credit and explain how to claim for it.
Eligibility for Florida R&D Tax Credit
Section 288.106 defines the qualified target industry. Your business must be on this list of industries. In addition, your business must be eligible for research credits against federal research credits under Section 41 of the internal revenue code.
The following industries are eligible for Florida R&D Tax Credit (The Florida Department of Revenue or DOR has set these parameters):
- Homeland defense and security
- Cloud information technology
- Nanotechnology industries
- Aviation and aerospace
- Information technology
- Marine sciences
- Materials science
- Life sciences
The companies must perform research to receive credit for the taxable year against federal income tax. This will make them eligible to utilize Florida R&D tax credit. The Department of Economic Opportunity decides the eligible companies from the target industries. The final decisions take place in consultation with Enterprise Florida. Companies may fill the forms on or after 20th March for the QREs received in the preceding calendar year.
The Florida State Statute 220.02 doesn’t recognize limited liability companies and partnerships as corporations. However, you can still claim Florida Tax Credit on your corporate partner’s behalf. It is always wise to count on a reputable accounting firm during such processes to avoid costly mistakes.
How Much Florida R&D Tax Credit You Can Claim
Post the approval, “companies can claim 10 percent of the number of qualified research expenses defined under section 41, IRC, and incurred in Florida, which exceeds the base amount, defined as the average of the qualified research expenses incurred in Florida for the four tax years before the calendar year for which the credit is determined.”
Tip: keep your prior tax information handy to find out the base amount.
Note that the Florida Tax Credit cannot go above 50% of your total corporate income tax liability after total credits are applied. If you are receiving Florida Tax Credit more than what you are allowed to claim, the exceeded credit will carry forward for 5 years.
Credits are prorated among qualified businesses of the annual cap of $9 million for Florida R&D Tax Credit is exceeded.
How to Apply for Florida R&D Tax Credit
Start the application process early as it gives you sufficient time to work on the necessary materials. Businesses require a clearance certificate from the Florida Department of Economic Opportunity (DEO) to confirm it belongs to a qualified target industry. You can download the form online to request the clearance certificate from the DEO.
The validity of DEO certification is 3 years. In other words, if you have a DEO certificate from 2019, you can use it for R&D Tax Credit claims in 2022 as well. Allocation of funds won’t be available if you do not have this certificate. However, there are a few exceptions that can allow you to apply for a Florida tax credit.
Once you successfully receive the DEO certificate, you can apply for the R&D tax credit in Florida when the window opens. You will need the following information and documents to make your claim (ensure you have that with you when applying).
- Brief description of your products, services, and other significant activities
- Accurate NAICS code (find it here: https://www.naics.com/search/)
- Florida R&D tax credit application form
- Qualified target industry information
- State and IRS tax forms
- Your previous tax returns
Generally, the R&D Tax Credit applications for expenses incurred this year will open in March next year. For instance, you can apply for a Florida tax credit for the expenses incurred in 2021 in March 2022.
Tip: Do not miss out on the deadlines as they do not accept late applications.
Trust Only The Best Accountants for Florida R&D Tax Credit
Even if you are fully careful, the chances of mistakes in R&D tax credit applications are more. In most cases, the applicants underestimate or overestimate the research expenses. Some applicants also fill in incorrect information or wrong NAICS code. These actions may lead to costly mistakes or complete rejection of an application.
Therefore, you should always get help from certified accountants and Florida R&D Tax Credit consultants like us. We have the right knowledge and experience required for simplifying your tax application process.
We are your #1 solution for all your Florida R&D Tax Credit concerns. Fill in the given online form & we will contact you as soon as possible. You can also call us at (800) 548 – 6098 to schedule your FREE assessment.