The Marcum 2016 Year-End Tax Guide continues our tradition of providing timely tax guidance for the upcoming year.
Job Tax Credit
The purpose of this tax credit is to foster employment opportunities in Florida and improve the everyday lives of those employed. The state of Florida wants to encourage economic expansion of new and existing businesses in its rural and urban areas.
- Rural: This program offers an incentive for eligible businesses located within one of 36 designated Qualified Rural Areas to create new jobs. The tax credit ranges from $1,000 to $1,500 per qualified employee and can be taken against either the Florida Corporate Income Tax or the Florida Sales and Use Tax.
- Urban: This program offers an incentive for eligible businesses located within one of the 13 designated urban areas to create new jobs. The credit ranges from $500 to $2,000 per qualified job and can be taken against either the Florida Corporate Income Tax or the Florida Sales and Use Tax.
Film in Florida Sales Tax Exemption
Any qualified production company may be eligible for an exemption from sales and use tax on the purchase or lease of certain items used exclusively as an essential part of production activities in Florida.
A qualified production company is engaged in the production of motion pictures, made for television motion pictures, television series, commercial advertising, music videos or sound recordings. The production company must apply for a certificate of exemption, to be presented to a registered Florida sales and use tax dealer when making purchases and rentals of qualified production equipment (Form DR-230). The Office of Film and Entertainment (OFE) will determine whether or not a production company meets the established approval criteria and qualifies for the exemption. The OFE will then notify the Department of Revenue of the approval. The Department of Revenue will issue the certificate of exemption within (5) working days of notification from the OFE.
The purchased or leased tangible personal property must be used exclusively as an integral part of production activities in the state to qualify for exemption. The equipment must be depreciable with a useful life of at least (3) years. The exemption may also be extended to parts and accessories as well as materials that become a component of the finished product. Additionally, the leasing, renting, or granting of a license to use any real property such as sound stages, studios, or any other real estate used as an integral part of the performance of the qualified production services is also exempt.
Capital Investment Tax Credit
This annual credit is used to attract and grow capital-intensive industries in Florida. The credit can be utilized against the corporate income tax. The certified project must be in designated high impact sectors such as advanced manufacturing, clean energy, biomedical technology, financial services, information technology, silicon technology, or transportation equipment manufacturing, or be a corporate headquarters facility. Additionally, the project must create at least 100 jobs and invest a minimum of $25 million in eligible capital costs. These costs include, but are not limited to, acquisition, construction, installation, and equipping expenses of the project.
The annual credit is equal to 5% of the eligible capital costs generated by a qualifying project for up to 20 years.
Community Contribution Tax Credit
The purpose of this program is to encourage Florida businesses to make donations toward community development and housing projects designed for the less fortunate.
In order to be eligible, the business must pay Florida corporate income tax or insurance premium tax and be registered with the Department of Revenue. An organization must be approved as a sponsor before it receives a donation eligible for this tax credit. Cash, property, and goods donated to approved sponsors are eligible for the credit. Donations must be directly used in the approved project.
A business is eligible to receive a tax credit of up to 50% of the value of donations to approved projects. A business can receive credits of up to $200,000 per tax year.This program designates $18.4 million in tax credits for projects that provide homeownership opportunities for low income individuals or housing opportunities for people with special needs.
Research and Development Tax Credit
Florida provides a corporate income tax credit to eligible businesses for certain qualified research expenses. The eligible business should have received the federal research and development tax credit before qualifying for The Florida Corporate Income Tax Credit.
This state credit is for business research expenses in the following industries:
- Aviation and Aerospace.
- Cloud Information Technology.
- Homeland Security & Defense.
- Information Technology.
- Life Sciences.
- Marine Sciences.
- Materials Science.
A letter from the Department of Economic Opportunity must be included when the business applies for this credit. This letter should certify the business as an eligible target industry business for the research and development tax credit.
The maximum amount of research and development tax credits that may be granted during any calendar year is $9 million. However, the combined total amount of tax credits that may be awarded to all business enterprises in the 2016 calendar year is $23 million. The Florida research and development tax credit may not exceed 50% of the Florida corporate income tax liability after all other credits have been applied in the order provided.
Credit for Contributions to Nonprofit Scholarship Funding Organizations
The Florida Tax Credit Scholarship Program (FTC) was established to provide an income tax credit for corporations that donate money to nonprofit Scholarship-Funding Organizations (SFOs). These organizations award scholarships to students from families with limited financial resources.
A corporation can receive a dollar-for-dollar tax credit up to 75% of its state income tax liability. The credit may be carried forward for five years.
Urban High Crime Area Job Tax Credit
For each qualified job created in a designated and ranked urban high-crime area, qualified businesses can receive a credit against Florida corporate income tax. New businesses can apply for the credit within the first year of operation. Existing businesses may claim the credit after a minimum number of qualified new employees are hired within a year of applying for the credit.
The program is administered by the Florida Office of Tourism, Trade, and Economic Development. The Office designates 15 areas to participate in the program every three years. These areas are ranked and divided into three tiers. In each program, credit requirements will be differentiated between qualified new businesses and qualified existing businesses.
Businesses eligible for the credit include those that are located in a qualified county and that are predominantly engaged in, or are headquarters for, a business predominantly engaged in, activities usually provided for consideration by firms classified within the following standard industrial classifications:
- Agriculture, forestry, and fishing.
- Public warehousing and storage.
- Hotels and other lodging.
- Research and development.
- Motion picture production and allied services.
- Public golf courses.
- Amusement parks.
- Customer service operations for multistate/international markets.
The credit ranges from $500 to $1,500 per employee, depending on the location of the business and the number of qualifying employees. An additional $500 credit will be provided for any qualified employee who is a welfare transition program participant. Excess credits may be carried forward for five years. Annual credits for all taxpayers may not exceed $5 million, with at least $1 million of the credit reserved for tier one areas. A business that claims the credit against corporate income tax may not claim the jobs tax credit.
Hazardous Waste Facility Tax Credit
This credit is for owners of any commercial hazardous waste recycling facility that incurs expenses for hydrologic, geologic, or soil site evaluations. Additionally, these facilities permit fees required by the Florida Department of Environmental Protection. The credit is equal to the amount of expenses incurred as well as to 5% of the cost of placing stationary facility equipment used for recycling hazardous waste during the taxable year. The credit may be carried forward for five years.
Contaminated Site Rehabilitation Tax Credit
This credit is for taxpayers that voluntarily rehabilitate brownfield sites or sites contaminated with dry-cleaning solvent. The credit must be approved by the Florida Department of Environmental Protection. The credit is equal to 50% of rehabilitation costs, up to $500,000 per site per year, and may be carried forward for five years.
State Housing Tax Credit
This credit is for private corporations that build low-income housing projects in urban areas. It is equal to 9% of the eligible basis of any designated project for each year of the credit period for a taxable year.
Salary Tax Credit
This program provides a credit against insurance premium taxes and fees, up to 15 percent of the salary of employees of the affiliated group of corporations that:
- Perform insurance-related activities,
- Are located or based within this state, and
- Are covered by Chapter 443, F.S. (Unemployment Compensation).
Florida Renewable Energy Production Credit
The purpose of this credit is to encourage the development and expansion of facilities that produce renewable energy in Florida. Beginning in 2014 and continuing until 2017, each taxpayer claiming a credit under this section must apply to the Department of Agriculture and Consumer Services by the established date for an allocation of available credits for that year.
This annual credit is based on the taxpayer's production and sale of electricity from a new or expanded Florida renewable energy facility. For a new facility, the credit depends on the taxpayer's sale of the facility's entire electrical production. For an expanded facility, the credit shall be based on the increases in the facility's electrical production.
The credit shall be $0.01 for each kilowatt-hour of electricity produced and sold by the taxpayer to an unrelated party during a given tax year.
Workers' Compensation Administrative Assessment Credit
Amounts assessed and paid by an insurance carrier, self-insurer, or commercial self-insurance fund may be deducted from the amount of any other tax levied by the state upon the premiums, assessments, or deposits for workers' compensation insurance on contracts or policies.
Machinery and Equipment Incentives
Machinery and Equipment Used by a New or Expanding Business to Increase Productive Output (exemption)
- Machinery for a new business must be ordered before the start of productive operations and received within 12 months of the date the business begins its productive operations.
- "Industrial machinery and equipment" means tangible personal property or other property that has a depreciable life of (3) years or more and is used as an integral part in the manufacturing, processing, compounding, or production of tangible personal property for sale, or is exclusively used in spaceport activities.
- Expanding businesses must show a minimum 5% increase in productive output.
Machinery and Equipment Used to Produce Electricity or Steam (exemption)
- This exemption is available to facilities that burn boiler fuels, other than residual oil.
- The electrical or steam energy must be primarily used for manufacturing, processing, compounding, or producing for sale items of tangible personal property in Florida.
- If a facility burns both residual and nonresidual fuels, the exemption is prorated.
- If 15% or less of all electrical or steam energy produced is from residual oil, the full exemption applies.
Industrial Machinery and Equipment Purchases for Eligible Manufacturing Businesses (exemption)
- An "eligible manufacturing business" means any business whose primary activity at the location where the industrial machinery and equipment are located is within the industries classified under manufacturing NAICS (North American Industry Classification System).
- The primary business activity of an eligible business is an activity that represents more than 50% of the activities conducted at the location where the industrial machinery and equipment are located.
- Effective April 30, 2014, purchases of industrial machinery and equipment used at a fixed location in Florida by eligible businesses that manufacture, process, compound, or produce for sale items of tangible personal property are exempt from sales and use tax.
- The exemption also includes parts and accessories for the industrial machinery and equipment if they are purchased before the date the machinery and equipment are placed into service.
- Examples of types of manufacturing establishments represented by the applicable NAICS codes include, but are not limited to food, apparel, wood, paper, printing, chemical, pharmaceutical, plastic, rubber, metal, transportation, and furniture.
Machinery and Equipment and Other Materials for Pollution Control (exemption)
- Purchases of machinery and equipment must be used primarily to control or abate pollutants resulting from manufacturing, processing, compounding, or producing for sale items of tangible personal property at a fixed location.
- Manufacturing facilities. Exemption applies to:
- Specialty chemicals (as defined by statute).
- Bio augmentation products (as defined by statute).
- Privately owned or operated landfills. Exemption applies to equipment, machinery, and materials.
- Construction and demolition debris disposal facilities. Exemption applies to equipment, machinery, and materials.
- Qualifying purchases must be used, installed, or constructed to meet a law enforced by, or a condition of a permit issued by, the Department of Environmental Protection.
Machinery and Equipment Used for Research and Development (exemption)
- Purchases of machinery and equipment used primarily (at least 50%) for research and development are exempt from sales and use tax.
- "Machinery and equipment" includes, but is not limited to, molds, dies, machine tooling, other appurtenances or accessories to machinery and equipment, testing and measuring equipment, test beds, computers, and software, whether purchased or self-fabricated, and, if self-fabricated, includes materials and labor for design, fabrication, and assembly.
- "Research and development" does not include ordinary testing or inspection of materials or products used for quality control, market research, efficiency surveys, consumer surveys, advertising and promotions, management studies, or research in connection with literary, historical, social science, psychological, or other similar nontechnical activities.
Certain Repair and Labor Charges Exemption
This sales and use tax exemption is available to businesses classified under specified Standard Industry Code (SIC) Major Groups for mining, construction, and manufacturing.
It exempts labor charges for the repair of, and parts and materials used in the repair of, and incorporated into industrial machinery and equipment which is used for the manufacture, processing, compounding, production, or preparation for shipping of items of tangible personal property at a fixed location within Florida.
Solar Energy Systems (Exemption)
Also available for individuals
This exemption is for businesses or individuals who own systems that convert sunlight into energy for use as a power source for another system.
Equipment and any component currently certified by Florida Solar Energy Center as a qualifying solar energy component, including solar collectors, pumps and controls, photovoltaic power conditioning equipment, energy storage units, and accessories integral to a qualifying system, is eligible for the credit.
Exemption is not available when the cost of the solar equipment cannot be separated from the total cost of the product (i.e., patio lights, calculators, novelty items).
For more information, visit: http://dor.myflorida.com/dor/taxes/tax_incentives.html
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