Current through Reg. 50, No. 187; September 24, 2024
(1)
(a)
1. A research and development tax credit
against Florida corporate income/franchise tax is provided in section
220.196, F.S., to a business
enterprise that claims a valid research credit against federal corporate income
tax for qualified research expenses as provided in section
41 of the Internal Revenue Code
(26 U.S.C. s.
41). The business enterprise must be a
corporation, as defined in section
220.03, F.S., and a qualified
target industry business, as defined in Section
288.106, F.S. However, only
qualified target industry businesses in the manufacturing, life sciences,
information technology, aviation and aerospace, homeland security and defense,
cloud information technology, marine sciences, materials science, and
nanotechnology industries may qualify for a research and development tax
credit.
2. Businesses that are
partnerships, limited liability companies taxed as partnerships, or disregarded
single member limited liability companies, are not corporations under section
220.03, F.S., and, therefore,
may not apply for an allocation of credit. However, each partner of a
partnership that is a corporation may apply separately for an allocation of
credit based on the corporation's separate research expenses, including
allocated partnership research expenses. For disregarded entities, the single
member that is a corporation must apply separately for an allocation of credit
based on the corporation's separate research expenses, including those of the
disregarded single member limited liability company. For purposes of
26 U.S.C. s.
41, the research expenses are apportioned
among the partners during the taxable year and are treated as paid or incurred
directly by the partners rather than by the partnership.
(b) "Qualified research expenses" include
research expenses qualifying for the credit under section
41 of the Internal Revenue Code
(26 U.S.C. s.
41) for in-house research expenses incurred
in Florida or contract research expenses incurred in Florida. The term
"qualified research expenses" does not include research conducted outside
Florida or research expenses that do not qualify for a credit under
26 U.S.C. s.
41.
(c)
1. The
credit is available annually and is based upon qualified research expenses in
Florida allowed under section
41 of the Internal Revenue Code
(26 U.S.C. s.
41).
2. Example: Tax credit applications approved
for the 2015 calendar year were based upon qualified research expenses incurred
during calendar year 2015 for tax years that began in
2015.
(2)
(a) To receive an annual allocation of the
annual funds available for granting tax credits to qualified target industry
businesses, an Allocation for Research and Development Tax Credit for Florida
Corporate Income/Franchise Tax (Form F-1196, incorporated by reference in rule
12C-1.051, F.A.C.) must be filed
with the Department between 12:00 a.m. (ET), March 20 and 11:59 p.m. (ET),
March 26 of that same year. The application is available on the Department's
website at www.floridarevenue.com/forms. Taxpayers required to file returns and
remit payments by electronic means pursuant to section
213.755, F.S., and rule chapter
12-24, F.A.C., must apply online using the Department's website. When the
completed application is submitted online, a confirmation number will be
provided to confirm receipt of the application.
(b) A business enterprise must attach a
letter from the Department of Economic Opportunity, certifying that the
business is an eligible target industry business, to its Allocation for
Research and Development Tax Credit for Florida Corporate Income/Franchise Tax
application. The Department of Economic Opportunity will provide a letter upon
receiving a request.
(c) Businesses
needing assistance with the Allocation for Research and Development Tax Credit
for Florida Corporate Income/Franchise Tax may call the Department at
(850)488-6800, Monday through Friday (excluding holidays). Persons with hearing
or speech impairments may call the Florida Relay Service at 1(800)955-8770
(Voice) and 1(800)955-8771 (TTY).
(d) If the total credits requested (computed
as the sum of the credit allocations requested from Form F-1196 for all
qualified applicants) exceed the annual credit cap, each qualified applicant
will be allocated credit on a prorated basis.
(e) Business enterprises that otherwise
qualify and that have timely exercised their rights and challenged a Department
of Economic Opportunity refusal to issue a certification letter may apply to
the Department for an allocation of credit pursuant to this paragraph, but must
include documentation of their protest. The Department will consider the credit
application and reserve an amount of credit for that applicant as if a
certification letter had been received.
1.
Should the petitioner prevail and receive a certification letter, the
Department will send the petitioner a letter indicating the amount of credit
allocated.
2. Should the petitioner
not prevail in its appeal, the Department will send the petitioner a letter to
confirm that because no certification letter was received, no credit will be
allocated to the petitioner.
3.
After all appeals related to that year's allocation have been resolved by the
Department of Economic Opportunity, the Department will recompute the original
allocation for all approved applicants, without any reserve for denied
applicants. To the extent a business enterprise's new allocation of credit is
at least $1 greater than the original allocation for that tax year, the
Department will provide a new letter stating the updated allocation
amount.
(f) The
Department will notify eligible taxpayers by letter of the amount of credit
that is allocated to them and the tax year in which the qualified target
industry business may claim the credit on its Florida corporate
income/franchise tax return.
(g)
1. Should the amount of credit requested by a
business enterprise be determined to be overstated, the percentage of the
original allocation provided by the Department will be applied to the lesser
amount of credit that should have been requested. For example, Taxpayer A
requested an allocation of credit for 2016 of $800, 000, and the Department
prorated the request and issued a letter allocating Taxpayer A $368, 000 in
research and development credit. Later, it was determined Taxpayer A should
have only applied for an allocation of $400, 000 in credit because its
qualifying Florida expenditures were less than originally computed. Taxpayer A
is only entitled to a credit allocation of $184, 000 ($400, 000 x $368,
000/$800, 000).
2. If the amount of
credit requested by a business enterprise is later determined to be
understated, the taxpayer may not claim more credit on its Florida corporate
income/franchise tax return than it was allocated by the Department because of
the annual cap on credit allocations. For example, Taxpayer Z requested an
allocation of credit for 2016 of $700, 000, and the Department prorated the
request and issued a letter allocating Taxpayer Z $322, 000 in research and
development tax credit. Later, Taxpayer Z determined its allocation request
should have been for $950, 000, because its qualifying Florida expenditures
were more than originally computed. Taxpayer Z is limited to a Florida research
and development credit of $322, 000 when it files its Florida corporate
income/franchise tax return.
(h) Correspondence from the Department to
credit applicants may be by electronic means.
(3) A federal research credit must be taken
on the federal return filed by the qualified target industry business for the
same tax year in which the Florida research and development credit is taken.
The amount taken as a Florida research and development credit must be added to
taxable income prior to computing the Florida corporate income/franchise tax
due. The Florida research and development credit is limited to fifty percent
(50%) of the Florida corporate income/franchise tax liability after all other
credits are applied in the order provided in section
220.02(8), F.S.
A copy of federal Form 6765 (Credit for Increasing Research Activities) and a
copy of federal Form 3800 (General Business Credit) must be attached to the
Florida corporate income/franchise tax return on which the Florida research and
development credit is taken. In the case of a corporate partner of a
partnership that has earned a federal credit for increasing research
activities, a copy of federal Form 1065, Schedule K-1 (Partner's Share of
Income, Deductions, Credits, etc.), and a copy of federal Form 3800 must be
attached to the Florida corporate income/franchise tax return on which the
Florida research and development credit is taken.
(4)
(a) Any
unused credits may be carried forward for up to five (5) tax years. Carryover
credits may be used in a subsequent year when the Florida corporate
income/franchise tax for such year exceeds the credit for such year after
applying the other credits and unused carryovers in the order provided in
section 220.02(8),
F.S.
(b) Example: A taxpayer is
allocated a Florida research and development credit of $30, 000 for its tax
year beginning in 2012 and all requirements of section
220.196, F.S., are met for the
taxpayer to earn the full $30, 000 allocation. Its Florida corporate
income/franchise tax liability after all other applicable credits are applied
is $50, 000. The $30, 000 Florida research and development credit that the
taxpayer is allocated for tax year 2012 is more than 50 percent of its tax
liability for tax year 2012. Therefore, the taxpayer is limited to a Florida
research and development credit of $25, 000 ($50, 000 x .50) for tax year 2012,
and the remaining $5, 000 of Florida research and development credit may be
carried forward for up to five tax years.
(5)
(a)
1. The Florida research and development tax
credit is equal to ten percent (10%) of the amount of qualified research
expenses incurred in Florida and allowed under section
41 of the Internal Revenue Code
(26 U.S.C. s.
41) that exceeds the base amount. The base
amount is defined as "the average of the qualified research expenses incurred
in Florida for the four tax years preceding the tax year for which the credit
is determined." The four taxable years used to compute the base amount must end
before the calendar year for which the qualified research expenses are
determined.
2. Example: A taxpayer
with a fiscal year end of June 30, 2013, that applies for the Florida research
and development credit based upon the qualified research expenses incurred
during calendar year 2012 will use the following taxable years for its base
amount: taxable years ended June 30, 2011; June 30, 2010; June 30, 2009; and
June 30, 2008.
(b)
1. Taxpayers that have not been in existence
for at least four tax years prior to the tax year in which the Florida research
and development credit is claimed must reduce the amount of the credit by
twenty-five percent (25%) for each year of the past four tax years that the
corporation did not exist.
2.
Example: A calendar year taxpayer is incorporated on January 1, 2009. The
taxpayer applies for the Florida research and development credit for its tax
year beginning January 1, 2012; its Florida qualified research expenses for
calendar year 2012 equal $250, 000. The taxpayer's Florida qualified research
expenses for its base amount are as follows:
Tax year 2008: $0, as Taxpayer did not exist.
Tax year 2009: $175, 000
Tax year 2010: $200, 000
Tax year 2011: $225, 000
The average of the Florida qualified research expenses for
the 4 taxable years preceding 2012 equals $150, 000 (($0 + $175, 000 + $200,
000 + $225, 000) ÷ 4). The excess Florida qualified research expenses
over the base amount equal $100, 000 ($250, 000 - $150, 000). The tentative
Florida research and development credit is $10, 000 ($100, 000 x .10). However,
since the taxpayer was not in existence for at least 4 taxable years
immediately preceding tax year 2012, the Florida research and development
credit is reduced by 25 percent for each taxable year the taxpayer did not
exist. Therefore, the taxpayer's Florida research and development credit for
tax year 2012 is reduced by 25 percent to $7, 500 ($10, 000 - $2,
500).
(6) Every taxpayer claiming a Florida
research and development credit must retain documentation that substantiates
and supports the credit, a copy of the letter received from the Department of
Economic Opportunity certifying that the taxpayer meets the requirements of
section 220.196(2)(a)3., F.S. (i.e., is an eligible qualified target industry
business), a copy of the letter received from the Department granting the
credit, and a schedule reconciling all credit carryovers until tax imposed by
chapter 220, F.S., may no longer be determined and assessed under section
95.091(3) or
220.23, F.S. Documentation to
substantiate and support the credit includes records or other evidence of the
amount of qualified Florida research expenses incurred for in-house research or
for contract research expenses, that those expenses qualified under
26 U.S.C. s.
41, and that the federal credit was
claimed.
(7) A taxpayer may not
sell or transfer a credit. However, if all of the assets of the business are
sold in a single transaction, the credit will transfer in the same manner that
the federal tax benefits transfer.
Rulemaking Authority
213.06(1),
220.196(4),
220.51 FS. Law Implemented
220.196
FS.
New 3-12-14, Amended 1-11-16,
3-14-17.
