Florida Senate - 2009 SB 768 By Senator Oelrich 14-00737-09 2009768__ 1 A bill to be entitled 2 An act relating to tax credits for research and 3 development; creating s. 220.194, F.S.; providing 4 legislative intent; providing definitions; authorizing 5 certain businesses that incur certain research and 6 development expenses in this state to receive a tax 7 credit against the corporate income tax; specifying 8 the amount of the tax credit; limiting the use of the 9 credit; permitting the carryover of unused tax credits 10 for a specified period; permitting the sale or 11 assignment of unused tax credits, subject to the 12 approval of the Department of Revenue; limiting the 13 total amounts of credits that may be granted and 14 approved annually to a specified amount; requiring an 15 application to receive the credit; authorizing the 16 Department of Revenue to adopt rules; amending s. 17 220.02, F.S.; providing that the tax credit for 18 research and development is credited against the 19 corporate income tax after other specified credits 20 have been exhausted; providing an effective date. 21 22 WHEREAS, research and development has become the underlying 23 source of wealth in the 21st century by generating ideas and 24 technologies that encourage productivity and economic growth, 25 and 26 WHEREAS, corporations generate the main body of growth 27 stimulating innovations, and 28 WHEREAS, research and development tax credits provide 29 incentives for corporate research and development beyond 30 expected levels, and 31 WHEREAS, research shows that the federal research and 32 development tax credit is an effective tool for stimulating 33 additional research and development, which in turn leads to 34 faster economic growth, and 35 WHEREAS, state research and development tax credit programs 36 are nearly as important to corporate research and development as 37 the federal research and development tax credit program, and 38 WHEREAS, the typical state research and development tax 39 credit program increases general, company-funded research and 40 development within a state, often enhancing the state's 41 competitiveness by enabling a state to draw research and 42 development activity away from other states, and 43 WHEREAS, this state needs a state research and development 44 tax credit program to ensure economic competition, and 45 WHEREAS, more than half of the states of this nation have a 46 research and development tax credit program, and 47 WHEREAS, Florida lags behind the rest of the nation in 48 important corporate research and development activities because 49 the state does not have a research and development tax credit, 50 and 51 WHEREAS, the Legislature must create a research and 52 development tax credit in order to encourage corporate research 53 and development activity within this state, level the playing 54 field with the state's regional and national economic 55 competitors, support the state's vibrant innovation economy, and 56 attract high-wage, professional research jobs to this state, 57 NOW, THEREFORE, 58 59 Be It Enacted by the Legislature of the State of Florida: 60 61 Section 1. Section 220.194, Florida Statutes, is created to 62 read: 63 220.194 Research and development tax credit.— 64 (1) DEFINITIONS.—As used in this section, the term: 65 (a) “Base amount” means the average of the business 66 enterprise's qualified research expenses in this state allowed 67 under 26 U.S.C. s. 41 for the 4 taxable years preceding the 68 taxable year for which the credit is being determined. The 69 qualified research expenses taken into account in computing the 70 base amount must be determined on a basis consistent with the 71 determination of qualified research expenses for the credit 72 year. 73 (b) “Base period” means the 4 taxable years preceding the 74 taxable year for which the credit is being determined. 75 (c) “Business enterprise” means any corporation, as defined 76 in s. 220.03(1)(e), which is engaged in the manufacturing, 77 transportation and warehousing, telecommunications, tourism, or 78 research and development industries in this state, including 79 retail businesses. 80 (d) “Manufacturing industry” means corporations clearly 81 engaged in manufacture which, during all years of the base 82 period reports, list the principal business activity codes for 83 manufacturing on their federal income tax returns. 84 (e) “Qualified research expenses” means research expenses 85 qualifying for the credit under 26 U.S.C. s. 41 for in-house 86 research expenses incurred in this state or contract research 87 expenses incurred in this state. The term does not include 88 research conducted outside this state, research that is excluded 89 under 26 U.S.C. s. 41, or research conducted by a business 90 enterprise which is not within its principal business activity. 91 (f) “Research and development industry” means corporations 92 clearly engaged in the research and development business which, 93 during all years of the base period reports, list the principal 94 business activity codes for scientific research and development 95 services on their federal income tax returns. 96 (g) “Retail industry” means corporations clearly engaged in 97 the retail business which, during all years of the base period 98 reports, list the principal business activity codes for retail 99 trade on their federal income tax returns. 100 (h) “Telecommunications industry” means corporations 101 clearly engaged in the telecommunications business which, during 102 all years of the base period reports, list the principal 103 business activity codes for telecommunications on their federal 104 income tax returns. 105 (i) “Tourism industry” means corporations clearly engaged 106 in the tourism business which, during all years of the base 107 period reports, list the principal business activity codes for 108 arts, entertainment, and recreation or accommodations on their 109 federal income tax returns. 110 (j) “Transportation and warehousing industry” means 111 corporations clearly engaged in the transportation or 112 warehousing business which, during all years of the base period 113 reports, list the principal business activity codes for 114 transportation and warehousing on their federal income tax 115 returns. 116 (2) TAX CREDIT.—Subject to the limitations contained in 117 paragraph (e), a business enterprise is eligible for a credit 118 against the tax imposed by this chapter if such business 119 enterprise has qualified research expenses in this state in the 120 calendar year exceeding the base amount and, for the same 121 calendar year, claims and is allowed a research credit for such 122 qualified research expenses under 26 U.S.C. s. 41. 123 (a) The tax credit shall be 10 percent of the excess 124 qualified research expenses over the base amount. However, the 125 maximum tax credit for a business enterprise, including any 126 predecessor corporation that was a business enterprise, which 127 has not been in existence for the entire base period, is reduced 128 by 25 percent for each taxable year for which the corporation 129 did not exist during the base period. 130 (b) The credit taken in any single tax year may not exceed 131 50 percent of the business enterprise's remaining net income tax 132 liability under this chapter after all other credits have been 133 applied under s. 220.02(8). 134 (c) Any unused credit authorized pursuant to this section 135 may be carried forward and claimed by the taxpayer for up to 5 136 years following the close of the taxable year in which the 137 qualified research expenses are incurred. 138 (d) Any unused credit authorized under this section may be 139 assigned or sold to another business enterprise, if a claim for 140 the allowance has not been filed within 1 calendar year 141 following the date on which the department approved the credit. 142 The business enterprise selling the tax credit and the purchaser 143 or assignee must file an application, waivers of 144 confidentiality, and affidavits to transfer the credit on a form 145 provided by the department and obtain the prior approval of the 146 department for the transfer. The department may not unreasonably 147 withhold such approval. The purchaser or assignee must use the 148 tax credit in the taxable year in which the purchase or 149 assignment of the credit is made. The transfer or purchase of 150 any amount of the tax credit may not be exchanged for less than 151 75 percent of the credit's value. 152 (e) The combined total amount of tax credits that may be 153 granted and approved to all business enterprises under this 154 section during any calendar year is $15 million. Applications 155 may be filed with the department on or after March 20 for 156 qualified research expenses incurred within the preceding 157 calendar year, and credits shall be granted in the order in 158 which completed applications are received. 159 (3) RULES.—The department may adopt rules to administer 160 this section, including, but not limited to, rules prescribing 161 forms, application procedures and dates, and notification or 162 other procedures for the sale or assignment of a credit. The 163 department may establish guidelines for making an affirmative 164 showing of qualification for a credit and any evidence needed to 165 substantiate a claim for credit under this section. 166 Section 2. Subsection (8) of section 220.02, Florida 167 Statutes, is amended to read: 168 220.02 Legislative intent.— 169 (8) It is the intent of the Legislature that credits 170 against either the corporate income tax or the franchise tax be 171 applied in the following order: those enumerated in s. 631.828, 172 those enumerated in s. 220.191, those enumerated in s. 220.181, 173 those enumerated in s. 220.183, those enumerated in s. 220.182, 174 those enumerated in s. 220.1895, those enumerated in s. 221.02, 175 those enumerated in s. 220.184, those enumerated in s. 220.186, 176 those enumerated in s. 220.1845, those enumerated in s. 220.19, 177 those enumerated in s. 220.185, those enumerated in s. 220.187, 178 those enumerated in s. 220.192,andthose enumerated in s. 179 220.193, and those enumerated in s. 220.194. 180 Section 3. This act shall take effect July 1, 2009, and is 181 effective for tax years beginning on or after January 1, 2010.