Florida Senate - 2011 SB 264 By Senator Ring 32-00217-11 2011264__ 1 A bill to be entitled 2 An act relating to economic development; providing 3 legislative purpose to promote the commercialization 4 of certain technologies by startup and early stage 5 companies in this state; amending s. 213.053, F.S.; 6 authorizing the Department of Revenue to share certain 7 confidential information with the Office of Tourism, 8 Trade, and Economic Development; amending s. 220.02, 9 F.S.; adding the tax credits available under s. 10 220.194, F.S., to the list of credits that may be 11 taken against state corporate income tax; amending s. 12 220.13, F.S.; redefining the term “adjusted federal 13 income” in relation to net operating losses 14 transferred and payments received for a certified tax 15 credit pursuant to the Micro-Targeted Technology 16 Commercialization Tax Credit Transfer Program; 17 amending s. 220.16, F.S.; providing for the allocation 18 of financial assistance pursuant to the Micro-Targeted 19 Technology Commercialization Tax Credit Transfer 20 Program as income in this state; creating s. 220.194, 21 F.S.; creating the Micro-Targeted Technology 22 Commercialization Tax Credit Transfer Program; 23 providing a short title, intent, goals, and 24 objectives; providing definitions; requiring that the 25 Institute for the Commercialization of Public Research 26 identify examples of micro-targeted technology and 27 compile a list of the technology for the Office of 28 Tourism, Trade, and Economic Development; requiring 29 the office to certify eligible companies for the 30 transfer of corporate income tax net operating loss 31 amounts as certified credits; providing qualifications 32 and an application process and requirements; requiring 33 an application fee; providing for an application 34 deadline; requiring the office to grant or deny an 35 application within a specified time after receiving a 36 completed application; providing for calculating the 37 certified credit amount; providing a maximum amount 38 that may be transferred; providing a penalty; 39 requiring each certified company to file an annual 40 report with the office; requiring the office and the 41 Department of Revenue to adopt rules; providing an 42 appropriation; providing for an allocation of the 43 funds; providing for future repeal of the credit 44 transfer program; providing an effective date. 45 46 Be It Enacted by the Legislature of the State of Florida: 47 48 Section 1. Legislative purpose.—The purpose of this act is 49 to promote the commercialization of certain technologies by 50 startup and early stage Florida companies, and to create high 51 wage jobs in these industry sectors. 52 Section 2. Paragraph (cc) is added to subsection (8) of 53 section 213.053, Florida Statutes, to read: 54 213.053 Confidentiality and information sharing.— 55 (8) Notwithstanding any other provision of this section, 56 the department may provide: 57 (cc) Information relative to tax credits taken under s. 58 220.194 to the Office of Tourism, Trade, and Economic 59 Development. 60 61 Disclosure of information under this subsection shall be 62 pursuant to a written agreement between the executive director 63 and the agency. Such agencies, governmental or nongovernmental, 64 shall be bound by the same requirements of confidentiality as 65 the Department of Revenue. Breach of confidentiality is a 66 misdemeanor of the first degree, punishable as provided by s. 67 775.082 or s. 775.083. 68 Section 3. Subsection (8) of section 220.02, Florida 69 Statutes, is amended to read: 70 220.02 Legislative intent.— 71 (8) It is the intent of the Legislature that credits 72 against either the corporate income tax or the franchise tax be 73 applied in the following order: those enumerated in s. 631.828, 74 those enumerated in s. 220.191, those enumerated in s. 220.181, 75 those enumerated in s. 220.183, those enumerated in s. 220.182, 76 those enumerated in s. 220.1895, those enumerated in s. 221.02, 77 those enumerated in s. 220.184, those enumerated in s. 220.186, 78 those enumerated in s. 220.1845, those enumerated in s. 220.19, 79 those enumerated in s. 220.185, those enumerated in s. 220.1875, 80 those enumerated in s. 220.192, those enumerated in s. 220.193, 81 those enumerated in s. 288.9916, those enumerated in s. 82 220.1899,andthose enumerated in s. 220.1896, and those 83 enumerated in s. 220.194. 84 Section 4. Paragraph (b) of subsection (1) of section 85 220.13, Florida Statutes, is amended to read: 86 220.13 “Adjusted federal income” defined.— 87 (1) The term “adjusted federal income” means an amount 88 equal to the taxpayer’s taxable income as defined in subsection 89 (2), or such taxable income of more than one taxpayer as 90 provided in s. 220.131, for the taxable year, adjusted as 91 follows: 92 (b) Subtractions.— 93 1. There shall be subtracted from such taxable income: 94 a. The net operating loss deduction allowable for federal 95 income tax purposes under s. 172 of the Internal Revenue Code 96 for the taxable year, 97 b. The net capital loss allowable for federal income tax 98 purposes under s. 1212 of the Internal Revenue Code for the 99 taxable year, 100 c. The excess charitable contribution deduction allowable 101 for federal income tax purposes under s. 170(d)(2) of the 102 Internal Revenue Code for the taxable year, and 103 d. The excess contributions deductions allowable for 104 federal income tax purposes under s. 404 of the Internal Revenue 105 Code for the taxable year, except that any net operating loss 106 transferred pursuant to s. 220.194 may not be deducted by the 107 seller. 108 109 However, a net operating loss and a capital loss shall never be 110 carried back as a deduction to a prior taxable year, but all 111 deductions attributable to such losses shall be deemed net 112 operating loss carryovers and capital loss carryovers, 113 respectively, and treated in the same manner, to the same 114 extent, and for the same time periods as are prescribed for such 115 carryovers in ss. 172 and 1212, respectively, of the Internal 116 Revenue Code. 117 2. There shall be subtracted from such taxable income any 118 amount to the extent included therein the following: 119 a. Dividends treated as received from sources without the 120 United States, as determined under s. 862 of the Internal 121 Revenue Code. 122 b. All amounts included in taxable income under s. 78 or s. 123 951 of the Internal Revenue Code. 124 125 However, as to any amount subtracted under this subparagraph, 126 there shall be added to such taxable income all expenses 127 deducted on the taxpayer’s return for the taxable year which are 128 attributable, directly or indirectly, to such subtracted amount. 129 Further, no amount shall be subtracted with respect to dividends 130 paid or deemed paid by a Domestic International Sales 131 Corporation. 132 3. In computing “adjusted federal income” for taxable years 133 beginning after December 31, 1976, there shall be allowed as a 134 deduction the amount of wages and salaries paid or incurred 135 within this state for the taxable year for which no deduction is 136 allowed pursuant to s. 280C(a) of the Internal Revenue Code 137 (relating to credit for employment of certain new employees). 138 4. There shall be subtracted from such taxable income any 139 amount of nonbusiness income included therein, including 140 payments received for a certified tax credit pursuant to s. 141 220.194. 142 5. There shall be subtracted any amount of taxes of foreign 143 countries allowable as credits for taxable years beginning on or 144 after September 1, 1985, under s. 901 of the Internal Revenue 145 Code to any corporation which derived less than 20 percent of 146 its gross income or loss for its taxable year ended in 1984 from 147 sources within the United States, as described in s. 148 861(a)(2)(A) of the Internal Revenue Code, not including credits 149 allowed under ss. 902 and 960 of the Internal Revenue Code, 150 withholding taxes on dividends within the meaning of sub 151 subparagraph 2.a., and withholding taxes on royalties, interest, 152 technical service fees, and capital gains. 153 6. Notwithstanding any other provision of this code, except 154 with respect to amounts subtracted pursuant to subparagraphs 1. 155 and 3., any increment of any apportionment factor which is 156 directly related to an increment of gross receipts or income 157 which is deducted, subtracted, or otherwise excluded in 158 determining adjusted federal income shall be excluded from both 159 the numerator and denominator of such apportionment factor. 160 Further, all valuations made for apportionment factor purposes 161 shall be made on a basis consistent with the taxpayer’s method 162 of accounting for federal income tax purposes. 163 Section 5. Subsection (5) is added to section 220.16, 164 Florida Statutes, to read: 165 220.16 Allocation of nonbusiness income.—Nonbusiness income 166 shall be allocated as follows: 167 (5) The amount of financial assistance received in exchange 168 for transferring a net operating loss as authorized by s. 169 220.194 is allocable to this state. 170 Section 6. Section 220.194, Florida Statutes, is created to 171 read: 172 220.194 Micro-Targeted Technology Commercialization Tax 173 Credit Transfer Program; transfer of net loss carryforward as a 174 certified credit.— 175 (1) This section may be cited as the “Micro-Targeted 176 Technology Commercialization Act.” 177 (2) INTENT; GOALS AND OBJECTIVES.—It is the intent of the 178 Legislature that the Micro-Targeted Technology Commercialization 179 Tax Credit Transfer Program act as a catalyst for eligible 180 companies to accelerate their revenue and job growth and their 181 market penetration by monetizing their net operating losses into 182 transferable credits. The program’s objectives include: 183 (a) Accelerating the entry of new technology-based products 184 into the marketplace; 185 (b) Producing additional technology-based jobs for this 186 state; 187 (c) Accelerating commercialization of micro-targeted 188 technologies in the biomedical and technical fields; and 189 (d) Encouraging the growth of high-quality, high-wage 190 biomedical and technology firms in this state. 191 (2) DEFINITIONS.—As used in s. 220.194, the term: 192 (a) “Certified credit” means the product of the net 193 operating loss generated in the current year apportioned to 194 Florida, multiplied by the corporate income tax rate imposed 195 during the year in which the loss occurred. 196 (b) “Certified micro-targeted technology company” means a 197 business entity that is registered with the Secretary of State, 198 is currently operating in this state, and is certified by the 199 office to trade certified credits based on the company’s net 200 operating losses, pursuant to this section. 201 (c) “Department” means the Department of Revenue. 202 (d) “Institute” means the Institute for the 203 Commercialization of Public Research. 204 (e) “Micro-targeted technology” means individual 205 components, technology, or processes that are crucial to the 206 development of larger or more complex biomedical or 207 technological devices, processes, or information systems. 208 (f) “Office” means the Office of Tourism, Trade, and 209 Economic Development. 210 (3) THE INSTITUTE FOR THE COMMERCIALIZATION OF PUBLIC 211 RESEARCH.—The Institute for the Commercialization of Public 212 Research or other Florida research-based consortium shall 213 identify examples of micro-targeted technology and compile a 214 list that is updated annually to add new technologies or delete 215 those technologies that are no longer applicable. The office 216 shall adopt this list as a rule. 217 (4) QUALIFICATIONS FOR CERTIFICATION.—A company seeking to 218 transfer a certified credit shall be certified as a micro 219 targeted technology company by the office if it timely files a 220 completed application and meets the requirements of this 221 subsection. For purposes of this subsection, all conditions in 222 paragraphs (a) through (g) must be met no later than the date 223 the application is filed with the office. All other requirements 224 in this subsection must be satisfied before the company received 225 certified credits. In order to be certified, a micro-targeted 226 technology company must demonstrate that it: 227 (a) Is registered with the Secretary of State to operate in 228 this state and is operating in Florida. 229 (b) Is primarily engaged in developing, manufacturing, 230 producing, or providing micro-targeted technology for commercial 231 or public purposes. 232 (c) Has fewer than 100 full-time employees worldwide, 233 including full-time employees leased to the applicant, of which 234 at least 75 percent work full time in this state at the time the 235 transfer of certified credits is first allowed. 236 (d) Has been audited by an independent certified public 237 accountant, and: 238 1. Has not had positive net income in any of the 2 previous 239 years of ongoing operations; 240 2. Has reported a net operating loss in any of the 2 241 previous years of operation; and 242 3. Is not at least 50 percent owned or controlled, directly 243 or indirectly, by another corporation that has demonstrated 244 positive net income in any of the 2 previous years of ongoing 245 operations, or is not part of a consolidated group of affiliated 246 corporations, as filed for federal income tax purposes, which in 247 the aggregate demonstrated positive net income in any of the 2 248 previous years of ongoing operations. 249 (e) Has at least one active application for a patent under 250 35 U.S.C. s. 111(a) on file with the United States Patent and 251 Trademark Office. 252 (f) Has received research grants from governmental 253 entities, foundations, or other private entities, or received 254 financial assistance from investors. 255 (g) Has an established business plan that describes its 256 commercialization strategy, a business-development plan that 257 includes revenue projections and a strategy for becoming 258 profitable, and a timeline for development which addresses 259 revenue growth and job creation in this state. 260 (h) Has certified that: 261 1. It will not transfer a certified credit in exchange for 262 private financial assistance in an amount that is less than 75 263 percent of the certified credit; 264 2. All proceeds from the transfer will be expended to 265 support the operation or expansion of the company’s business 266 activity in this state; and 267 3. Upon transfer of a certified credit, it will notify the 268 office of the amount within 30 days after each certified credit 269 is transferred, the amount of the financial compensation for the 270 credit received, and the identity of the purchaser of the 271 certified credit. 272 (5) APPLICATION FOR CERTIFICATION.— 273 (a) A completed application must be filed with the office 274 on or after 2 p.m., on the first business day of July commencing 275 in 2011. The office may investigate the qualifications of each 276 company applicant and may require by rule the applicant to 277 provide such evidence of its qualification as is necessary to 278 assure compliance with the requirements of this section, 279 including, but not limited to, the state corporate income tax 280 return supporting the request for certification of a certified 281 credit, audited financial statements, federal tax returns, and 282 state and federal employment filings. 283 (b) The office shall require a nonrefundable application 284 fee of $100 per application submitted. The department shall 285 cooperate with the office in its review of the applications. 286 (c) The office shall grant or deny an application in full 287 or in part within 90 days after receiving a completed 288 application containing the necessary information, including 289 payment of the application fee. If the office denies any part of 290 the application, it shall inform the applicant of the grounds 291 for the denial. 292 (d) This section does not create a presumption that a 293 company applicant will be approved by the office to transfer its 294 certified credits. However, the office may issue a nonbinding 295 opinion letter, upon the request of a prospective applicant, as 296 to its eligibility and the potential amount of certified credits 297 available. 298 (6) CALCULATION OF CERTIFIED CREDIT TRANSFER AMOUNT AND 299 LIMITATIONS.—When submitting an application for certification, a 300 company shall state the amount of the net operating loss, 301 including any net operating loss carryover, it requests to be 302 transferred as a certified credit. To the extent allowed as a 303 deduction in this state, a reported net operating loss not 304 otherwise taken may be certified by the office for transfer by a 305 certified micro-targeted technology company in exchange for 306 private financial assistance from a purchaser as follows: 307 (a) The net operating loss shall be transferred as a 308 certified credit. 309 (b) The maximum amount of certified credits which a micro 310 targeted technology company may transfer during its existence 311 may not exceed $1 million. 312 (c) Once the office has certified the transfer of total 313 certified credits that may be claimed during a state fiscal year 314 in a cumulative amount of $3 million, the office may not approve 315 the transfer of any additional credits that may be taken in that 316 state fiscal year. 317 (d) The certified micro-targeted technology company is 318 liable if, after a transfer, the net operating loss is adjusted 319 by amendment or as a result of any other recomputation or 320 redetermination of federal or Florida taxable income or loss. 321 The certified micro-targeted technology company is also liable 322 for a penalty equal to the amount of the credit transferred, 323 reduced in proportion to the amount of the net operating loss 324 certified for transfer over the amount of the certified net 325 operating loss disallowed. 326 (e) The applicant and its successors shall maintain all 327 records necessary to support the reported amount of certified 328 credits. 329 (7) PURCHASE OF TRANSFERRED CERTIFIED CREDITS.— 330 (a) The certified credit must be reported as a credit 331 against tax due by the unaffiliated corporate purchaser on the 332 next tax return due to be filed by the purchaser, but in no case 333 may it be reported later than 1 year after the date of transfer. 334 (b) If the certified credit is larger than the amount owed 335 to the state on the tax return for the period in which the 336 credit is claimed, after applying the other credits and unused 337 credit carryovers in the order provided in s. 220.02(8), the 338 amount of the credit for that period shall be the amount owed to 339 the state on that tax return. Unused certified credit amounts 340 remaining may not be carried forward. 341 (c) The purchaser of a certified credit amount may not 342 further sell, or otherwise transfer, the certified credit 343 amount. 344 (d) It is the responsibility of the certified micro 345 targeted technology company that transferred the certified 346 credit amount to notify the office, within 30 days after 347 transfer, of the amount of each certified credit transferred, 348 the amount of the financial assistance received, and the 349 identity of the purchaser of the certified credit. The office 350 shall certify to the department the same information within 14 351 working days. 352 (8) REPORTING REQUIREMENT.—Each company that is certified 353 to transfer its certified credit must provide the office with an 354 annual report on its development covering the year after it 355 receives funds from transferring its certified credits. The 356 report must include the company’s commercialization strategy; 357 business development plan; timeline for development; actual 358 revenue and revenue projections, both total and within Florida 359 only; and actual employment and employment projections, both 360 total and within Florida only. The report is due January 3 each 361 applicable year. 362 (9) RULEMAKING AUTHORITY.— 363 (a) The office shall adopt rules to administer this 364 section. The rules must establish the criteria for qualified 365 technology research and experimental development, production, or 366 provision of technology for commercial or public purposes; the 367 format of application forms; and the procedures to implement the 368 program. 369 (b) The department may adopt rules to administer this 370 section. 371 Section 7. (1) The sum of $8 million is transferred from 372 the Florida Opportunity Fund to the Economic Development Trust 373 Fund for the purpose of funding the Micro-Targeted Technology 374 Commercialization Credit Transfer Program. Notwithstanding s. 375 216.301, Florida Statutes, and pursuant to s. 216.351, Florida 376 Statutes, the unexpended balance of this appropriation at the 377 end of the fiscal year shall remain in the trust fund and shall 378 be available for carrying out the purposes of the programs in 379 future years. 380 (2) Of that amount: 381 (a) The sum of $2 million is appropriated to the Institute 382 for the Commercialization of Public Research for the 2011-2012 383 fiscal year to support its operations. 384 (b) The sum of $5.8 million shall be retained in the 385 Economic Development Trust Fund to be used to reimburse the 386 General Revenue Fund so as to defray the cost to the state of 387 the net operating loss tax credits created in s. 220.194, 388 Florida Statutes. 389 (c) The sum of $200,000 shall be retained in the Economic 390 Development Trust Fund to be drawn, as needed, to pay the 391 administrative costs incurred by the Office of Tourism, Trade, 392 and Economic Development associated with implementing the credit 393 transfer program. 394 Section 8. Section 220.194, Florida Statutes, is repealed 395 effective June 30, 20l5, unless reviewed and saved from repeal 396 through reenactment by the Legislature. 397 Section 9. This act shall take effect upon becoming a law.