Florida will nearly double its investment in Research and Development (R&D) when it raises the maximum amount of tax credits available to companies to $16.5 million in 2018. The R&D tax credit, now capped at $9 million, encourages and rewards manufacturers who bring new or improved products to market, as well as manufacturers who improve the manufacturing process.

The R&D tax credit works like this:

  • The state authorizes an R&D tax credit against state corporate income taxes for certain business with qualified research expenses.
  • The tax credit is 10 percent of the difference between the current tax year’s research and development expenditures in Florida and the average of R&D expenditures over the previous four tax years.
  • If the business has existed for fewer than four years, the credit amount is reduced by 25 percent for each year the business or predecessor corporation did not exist.

The “U.S. Research and Experimentation Tax Credit” was first created in 1981 as part of the Economic Recovery Tax Act. This comprehensive package of initiatives was designed to boost U.S. business competitiveness and encourage investment and savings by taxpayers during a period of economic recession.

In December 2015, the R&D tax credit was made permanent law. The R&D tax credit is the largest tax credit provided to businesses, both large and small, by the federal government and it is intended to help domestic manufacturing. Contact us to learn more about how this tax credit can apply to your business.