Short answer: yes, Florida has a state research credit, but it is narrow and few businesses use it. The credit most Florida businesses claim is the federal R&D credit, which works the same way in every state.

The federal credit

The federal credit is claimed on the federal return. It rewards work that tries to develop or improve a product, process, software or technique through a process of experimentation. Florida has no personal income tax, but that does not stop owners from claiming the federal credit. Many Florida companies are S corporations or LLCs, so the credit passes through to the owners and is used against their federal tax.

What the Florida credit is

Florida's state credit is a separate program under the state's corporate income tax. It is limited to qualified target industry businesses, and a business needs a certification from the state's economic development agency before it can apply. The application is made to the Florida Department of Revenue during a set window in the year, and it covers the prior calendar year's research expenses.

Why many Florida businesses do not use it

• It sits against the corporate income tax, so it matters mainly to corporations that pay that tax

• The business has to be in a qualifying target industry and be certified

• There is an overall cap on what the state will allocate, so credits are limited

• The application window is short and the paperwork is separate from the federal return

The differences at a glance

• Federal credit: open to businesses of any size and structure that meet the four-part test, claimed on the federal return

• Florida credit: limited to certain corporations in target industries, requires state certification and an application, and has a cap

What this means for a Florida business

Start with the federal credit. If your team designs, builds or improves something, check the work against the four-part test. If it passes, a study documents the projects and the expenses so your CPA can claim the credit.

If you are a corporation in one of the state's target industries, ask your CPA whether the state credit is worth a look as well. The two programs are separate, and how they interact should be confirmed for your situation.

Who in Florida claims the federal credit

We see it most in manufacturing, software, marine, medical device, engineering and construction. You can browse examples by industry or read the Florida guide.

Common questions

• Do S corporations and LLCs get the federal credit? Yes, it passes through to the owners

• Does Florida's lack of a personal income tax matter? Not for the federal credit

• Can I claim prior years? Often, by amended return, as long as the years are open

Not sure where you stand? A free 5 to 10 minute screening will tell you whether your work looks like it qualifies.