Fla. Admin. Code R. 12C-1.0196
(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.
(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.
(e) Business enterprises that otherwise qualify and that have timely exercised their rights and challenged a Florida Department of Commerce 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 Florida Department of Commerce, 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.
(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.
(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 × .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).
Rulemaking Authority 213.06(1), 220.196(4), 220.51 FS. Law Implemented 220.196 FS. History‒New 3-12-14, Amended 1-11-16, 3-14-17.