Florida
As the sixteenth largest economy in
the world, the state of Florida continues to rapidly
develop. Modern infrastructure, low employment costs and tax
burdens, availability of financial capital, and manageable cost of
living have made Florida’s major cities increasingly desirable for
companies. Businesses innovating throughout the Sunshine
State can utilize both federal and state Research and Development
Tax Credits to help support and stimulate growth.
The Research & Development Tax
Credit
Enacted in 1981, the now permanent
Federal Research and Development (R&D) Tax Credit allows a
credit that typically ranges from 4%-7% of eligible spending for
new and improved products and processes. Qualified research
must meet the following four criteria:
Must be technological in nature
Must be a related to the
taxpayers business
Must represent R&D in the
experimental sense and generally includes all such costs
related to the development or improvement of a product or
process
Must eliminate uncertainty
through a process of experimentation that considers one or
more alternatives
Eligible costs include U.S. employee wages, cost of supplies
consumed in the R&D process, cost of pre-production testing,
U.S. contract research expenses, and certain costs associated with
developing a patent.
On December 18, 2015, President Obama signed the PATH Act, making
the R&D Tax Credit permanent. Beginning in 2016, the
R&D credit can be used to offset Alternative Minimum tax for
companies with revenue below $50MM and for the first time,
pre-profitable and pre-revenue startup businesses can obtain up to
$250,000 per year in payroll taxes and cash rebates.
The Florida State R&D Tax
Credit
For qualifying corporations, the
Florida state R&D Tax Credit program is contingent, in part,
on the eligible business having received the federal R&D Tax
Credit. The funds are available on an application basis with
a total pool of about $9 million annually. The state
requires that the credit applicant be involved in a “target
industry business.” The Florida Department of Revenue
defines these target industries below1:
Manufacturing
Life Sciences
Information Technology
Aviation / Aerospace
Materials Science
Homeland Security / Defense
Cloud Technology
Nanotechnology
Marine Sciences
The Florida Landscape
Florida is home to nearly 3,000
headquartered offices2.
With an economy of nearly $1 trillion and having the third largest
workforce in the U.S., Florida is a financial powerhouse all its
own. Florida’s number one export is airplanes and airplane
parts/components.
The business-friendly cities of Tampa, Tallahassee, Jacksonville,
Orlando, Palm Beach, Ft. Lauderdale, and Miami host companies in a
myriad of industries that are focused on innovation, research, and
development.
Tampa
Tampa is the third most populated
city in Florida after Jacksonville and Miami. Tourism and
healthcare are the largest industries in the city.
The city has been named one of the area’s top 20 tech towns.
In fact, there is a Technology & Innovation (T&I)
Department run by the city that provides technology consulting and
support services to all city departments and is responsible for
servicing the city’s complex infrastructure, networks, data,
applications and mobile devices3.
Forbes recently referred to Tampa as an emerging tech city in the
U.S., as the city is home to over 2,000 new tech jobs in 2021, in
addition to the existing community4.
Jacksonville
Jacksonville is one of the largest
cities in America by square footage and has a population
approaching 1 million.
Jacksonville has a strong reputation for being a good place for
entrepreneurs to start their ventures, or to relocate to. A
combination of low-tax business climate, workforce talent, and
infrastructure have contributed to Jacksonville being referred to
as the East Coast Silicon Valley. Early-stage startups 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.
Jacksonville is surging as a destination for tech workers. A
new study from Bloomberg and LinkedIn revealed that the city is
the preferred location for tech workers, ranking 4th in the most
recent analysis5.
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.
Miami/Fort Lauderdale
Miami is the largest urban economy in
Florida and the 12th largest in the U.S. 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 workspaces. Fort Lauderdale is known as the
“Venice of America.” It is known for its beaches and arts,
however, there is a strong business climate as well. The
labor force has been consistent at about 1 million and there are
just over 70,000 business establishments there.
Many companies and startups relocating to the greater Miami area
are primed for both the federal and Florida R&D Tax Credits,
as a large percentage are in qualifying industries and meet the
necessary criteria.
St. Pete Innovation District
The St. Pete Innovation District
(SPID) was established in 2016 and has been growing, now
encompassing the Life Science6,
Marine Science, Education7, Data
Analytics8, Art9
and Technology sectors. Many of these institutions are
within a designated boundary of the District, while others are
engaged from throughout the region and nation10.
Recently, in a formal exit from New York City, ARK Investment
Management LLC is making a permanent move to St. Petersburg,
Florida. Cathie Wood, CEO of ARK11,
has aligned herself and her team more with the Silicon Valley
startup model as opposed to the traditional Wall Street
approach. Several of her ETFs more than doubled in 2020,
profiting off the focus of the growth during the COVID-19
pandemic.
The move to St. Pete is aimed at deepening ARK’s ties to local
entrepreneurs and technology startups. ARK will be
developing its designated Innovation Center on 2.5 acres of land
donated by the city of St. Petersburg.
R&D Intensive Industries
Many of Florida’s strongest business
sectors including aerospace, life sciences, manufacturing,
defense, IT, and cloud 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 &
Johnson12, Medtronic13, and Bristol Meyers Squibb are
among some of the industry leaders located in the state.
Life science companies throughout the state are increasingly
focused on novel research and development to solve the nation’s
largest health concerns including Alzheimer’s14,
cancer15, diabetes16, and heart disease17.
Over the past decade, Florida has built a robust life sciences
industry, establishing itself as an industry hub with significant
potential for continued innovation and growth. The life
sciences have positively impacted the state’s economy and have
increased the number of high-wage jobs in the state.
Existing companies are expanding, and new companies are
establishing in Florida. The industry’s breakthrough
research is paving the way for tomorrow’s discoveries and
improving the health and quality of life we enjoy18.
Manufacturing
The Sunshine State is home to over
19,000 manufacturers in diverse sectors including plastics,
automotive, aerospace parts, medical equipment, electronic
components, ship/boat building, and specialty foods.
Florida may seem like an unlikely hero in the story of an industry
whose factories and industrial centers have historically been
concentrated elsewhere. However, the state has rapidly
emerged as a major force thanks to advancing technologies and
improved, reimagined infrastructure. Today,
manufacturing contributes $40 billion annually to Florida’s
economy – and much of this impact originates in The Corridor
Region19.
Food manufacturing is huge in the state of Florida. All food
establishments, manufacturers and distributors are subject to
stringent regulations and standards. This means that they
must constantly be developing healthier, more innovative products
and processes that can be stored and transported without spoilage
and rotting.
Information Technology
Florida is at the forefront of IT
innovation with diverse industry strengths including software
development, photonics20, mobile
technologies, virtual reality21
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 processing22,
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.
Companies that migrate to the cloud and integrate new
technologies, such as cloud technology, are improving their
companies’ technology. Leveraging the power of technology is
critical to survival in today’s economic climate.
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 Boeing23, Embraer, General Dynamics24, Lockheed Martin25,
Northrop Grumman, and Pratt & Whitney. In 2020, Florida
exported almost $4.9 billion in aircraft, engines, and
parts, putting the state in the top rankings for aviation.
In 2016, global leader in aeronautical electrical systems, Labinal
Power Systems (a subsidiary of Safran), announced its expansion in
Manatee County as well as the relocation of the 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 accelerate space
research, engineering, education, and training by combining
federal, state, and other funding programs.
Architecture and Engineering
(A&E)
Florida is a great place to recruit
top A&E talent. Two schools offer outstanding A&E
programs. They are the University of Miami and Seminole
State College of Florida. That is why the degrees offered by
universities in Florida for A&E are top-notch and represent a
comprehensive curriculum. As the infrastructure in the State
improves and develops, educating future generations of architects
and engineers is something that Florida is taking seriously.
Today’s A&E firms are continuously engaging in innovation,
eligible for R&D Tax Credits.
Construction
To provide facilities for business
and housing for its residences in this constant growth market,
Florida has a robust construction industry. The construction
industry is increasingly implementing a wide variety of new
technologies, some of which are eligible for the R&D Tax
Credit.
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 is a gateway to Latin America. Florida’s similar
climate and 27%26 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 estate27.
The organization Latinas in Tech provides funding through various
sources including, venture capital, grants and angel
investments. All geared at tech entrepreneurs of Latino
heritage.
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 industries. Companies innovating
throughout Florida should be working closely with their tax
professionals to build in these cost-effective federal and state
R&D Tax Credits.
