November 04, 2011
Florida Corporate Income Tax 2011 Law Changes
>Recently, the Florida Legislature announced corporate law changes for taxpayers who have or will have a Florida filing requirement for 2011 and beyond. The law changes relate to depreciation adjustments, the Florida exemption amount, and the corporate research and development tax credit. Below is a summary outlining these Florida law changes.
The 2011 Florida Legislature amended Florida law to require corporate taxpayers to add back to adjusted federal income:
- The federal special 50 percent (50%) bonus depreciation for assets placed in service between January 1 and September 8, 2010.
- The federal 100 percent (100%) bonus depreciation for assets placed in service after September 8, 2010, through December 31, 2011.
- The federal 50 percent (50%) bonus depreciation for assets placed in service in 2012.
Florida law allows Taxpayers a corresponding subtraction taken equally over a seven year period in the amount of the special bonus depreciation that must be added back to adjusted federal income, beginning with the year the addition occurs.
Section 179 Depreciation
The 2011 Florida Legislature amended Florida law to require corporate taxpayers claiming a deduction under Section 179 of the Internal Revenue Code to add back to adjusted federal income those amounts that exceed specified dollar limits for tax years beginning in 2008, 2009, 2010, and 2011. All Section 179 amounts deducted in excess of $128,000 for tax years beginning in 2008 & 2009, $250,000 for tax years beginning in 2010, and $128,000 for tax years beginning in 2011 must be added back.
As an offset to the required add back, the taxpayer is entitled to a depreciation subtraction taken equally over a seven year period in the amount of any excess Section 179 expense added back to adjusted federal income.
The bonus depreciation and Section 179 depreciation add back adjustments will increase a corporate taxpayer’s Florida tax liability. It is important for the taxpayer to keep these Florida law changes in mind when completing its 2011 Florida Corporate Tax Return.
Effective for tax years beginning on or after January 1, 2012, the Florida corporate income tax exemption was increased from $5,000 to $25,000. This will eliminate the tax on corporations with $25,000 or less in Florida income. However, this does not change a corporate tax payer’s return filing requirements.
Research & Development Tax Credit
In tax years beginning on or after January 1, 2012, corporations that are allowed the Federal Credit for Qualified Research Expenses may apply to the Department of Revenue on or after March 20 of each year (beginning March 20, 2013) to receive a credit against the Florida corporate income tax. The credit is equal to 10 percent (10%) of qualified research expenses in Florida that exceed a base amount consisting of the average expenses of the previous four tax years. The amount of credit taken in any taxable shall be limited to 50 percent of the taxpayer’s income tax liability. The total amount of tax credits that may be granted by the Department is $9 million per calendar year.
The law also:
- Allows for a credit carry forward of five years for any unused credit remaining.
- Requires a re-computation and repayment of the credit amount, plus interest, when a corporation’s qualified research expenses are reduced as a result of a federal audit or examination.
Should you have any questions related to this Tax Flash, please contact your Marcum LLP State and Local tax professional.