Florida-Innovation
As the fourth largest economy in the
country, the state of Florida continues to rapidly
develop. Modern infrastructure, low employment costs and
tax burdens, availability of financial capital, and manageable
costs of living have made Florida’s major cities increasingly
desirable for companies. Companies innovating throughout
the Sunshine State should utilize federal and state Research
and Development Tax Credits to help support and stimulate
growth.
The Research &
Development Tax Credit
Enacted in 1981, the federal Research and
Development (R&D) Tax Credit allows a credit of up to 13%
of eligible spending for new and improved products and
processes. Qualified research must meet the following four
criteria:
- New or improved products,
processes, or software
- Technological in nature
- Elimination of uncertainty
- Process of experimentation
Eligible costs
include employee wages, cost of supplies, cost of testing,
contract research expenses, and costs associated with
developing a patent. On December 18, 2015 President Obama
signed the bill making the R&D Tax Credit permanent.
Beginning in 2016, the R&D credit can be used to offset
Alternative Minimum tax and startup businesses can utilize the
credit against payroll taxes.
The Florida Landscape
Florida is home to nearly 3,000
headquartered offices. In the food industry, Fresh
Express, the large packaged salad producer, recently relocated
their headquarters to Orlando and banana retailer Chiquita,
has recently moved their headquarters to Dania Beach –
bringing a total of 210 jobs to the areas. Granex, a leading
granite and marble manufacturer recently opened its first
location in Tampa and intends to add 50 jobs.
The business friendly
cities of Tallahassee, Jacksonville, Orlando, Tampa, Palm
Beach, Ft. Lauderdale, and Miami host major company
headquarters including Office Depot, Citrix Systems,
Univision, BookIt.com, Publix Super Markets, and NASCAR.
Miami/Ft. Lauderdale
Miami is the
state’s most populous county with 13.4% of Florida’s
population. TechAmerica Foundation’s Cybercities 2010 study
reported that close to 7,000 high-tech establishments operate
in the Miami/Ft. Lauderdale area with over 65,000 high-tech
workers. Local organizations such as The LAB Miami,
Miami Entrepreneurship Center, Venture Hive, and Refresh Miami
provide support for emerging startups and entrepreneurs by
hosting lecture series and workshops and providing shared work
spaces.
A proposal is in the
works for the development of a 10-acre Miami Innovation
District, which would include nine towers of mostly office
space. The proposal is gaining support from local
entrepreneurs and tech investors as it would provide a central
hub for the spread out ecosystem of Miami.
Multi-national software
company, Citrix Systems, has its Executive Briefing Centers
(EBC) headquartered in Ft. Lauderdale. Ryder Systems Inc,
leading trucking and supply chain manager, has its
headquarters in Miami.
Jacksonville
Jacksonville has
recently gained the reputation as a growing city for
entrepreneurs. Also known as the next Silicon Valley,
early stage start-ups have taken notice of the many benefits
Jacksonville has to offer such as easy access to private
funding with the growing population of retirees with high net
worth.
In terms of fostering
successful startups, Jacksonville ranks among one of the top
cities in the world, above Moscow, Sydney, and Tel Aviv.
OneSpark, an annual crowdfunding festival held in downtown
Jacksonville, festival attracted over 320,000 attendees in
2015, making it one of the world’s largest crowdfunding events
to date.
Beaver Street Enterprise
Center (BSEC), in Jacksonville, offers 25,000 square feet of
professional office space for startups and small business
incubation. BSEC also offers workshops, accounting
services, technology solutions, and mentoring.
The Florida R&D
Tax Credit
For qualifying corporations, the state of
Florida R&D Tax Credit amounts to 10% of qualified
research expenses (QREs) incurred in the state. The funds are
available on a first come, first serve basis, with a total
pool of $23 million in available funds for the 2016
application period (up from the previous $9 million per year).
The annual available funds revert back to $9 million after the
2016 application period. The state requires that the credit
applicant be involved in a “target industry business.” The
Florida Department of Revenue defines these industries below:
Many companies and
startups relocating to the greater Miami area are primed for
the both the federal and Florida R&D Tax Credits, as a
large percentage are in qualifying industries and meet the
necessary criteria.
R&D Intensive
Industries
Many of Florida’s strongest business
sectors including aerospace, life sciences, manufacturing,
defense, IT, and could computing are R&D intensive
industries in which product and process development occur
constantly. Companies innovating in these and similar
industries are great candidates for federal and state R&D
Tax Credits.
Life Sciences
Florida has some of the
nation’s most prestigious research centers and boasts over
1,100 biotech, pharmaceutical, and medical device
companies. Johnson & Johnson, Medtronic, and Bristol
Meyers Squibb, are among some of the industry leaders located
in the state.
Life science companies
throughout state are increasingly focused on novel research
and development to solve the nation’s largest health concerns
including Alzheimer’s , cancer , diabetes , and heart disease.
Tampa-based healthcare
informatics company, M2Gen®, recently announced its
collaboration with leading cancer centers and pharma companies
to create an alliance for precision medicine and cancer
treatment developments.
Orlando-based drug
discovery company, US Phytotherapy, Inc. focuses on natural,
plant-based active ingredient formulas for the treatment of
invasive diseases. With the use of cutting edge
technology, US Phytotherapy recently discovered of a drug
candidate for dengue virus inhibition. The patented
solution effectively inhibited three different models of the
dengue virus.
Manufacturing
The Sunshine State is
home to over 19,000 manufacturers in diverse sectors including
plastics, automotives, aerospace parts, medical equipment,
electronic components, ship/boat building, and specialty
foods.
Anheuser-Busch recently
broke ground on their latest expansion project, an aluminum
bottle line at their Metal Container Corporation (MCC) in
Jacksonville. The new facility is in addition to
Anheuser-Busch’s existing brewery in Jacksonville.
Sanford-based fabricated
metal manufacturer, Southern Manufacturing, has incorporated
state-of-the-art automation equipment and production lines to
meet the quality and tolerance standards of today’s industries
such as medical, transportation, etc.
Information Technology
Florida is at the
forefront of IT innovation with diverse industry strengths
including software development, photonics , mobile
technologies, virtual reality and simulation, telecoms,
and microelectronics.
The National Center for
Simulation in Orlando is a consortium of government, academic,
and industry members focused on the advancement and useful
applications of virtual reality and simulation. One of
the center’s major focuses is on modeling and simulation usage
within the medical industry. 3D Perception, based in
Orlando, designs and builds immersive display solutions using
precision image alignment, automatic color calibration, curved
screens, and multi-projection solutions to bring simulation
training to life.
LinguaSys, Inc., based
in Boca Raton, is a software company that leverages human
language technology to bring linguistic engineering and
enterprise IT together. The company utilizes text
analytics, natural language processing , and reasoning
automation to bring grammar-aware translations in over 16
languages.
Cloud Technology
Advancements in cloud
computing have facilitated growth in many industries
throughout the country. This is also the case in the
Florida region where cloud computing integrates with
healthcare and other industries to provide flexible solutions.
Miami-based healthcare
software company, CareCloud, has developed a modern, flexible,
and powerful cloud platform to help doctors manage their
practices and facilitate the transition to electronic health
records (EHRs).
Aviation/Aerospace
Florida is home to the
nation’s largest aerospace and aviation industry with over
2,000 companies. The large concentration of military
bases has attracted many of the largest companies including
Boeing , Embraer, General Dynamics, Lockheed Martin, Northrop
Grumman, and Pratt & Whitney. In 2014, Florida
exported almost $4.8 billion in aircraft, engines, and parts,
putting the state in the top 10 for aviation.
Global leader in
aeronautical electrical systems, Labinal Power Systems (a
subsidiary of Safran), recently announced its expansion in
Manatee County as well as the relocation of subsidiary
Aerosource from New Jersey to Manatee County.
Safran/Labinal Power Systems’ research and technology programs
are focused on shifting plane functions from hydraulic and
pneumatic energy to electric.
The Florida Space
Research Program (FSRP), funded by the Florida Space Grant
Consortium and Space Florida, aims to accelerating space
research, engineering, education, and training by combining
federal, state, and other funding programs.
The Latin American
Advantage
In recent years, Latin America has seen
tremendous growth in its tech sector and startup scene. The
increasingly tech savvy population has been a major
contributor to growth in countries such as Brazil and Chile,
which have their own ‘Silicon Valley’ tech scenes with
technology giants like Microsoft, Samsung, Oracle, IBM, Dell,
and Motorola, opening centers in these hubs.
Florida’s similar
climate and 23.2% Hispanic population make an ideal location
for many Latin American entrepreneurs to expand or start their
companies. With more financial capital per capita in Miami
than any U.S. city, a significant portion of this is from
Latin American firms and wealthy families that invest with
area banks and real estate.
YellowPepper, is a
recent example of a Latin American firm shifting operations to
Florida. The Panama-founded mobile banking software
developer has over 3.5 million users in nine countries. The
firm, which has more than 70 employees, recently moved its
operations to Miami and shortly thereafter received $15
million in venture funding.
Conclusion
Florida’s modern infrastructure, low
employment costs and tax burdens, availability of financial
capital, and low costs of living have made the state an ideal
location for many business sectors. Companies innovating
throughout Florida should be working closely with their tax
professionals to build in these lucrative federal and state
R&D Tax Credits.
