The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Finance and Tax
BILL: CS/SB 952
INTRODUCER: Military and Veterans Affairs, Space, and Domestic Security Committee and Senator
Gruters
SUBJECT: Taxation
DATE: February 1, 2022
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Lloyd Caldwell MS Fav/CS
2. Covin Babin FT Pre-meeting
3. AP
Please see Section IX. for Additional Information:
COMMITTEE SUBSTITUTE - Substantial Changes
I. Summary:
CS/SB 952 creates a Documentary Stamp Tax exemption for federal loans made in response to a
state of emergency declared by executive order or proclamation of the Governor. The bill also
increases the combined amount of tax credits which may be awarded to qualified businesses for
research and development under s. 220.196, F.S., from $9 million to $50 million in any calendar
year and provides that the increase first applies to the 2022 allocation of tax credits for expenses
incurred in the 2021 calendar year.
The Revenue Estimating Conference estimates that the portion of the bill that grants the
exemption from Documentary Stamp Tax will reduce General Revenue Fund receipts by zero or
an indeterminate amount beginning in Fiscal Year 2022-2023. The portions of the bill that
increase the credits allowed for Research and Development Expenditures will reduce General
Revenue Fund receipts by $41 million dollars in Fiscal Year 2022-2023 and by $41 million in
future years.
The bill takes effect upon becoming a law.
REVISED: BILL: CS/SB 952 Page 2
II. Present Situation:
Documentary Stamp Tax
Florida levies a Documentary Stamp Tax on certain documents, which is comprised of two taxes
imposed on different bases at varying rates. The tax on deeds and other documents related to real
property is 70 cents per $100,
1
and the tax on bonds, debentures, certificates of indebtedness,
promissory notes, nonnegotiable notes, and other written obligations to pay money is 35 cents
per $100.
2,3
Documentary Stamp Taxes levied on promissory notes, nonnegotiable notes, and
written obligations may not exceed $2,450.
4
Documentary Stamp Tax revenue accounted for approximately 3.3 percent of the state’s General
Revenue in Fiscal Year 2021-2022.
5
Certain transactions are exempt from the Documentary Stamp Tax.
6
Any loan made by the Small
Business Emergency Bridge Loan Program in response to a disaster for which the Governor
declares a state of emergency and any loan made by the Agricultural Economic Development
Program pursuant to s. 570.82, F.S., are exempt from the Documentary Stamp Tax.
7
Federal CARES Act
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law on
March 27, 2020, in response to the COVID-19 pandemic. The CARES Act established, among
other programs, the Paycheck Protection Program (PPP), which expanded the scope of both the
businesses eligible for – and allowable uses of – loans made under section 7(a) of the Small
Business Act.
8
In addition to businesses which had already been eligible for Small Business
Administration (SBA) loans, eligibility was expanded to businesses, nonprofits, veterans’
organizations, and tribal businesses with fewer than 500 employees or that meet the size
standards based on the business’s NAICS code.
9
COVID-19 State of Emergency
On March 9, 2020, Governor DeSantis issued Executive Order 20-52, which declared that a state
of emergency existed in Florida due to the COVID-19 pandemic.
10
On April 6, 2020, Governor
DeSantis issued Executive Order 20-95, suspending the collection of Documentary Stamp Taxes
1
Section 201.02(1)(a), F.S.
2
Section 201.07, F.S.
3
Section 201.08(1)(a), F.S.
4
Id.
5
The Florida Legislature, Fiscal Analysis in Brief, 2021 Legislative Sessions Including Special Session A, 32 (July 2021),
available at
http://edr.state.fl.us/Content/revenues/reports/fiscal-analysis-in-brief/FiscalAnalysisinBrief2021.pdf (last visited Jan. 27,
2022).
6
Chapter 201, F.S.
7
Section 201.25, F.S.
8
Coronavirus Aid, Relief, and Economic Security Act, Pub. L. No. 116-136, § 1102, 134 Stat. 286 (2020).
9
Coronavirus Aid, Relief, and Economic Security Act, Pub. L. No. 116-136, § 1102, 134 Stat. 288 (2020).
10
Governor Ron DeSantis, Fla. Exec. Order No. 20-52 (Mar. 9, 2020), available at https://www.flgov.com/wp-
content/uploads/orders/2020/EO_20-52.pdf (last visited Jan. 28, 2022). BILL: CS/SB 952 Page 3
levied on notes and other written obligations made under Title I of the federal CARES Act.
11
The
suspension remained in effect until the expiration of Executive Order 20-52 on May 3, 2021,
when the Governor issued Executive Orders 20-101 and 102 ending the state of emergency
related to COVID-19.
12,13
Federal Tax Credit
The U.S. Research and Experimentation Tax Credit
14
was created in 1981 as part of the
Economic Recovery Tax Act, a comprehensive package of initiatives designed to boost U.S.
business competitiveness and encourage investment and savings by American taxpayers during a
period of economic recession.
15
In 2015, the Protecting Americans from Tax Hikes (PATH) Act
permanently extended the Research and Experimentation Tax Credit (also known as the
Research and Development Tax Credit or R&D) after 16 temporary extensions.
16
In September 2021, the Internal Revenue Service (IRS) issued a Memorandum containing new
guidance for taxpayers who apply for a refund claim for a research credit. This memorandum
describes new requirements for increased documentation and more detailed information,
including a declaration under the penalty of perjury verifying that the information and facts
provided by the taxpayer are accurate.
17
These changes remained in a grace period until January
10, 2022, and then transitioned to a one-year transition period during which the IRS provides
taxpayers 30 days to perfect research credit claims for refund prior to a final determination by the
IRS.
18
To qualify as a valid research credit claim request, the taxpayer, at a minimum, must:
Identify all the business components to which the I.R.C. § 41 research credit claim relates for
that year.
For each business component,
o Identify all research activities performed;
o Identify all individuals who performed each research activity; and
o Identify all the information each individual sought to discover.
Provide the total qualified employee wage expenses, total qualified supply expenses, and
total qualified contract research expenses for the claim year.
19
11
Governor Ron DeSantis, Fla. Exec. Order No. 20-95 (Apr. 6, 2020), available at https://www.flgov.com/wp-
content/uploads/orders/2020/EO_20-95.pdf (last visited Jan. 28, 2022).
12
Section 252.36(2), F.S., provides that states of emergency may not continue for more than 60 days unless renewed by the
Governor.
13
Governor Ron DeSantis, Fla. Exec. Orders No. 21-101 and 102 (May 3, 2021), available at https://www.flgov.com/2021-
executive-orders/ (last visited Jan. 28, 2022).
14
The U.S. Research and Experimentation Tax Credit is also known as the Research and Development Tax Credit, 26 U.S.C
§ 41, Credit for increasing research activities.
15
Francisco Moris, The U.S. Research and Experimentation Tax Credit in the 1990s (July 2005), National Science
Foundation Report, available at https://wayback.archive-
it.org/5902/20150627200929/http://www.nsf.gov/statistics/infbrief/nsf05316/ (last visited on Jan. 28, 2022).
16
U.S. Department of the Treasury, Office of Tax Analysis, Research and Experimentation (R&E) Credit, available at
https://www.treasury.gov/resource-center/tax-policy/tax-analysis/Documents/RE-Credit.pdf (last visited Jan. 28, 2022).
17
Internal Revenue Service, Office of the Chief Counsel, Memorandum Relating to I.R.C. § 41 Research Credit Refund
Claims (September 17, 2021), available at https://www.irs.gov/pub/irs-lafa/20214101f.pdf (last visited Jan. 28, 2022).
18
Id.
19
Id. at 2. BILL: CS/SB 952 Page 4
Florida Tax Credit
Florida law authorizes a R&D tax credit
against state corporate income taxes for
certain businesses with qualified research
expenses.
20
Under the federal definition, a
qualified research expense includes
in-house research expenses and contract
research expenses, including any wages
paid or incurred to employees, supplies
used in the conduct of qualified research,
and any amounts paid or incurred to
another person for the right to use
computers in the conduct of qualified
research.
21
A business is eligible for the tax credit if it:
Has qualified research expenses in Florida in the taxable year exceeding the base amount;
22
Claims, and is allowed, a research credit for such qualified expenses under federal law for the
same taxable year; and
Is in a qualified target industry,
23
specifically manufacturing, life sciences, information
technology, aviation and aerospace, homeland security and defense, cloud information
technology, marine sciences, materials sciences, or nanotechnology.
24
The tax credit is 10 percent of the difference between the current tax year’s R&D expenditures in
Florida and the average of R&D expenditures over the previous four tax years. However, if the
business has existed for fewer than four years, then the credit amount is reduced by 25 percent
for each year the business or predecessor corporation did not exist.
25
The state tax credit taken in
any taxable year may not exceed 50 percent of the company’s remaining net corporate income
tax liability under ch. 220, F.S., after all other credits to which the business is entitled have been
applied.
26
Any unused credits may be carried forward by the business for up to five years
following the year in which the qualified research expenses were incurred.
27
Currently, the maximum amount of R&D credits that may be approved by the Department of
Revenue (DOR) during any calendar year is $9 million. Applications for the credit may be filed
with the DOR on or after March 20 and before March 27 for qualified research expenses incurred
20
Section 220.196. “Qualified research expenses” is defined as research expenses qualifying for the credit under federal law
for in-house research expenses incurred in Florida or contract research expenses incurred in Florida.
21
See 26 U.S.C. §41(b). Credit for increasing qualified research; qualified research expenses.
22
“Base amount” means the average of the business’ qualified research expenses in Florida allowed under 26 U.S.C. s. 41 for
the preceding 4 taxable years. Section 220.196(1)(a), F.S.
23
The Department of Economic Opportunity (DEO) certifies whether a business is a qualified target industry business,
pursuant to s. 220.196(2)(a)3., F.S.
24
See s. 220.196(2)(a)3., F.S.
25
See s. 220.196(2)(b), F.S.
26
See s. 220.196(2)(c), F.S.
27
See s. 220.196(2)(d), F.S.
Figure 1: Data source: Florida Department of Revenue Annual Allocation
Reports, available at:
https://floridarevenue.com/taxes/Documents/flCitRDCredit.pdf
Figure 1: Data source: Florida Department of Revenue Annual Allocation
Reports, available at:
https://floridarevenue.com/taxes/Documents/flCitRDCredit.pdf BILL: CS/SB 952 Page 5
within the preceding calendar year. If the total amount of credits applied for exceeds the annual
cap, credits are allocated on a prorated basis.
28
Eligible taxpayers are notified of the amount of
credit allocated to them and the year for which the credit may be claimed. The chart above
illustrates the number of applications received and approved by the DOR since program
inception.
29
Since the program’s inception, funding requests have annually exceeded the amount of credit
available to be allocated as the chart below illustrates. The statutory cap has been more than
$9 million twice: $16.5 million during the 2017 calendar year and $23 million in the first
program year. Except for the initial year when funds were distributed on a first come, first served
basis, all qualified applicants receive a pro-rated amount of their funding request if the
application is approved.
30
Qualified Target Industry Businesses
The qualified target industry program is used to
identify businesses that are eligible for tax
refunds and which can create jobs with higher
than average wages in industries that are
expected to have a positive economic impact.
31
A
target industry business is defined in Florida law
as a corporate headquarters business or any
business that is engaged in one of the target
industries identified pursuant to criteria
developed by DEO in consultation with
Enterprise Florida, Inc. (EFI).
32
The criteria
includes future growth, stability, high wage, market and resource independence, industrial base
diversification and strengthening, and positive economic impact.
33
EFI lists the recognized
qualified target industries as manufacturing, corporate headquarters, research and development,
global logistics, cleantech, life sciences, financial and professional services, aviation and
aerospace, homeland security and defense, infotech, emerging technologies, and other
manufacturing.
34
In Fiscal Year 2019-2020, the DEO reported that 74 of its executed agreements
were with businesses in qualified target industries. These agreements had a projected capital
investment of approximately $2.2 billion and an average contracted annual wage of $65,176.
35
28
See s. 220.196(2)(e), F.S.
29
Department of Revenue, Research and Development Tax Credit for Florida Corporate Income Tax (2015-2021),
https://floridarevenue.com/taxes/Documents/flCitRDCredit.pdf (last visited Jan. 28, 2022).
30
Id.
31
Florida Department of Economic Opportunity and Enterprise Florida, 2020 Incentives Report, 12, available at
https://floridajobs.org/docs/default-source/reports-and-legislation/2019-2020-annual-incentives-report-
final.pdf?sfvrsn=af674ab0_2 (last visited Jan. 28, 2022).
32
See s. 288.106(2)(n), F.S.
33
See s. 288.106(2)(q), F.S.
34
Supra note 31.
35
Florida Department of Economic Opportunity and Enterprise Florida, 2020 Incentives Report, p. 13, available at
https://floridajobs.org/docs/default-source/reports-and-legislation/2019-2020-annual-incentives-report-
final.pdf?sfvrsn=af674ab0_2 (last visited Jan. 28, 2022). BILL: CS/SB 952 Page 6
III. Effect of Proposed Changes:
Section 1 amends s. 201.25, F.S., to exempt from the Documentary Stamp Tax, any federal loans
relating to a state of emergency declared through either an executive order or a proclamation
from the Governor pursuant to s. 252.36, F.S.
Section 2 amends s. 220.196, F.S., to increase the total amount of annual Research and
Development Tax Credits available each calendar year from $9 million to $50 million and to
remove obsolete language relating to the 2018 calendar year.
Section 3 provides that the amendment made to s. 220.196, F.S. in the bill first applies to the
2022 allocation of tax credits for expenses incurred in the 2021 calendar year.
Section 4 provides the act shall take effect upon becoming a law.
IV. Constitutional Issues:
A. Municipality/County Mandates Restrictions:
Article VII, section 18 of the Florida Constitution requires a two-thirds vote of the
membership of each house of the Legislature to pass legislation requiring counties and
municipalities to spend funds, limit their ability to raise revenue, or reduce the percentage
of a state tax shared with them. This bill does not require counties and municipalities to
spend funds, limit their ability to raise revenue, or reduce the percentage of a shared state
tax. Therefore, the provisions of Article VII, section 18 of the Florida Constitution do not
apply.
B. Public Records/Open Meetings Issues:
None.
C. Trust Funds Restrictions:
None.
D. State Tax or Fee Increases:
The bill does not create or raise a state tax or fee. Therefore, the requirements of Art. VII,
s. 19 of the Florida Constitution do not apply.
E. Other Constitutional Issues:
None identified. BILL: CS/SB 952 Page 7
V. Fiscal Impact Statement:
A. Tax/Fee Issues:
The Revenue Estimating Conference estimates that the portion of the bill that grants the
exemption from Documentary Stamp Tax will reduce General Revenue Fund receipts by
zero or an indeterminate amount beginning in Fiscal Year 2022-2023. The portions of the
bill that increase the credits allowed for Research and Development Expenditures will
reduce General Revenue Fund receipts by $41 million dollars in Fiscal Year 2022-2023
and by $41 million in future years.
36
B. Private Sector Impact:
For eligible taxpayers, the bill would provide tax savings.
C. Government Sector Impact:
None.
VI. Technical Deficiencies:
None.
VII. Related Issues:
None.
VIII. Statutes Affected:
This bill substantially amends the following sections of the Florida Statutes: 201.25 and 220.196,
F.S.
IX. Additional Information:
A. Committee Substitute – Statement of Substantial Changes:
(Summarizing differences between the Committee Substitute and the prior version of the bill.)
CS by Military and Veterans Affairs, Space, and Domestic Security on January 25,
2022:
The committee substitute changed the effective date of the bill from July 1, 2022, to upon
becoming a law.
B. Amendments:
None.
36
The Revenue Estimating Conference, 2022 Regular Session Revenue Estimating Conference: Impact Conference Results,
p. 273-274 (Jan. 28, 2022), available at
http://edr.state.fl.us/Content/conferences/revenueimpact/archives/2022/_pdf/Impact0128.pdf (last visited Jan. 28, 2022). BILL: CS/SB 952 Page 8
This Senate Bill Analysis does not reflect the intent or official position of the bill’s introducer or the Florida Senate.