R&D in Florida

R&D Tax Credits


The R&D tax credit can help a wide variety of businesses
offset and reduce their income tax liability, in addition to
providing many other benefits.

In Florida, a tax credit of 10% will be granted for the qualified research expenses incurred by a business enterprise exceeding the base amount. The Florida R&D tax credit available to a company is restricted to 50% of its tax liability, following the utilization of all other applicable tax credits. Nevertheless, If a business enterprise or its prior entity has not been operational for at least four consecutive taxable years prior to the current taxable year, the maximum allowable tax credit will be reduced by 25% for each taxable year during which the enterprise did not operate. This reduction in the maximum tax credit seeks to balance the tax incentives provided to newly established businesses with those established businesses that have been operating in the state for an extended period. Also, it is possible to carry forward excess credits for up to five years.

In order to obtain the Florida credit, it is imperative for the taxpayer to secure the federal R&D credit first. A certification letter from the Department of Economic Opportunity that verifies the corporation’s eligibility as a QTIB must be submitted alongside the application to apply for the tax credit. The amount of credit that can be claimed is limited to a maximum of $9 million. Once the state credit cap is attained, the allocation of credits will be proportionated and distributed to the corporations that have successfully submitted a valid application.

The state offers a tax credit that can be applied to eligible taxes on qualified research expenses incurred within its borders. To qualify for the Florida tax credit, the business must belong to a Target Industry, as defined by the state of Florida. Target Industries are those businesses operating in specific sectors, such as marine sciences, production, biotechnology, aeronautics industry, and nanotechnology, provided they satisfy the necessary requirements. This credit is exclusively available to corporations that are entitled to the federal credit for qualified research expenses. However, the credit amount that can be claimed by a taxpayer is subject to a cap of 50 percent of their income tax liability, once all other eligible credits have been applied. This means that the credit cannot exceed half of the total tax liability incurred by the taxpayer.

The Research and Development Tax Credit in Florida is limited to “business enterprises.” This classification includes C and S corporations but excludes partnerships and LLCs taxed as partnerships. The purpose of this exclusion is to ensure that only those business entities that have a significant impact on the state’s economy are incentivized to invest in research and development activities. By providing tax credits only to corporations that have a more substantial financial impact on the state, the government can promote innovation and economic growth without stretching its resources too thin. This targeted approach to incentivizing research and development activity helps to ensure that the state is using its resources in the most efficient and effective way possible.

R&D Tax Credits in Florida

Florida Statutes provide the Research and Development Tax Credit as an opportunity for business enterprises that have incurred qualified research expenses in the state, exceeding the base amount in a taxable year. To be eligible for this credit, the business must claim and be allowed a research credit for the same qualified research expenses incurred in the taxable year. In addition, the business must be a part of a Target Industry, as defined by the state of Florida. Target industries comprises businesses operating in specific industries, including production, biotechnology, aeronautics industry, marine sciences, nanotechnology provided they meet the required qualifications. This credit serves as an incentive for businesses to engage in research and development activities within the state, thereby promoting economic growth and innovation.

The credit is generally 5% of the amount by which current year qualified research expenses exceed the base amount, but may be limited to 50% of the company’s franchise tax liability for the current year.

What Goes into the Florida R&D Tax Credit as a Qualified Research Expense?​

The Florida research and development tax credit allows for businesses to claim a percentage of their qualifying research expenses. 

In order for an expense to qualify it must meet specific research criteria:

  1. Products, services, processes, or software must be new or improved in some way 
  2. Uncertainty must be eliminated as a result of the research 
  3. The research must be technological 
  4. Research must include experimentation processes of some nature

The types of expenses that are applicable to claim under the credit include the following:

Wages paid to employees who are directly involved in the performance of research and development activities within the state of Florida. This includes payments made to subcontractors involved in the performance of such activities.

Take Advantage of the
R&D Tax Credit with Source Advisors

Most states offer R&D tax credits as well with many of them being more lucrative than the federal credit. At Source Advisors, we can help assess your company’s federal R&D tax credit opportunity and also determine any state R&D tax credit availability. Our team of experienced CPAs, attorneys, engineers, and technology experts helps companies save money and create cash flow with R&D tax credits that can then help drive overall growth.