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 Commerce and Tourism
BILL: SB 1878
INTRODUCER: Senator Gruters
SUBJECT: Capital Investment Tax Credit
DATE: January 21, 2022
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Renner McKay CM Pre-meeting
2. FT
3. AP
I. Summary:
SB 1878 amends s. 220.191, F.S. to expand an existing credit under the Capital Tax Credit
(CITC) to include certain projects for the development or creation of intellectual property, and to
create an additional tax credit under the CITC relating to intellectual property projects.
The bill amends an existing credit under the CITC for certain high-impact sector facilities, and
enterprise zone and brownfield area headquarters facilities, which is granted against the state
corporate income tax or insurance premium tax. The bill adds to such categories a project or
projects that involve the development or creation of intellectual property and that meet a certain
average wage requirement.
The bill creates a new tax credit for qualifying businesses relating to intellectual property
projects if one or more project is at least an aggregate of $500 million over a 3-year period. The
tax credit is calculated as 20 percent of the eligible wages, salaries, employer-paid taxes and
benefits, or other compensation paid to any individual, including amounts paid through an
employee leasing company, and the direct production costs paid to any business, regardless of
the location, generated by the qualifying project.
The credit is granted against the state corporate income tax, the state sales tax, or both.
The Revenue Estimating Conference has not yet determined the fiscal impact of the bill.
The bill takes effect July 1, 2022.
REVISED: BILL: SB 1878 Page 2
II. Present Situation:
Capital Investment Tax Credit
The Capital Investment Tax Credit (CITC) was established by the Legislature in 1998 to attract
and grow capital-intensive industries in the state.
1
The CITC is currently comprised of two tax
credits–one that is available for three categories of qualifying projects and that provides a credit
against the state corporate income tax or insurance premium tax
2
, and a second that is limited to
certain headquarters facilities and that provides a credit against the corporate income tax.
3
Both
credits are granted to qualified businesses certified by the Department of Economic Opportunity
(DEO).
Credit under s. 220.191(2), F.S.
The first credit under the CITC is available for three categories of qualifying projects:
4
A new or expanded Florida facility that is in a designated high-impact sector
5
and that creates
at least 100 new jobs in Florida (high-impact sector facilities).
A new or expanded Florida facility that is in a qualified target industry
6
and that creates or
retains at least 1,000 jobs in Florida, provided that at least 100 of those jobs are new, pay an
annual average wage of at least 130 percent of the average private sector wage in the area,
and result in a cumulative capital investment of at least $100 million (QTI facilities).
A new or expanded Florida headquarters facility that is located in an enterprise zone and
brownfield area; that creates at least 1,500 jobs, which on average pay at least 200 percent of
the statewide average annual private sector wage; and that makes a cumulative capital
investment in this state of at least $250 million (headquarters facilities).
The annual credit amount is 5 percent of the eligible capital costs generated by the qualifying
project for up to 20 years,
7
beginning with the commencement of operations of the project.
8
The
credit is granted against state corporate income tax liability or premium tax liability generated
by, or arising out of, the qualifying project. Annual limits for the tax credit apply, depending on
the type of qualifying project:
1
Chapter 98-61, Laws of Fla.
2
Section 220.191(2), F.S.
3
Section 220.191(3), F.S.
4
Section 220.191(1)(g) and (2)(a), F.S.
5
The sectors currently designated as high impact are clean energy, life sciences, financial services, information technology,
semi-conductors, transportation equipment manufacturing, advanced manufacturing, or a corporate headquarters facility. See
Department of Economic Opportunity, 2021 Annual Incentives Report, 41, available at https://floridajobs.org/docs/default-
source/reports-and-legislation/2020-2021-annual-incentives-report-final.pdf?sfvrsn=287550b0_2 (last visited Jan. 21, 2022).
6
The current qualified target industries are aviation and aerospace; corporate headquarters; clean technology; defense and
homeland security; financial and professional services; global logistics and trade; information technology; life sciences;
manufacturing; and research and development. See Department of Economic Opportunity, 2021 Annual Incentives Report,
12, available at https://floridajobs.org/docs/default-source/reports-and-legislation/2020-2021-annual-incentives-report-
final.pdf?sfvrsn=287550b0_2 (last visited Jan. 21, 2022).
7
For qualified target industry facilities, the tax credit period is limited to 5 years. See s. 220.191(1)(g)2., F.S.
8
Section 220.191(2)(a), F.S. Eligible capital costs include all expenses incurred in the acquisition, construction, installation,
and equipping of a project from the beginning of construction to the commencement of operations. They do not include the
cost of any property previously owned or leased by the qualifying business. See s. 220.191(1)(c), F.S. BILL: SB 1878 Page 3
For a QTI facility, annual credits against the state corporate income tax may not exceed
50 percent of the increased annual corporate income tax liability or the premium tax liability
generated by, or arising out of, the qualifying project.
9
For high-impact sector facilities and headquarters facilities, the annual credit limits depend
on the amount of cumulative capital investment resulting from the qualifying project:
10
o For a qualifying project resulting in a cumulative capital investment of at least
$100 million, the annual credit may not exceed 100 percent of the annual corporate
income tax liability or premium tax liability generated by, or arising out of, the qualifying
project.
o For a qualifying project resulting in a cumulative capital investment of at least
$50 million to under $100 million, the annual credit may not exceed 75 percent of the
annual corporate income tax liability or premium tax liability generated by, or arising out
of, the qualifying project.
o For a qualifying project resulting in a cumulative capital investment of at least
$25 million to under $50 million, the annual credit may not exceed 50 percent of the
annual corporate income tax liability or premium tax liability generated by, or arising out
of, the qualifying project.
A qualifying project with less than a $25 million cumulative capital investment is not eligible for
the credit.
11
Generally, an unused credit may not be carried backward or forward to apply to tax liabilities in
previous or subsequent years, respectively.
12
However, a business with a qualifying project
resulting in a cumulative capital investment of at least $100 million may apply unused credits
beginning with the 21st year after the commencement of the project’s operations and ending the
30th year after the commencement of the project’s operations.
13
The credit may not be assigned or transferred, except by a qualifying business establishing a
qualifying project that includes locating a new solar panel manufacturing facility in Florida and
that generates a minimum of 400 jobs within 6 months after commencement of operations, with
an average salary of at least $50,000. Such business may assign or transfer its annual credit or
any portion thereof to any other business, subject to certain limitations and conditions.
14
Credit under s. 220.191(3), F.S.
The second credit under the CITC is limited to qualifying businesses that establish a
headquarters facility qualifying project. The annual credit amount is the lesser of $15 million or
5 percent of the eligible capital costs made in connection with a qualifying project for up to
20 years, beginning with the commencement of the project.
15
The credit is granted against the
9
Section 220.191(1)(g)2., F.S.
10
Section 220.191(2)(a), F.S.
11
Section 220.191(2)(b), F.S.
12
Section 220.191(2)(a), F.S.
13
Section 220.191(2)(d), F.S.
14
Section 220.191(2)(c), F.S.
15
Section 220.191(3)(a), F.S. BILL: SB 1878 Page 4
state corporate income tax liability of the qualifying business. The total tax credit is limited to
100 percent of the qualifying project’s eligible capital costs.
16
Unused credits may be carried forward for up to 20 years after the commencement of the
project’s operations.
17
The credit may be used by certain related entities of the qualifying
business.
18
Certification of Qualifying Businesses and Issuance of Tax Credits
The DEO must certify a business as eligible to receive either of the CITC tax credits before the
commencement of operations of a qualifying project. If a business is certified, the DEO will
enter into an agreement with the business that specifies the planned commencement date of
operations and the total amount of credit the business can expect if the project proceeds as
planned. Agreements are drafted so that a qualified business’s annual credit amount begins on
the date of commencement of operations, beginning the 20-year credit period. If for some reason
operations do not commence on time, the 20-year window is not adjusted.
19
Before receiving a
tax credit each year, a qualifying business must achieve and maintain its minimum employment
goals beginning with the commencement of operations of a qualifying project.
20
Qualifying
businesses must also affirmatively demonstrate to the Department of Revenue (DOR) that they
meet job creation and capital investment requirements.
21
Economic Impact
According to the DEO, there were 65 active CITC awardees with 31 reporting performance as of
Fiscal Year 2020-2021; the DEO confirmed 3,216 jobs created and over $313 million in capital
investment in said fiscal year.
22
Over $70 million in tax credits were approved to be claimed by
qualified business in calendar year 2020.
23
16
Id.
17
Section 220.191(3)(b), F.S.
18
Section 220.191(3)(c), F.S.
19
Florida Senate Committee on Finance and Tax, Issue Brief 2012-2014: Review of the Capital Investment Tax Credit
(September 2011), available at https://www.flsenate.gov/PublishedContent/Session/2012/InterimReports/2012-204ft.pdf (last
visited Jan. 21, 2022). See also s. 220.191(5), F.S.
20
Section 220.191(4), F.S.
21
Section 220.191(7), F.S.
22
Department of Economic Opportunity, 2021 Annual Incentives Report, 8, available at https://floridajobs.org/docs/default-
source/reports-and-legislation/2020-2021-annual-incentives-report-final.pdf?sfvrsn=287550b0_2 (last visited Jan. 21, 2022).
23
Id at 37. BILL: SB 1878 Page 5
Select State Taxes
The following describes select Florida taxes, which the bill provides credits against.
Corporate Income Tax
Florida imposes a tax on the taxable income of certain corporations and financial institutions
doing business in Florida.
24
The current rate is 5.5 percent
25
of a taxpayer’s net income for its
taxable year (the calendar or fiscal year or period upon which its net income is computed).
26
The calculation of Florida corporate income tax starts with a corporation’s federal taxable
income.
27
Taxable income earned by corporations operating in more than one state is taxed in
Florida on an apportioned basis using a formula based 25 percent on property, 25 percent on
payroll, and 50 percent on sales.
28
Income that is apportioned to Florida using this formula is
then subject to the Florida income tax. The first $50,000 of net income is exempt, effective with
taxable years beginning January 1, 2013.
29
Corporate income tax net collections in Fiscal Year 2020-2021 were a little over $3 billion.
30
Insurance Premium Tax
Florida imposes on insurers a tax on insurance premiums. For the tax imposed by
s. 624.509(1), F.S., tax is due on:
Insurance premiums;
Premiums for title insurance;
Assessments, including membership fees and policy fees and gross deposits received from
subscribers to reciprocal or interinsurance agreements; and
Annuity premiums or considerations.
The general tax rate is 1.75 percent of gross receipts on account of life and health insurance
policies covering Florida residents and on account of all other types of policies and contracts
covering property, subjects, or risks located, resident, or to be performed in Florida, minus
reinsurance and return premiums.
31
Annuity policies or contracts held in Florida are taxed at
1 percent of gross receipts, and direct written premiums for bail bonds are taxed at 1.75 percent,
excluding any amounts retained by licensed bail bond agents or appointed managing general
agents.
32
The insurance premium tax is collected by the DOR and distributed to the General
24
Chapter 220, F.S.
25
The tax rate was adjusted downward to 4.458 percent pursuant to s. 220.1105, F.S., for taxable years beginning on or after
January 1, 2019. Pursuant to s. 220.1105(5), F.S., the rate returned to 5.5 percent for taxable years beginning on or after
January 1, 2022.
26
Sections 220.11(2) and 220.63(2), F.S.
27
Section 220.12, F.S.
28
Section 220.15, F.S.
29
Section 220.14, F.S.
30
Revenue Estimating Conference, General Revenue Consensus Estimating Conference Comparison Report (August 17,
2021), 27, available at http://www.edr.state.fl.us/Content/conferences/generalrevenue/grpackage.pdf (last visited Jan. 21,
2022).
31
Section 624.509(1), F.S.
32
Id. BILL: SB 1878 Page 6
Revenue Fund.
33
Total insurance premium tax collections in Fiscal Year 2020-2021 were
$1.1 billion.
34
Sales and Use Tax
Florida levies a 6 percent sales and use tax on the sale or rental of most tangible personal
property, admissions,
35
transient rentals,
36
and a limited number of services, and a 5.5 percent
sales and use tax on commercial real estate rentals
37
(state sales tax). Chapter 212, F.S.,
authorizes the levy and collection of the state sales tax, and provides exemptions and credits
applicable to certain items or uses under specified circumstances.
38
Florida requires a dealer to
add the tax to the sales price of the taxable good or service and collect it from the purchaser at
the time of sale.
39
Total sales tax collections in Fiscal Year 2021-2022 is estimated at
$32.7 billion.
40
In addition to the state sales tax, county and municipal governments and school districts are
authorized to levy certain local discretionary sales surtaxes (also referred to as local option sales
taxes), subject to certain requirements and limitations.
41
III. Effect of Proposed Changes:
The bill amends s. 220.191, F.S., to expand the credit under s. 220.191(2), F.S., to add certain
projects involving the development or creation of intellectual property to the list of eligible
categories, and to create one new tax credit under the CITC.
Expansion of the Credit
The bill expands the credit by adding to the categories of qualifying projects a project involving
the development or creation of intellectual property, which may consist of one or more projects
with different start and completion dates, provided that the project’s jobs in Florida pay at least
150 percent of the annual average private sector wage in the area (intellectual property project).
The bill defines “intellectual property” as a qualifying copyrightable project for which the
cumulative intellectual property investment is principally paid directly or indirectly for the
creation of the project. The bill provides examples of “qualifying copyrightable projects,” as
television or streaming video projects that include only the following content: series, pilots,
commercial advertisements, music videos, music, animation, interactive entertainment, or sound
recording projects used in series or pilots. Projects are limited to being recorded in this state, in
whole or in part. The term also includes projects provided for distribution using delivery systems
33
Section 624.509(3), F.S.
34
Supra note 30, at 34.
35
Section 212.04, F.S.
36
Section 212.03, F.S.
37
Section 212.031, F.S.
38
Section 212.02(14)(a), F.S.
39
See ss. 212.07(2) and 212.06(3)(a), F.S.
40
Office of Economic and Demographic Research, The Florida Legislature, Florida Tax Handbook, Including Fiscal Impact
of Potential Changes, 155 (2021), available at http://edr.state.fl.us/Content/revenues/reports/tax-
handbook/taxhandbook2021.pdf (last visited Jan. 21, 2022).
41
See ss. 212.054 and 212.055, F.S. BILL: SB 1878 Page 7
that include film, videotape, computer disc, laser disc, and any element of the digital domain
from which the program is viewed or reproduced and which is intended for licensing for
exhibition by individual television stations, groups of stations, networks, cable television
stations, public broadcasting stations, corporations, live venues, the Internet, or any other
channel or exhibition except for theaters. Software or feature-length films exceeding 80 minutes
in length are excluded.
The bill also expands the definition of “eligible capital costs” to include a qualifying project for
the development or creation of intellectual property during the period from the start date of the
project to the completion of the project.
The bill defines “employer-paid taxes and benefits” to include social security tax; Medicare tax;
federal unemployment and state reemployment assistance taxes; workers’ compensation
premiums and benefits; vacation pay, holiday pay, and sick pay; payroll-handling fees; mileage;
car allowances; housing allowances; and per diem. “Direct production costs” is defined to mean
direct expenses related to the preproduction, development or filming, and postproduction of
intellectual property, but does not include the distribution and marketing of intellectual property.
A qualifying business establishing an intellectual property project would be eligible for a
corporate income tax credit or an insurance premium tax credit for 5 percent of the above
expenses.
The current requirements, limitations, and other provisions of the s. 220.191(2), F.S., credit, as
discussed above, apply to intellectual property projects. The applicable annual credit limits for
intellectual property projects is the same as for high-impact sector facilities and headquarters
facilities.
Creation of Credit for Intellectual Property Investment
The bill creates a tax credit for qualifying business establishing intellectual property projects that
meet certain levels of cumulative intellectual property investment (IP investment credit).
The bill defines “cumulative intellectual property investment” as the total investment for the
development of intellectual property during the period from the start date of the project to the
completion of the project in buildings or equipment; in wages, salaries, or other compensation
paid to employees, including amounts paid through an employee leasing company and any
employer-paid taxes and benefits regardless of location.
Unlike existing CITC credits, the IP investment credit is granted against the state corporate
income tax, the state sales tax, or a stated combination of the two.
To qualify for the credit, a qualifying business must elect to make a cumulative intellectual
property investment of one or more projects is at least an aggregate of $500 million over a 3-year
period. The tax credit is calculated as 20 percent of the eligible wages, salaries, employer-paid
taxes and benefits, or other compensation paid to any individual, including amounts paid through
an employee leasing company, and the direct production costs paid to any business, regardless of BILL: SB 1878 Page 8
the location, generated by the qualifying project. The tax credit must be granted against the tax
liability of the qualifying business.
The tax credit may be used in any one year or years beginning with the commencement of the
project and ending the second year after the completion of the project.
The DEO must grant tax credits within 30 days after it certifies the costs. If the qualifying
business fails to meet the required cumulative intellectual property investment level, any
previously granted IP investment credit must be revoked and rescinded. A qualified business is
subject to a 10 percent penalty and interest, along with repayment of the credit, if a revoked and
rescinded credit has already been claimed on a return or transferred to another business.
Other Changes
The bill amends the definition of “cumulative investment” under the Innovation Incentive
Program in s. 288.1089, F.S., to specify that the expanded definition of “eligible capital costs”
for CITC made by the bill does not apply to that program, which incorporates the definition of
“eligible capital costs” by reference.
The provisions of the bill do not apply to any qualifying project application certified before
December 31, 2021.
The bill takes effect July 1, 2022.
IV. Constitutional Issues:
A. Municipality/County Mandates Restrictions:
None.
B. Public Records/Open Meetings Issues:
None.
C. Trust Funds Restrictions:
None.
D. State Tax or Fee Increases:
None.
E. Other Constitutional Issues:
None. BILL: SB 1878 Page 9
V. Fiscal Impact Statement:
A. Tax/Fee Issues:
The Revenue Estimating Conference has not yet determined the fiscal impact of the bill.
B. Private Sector Impact:
A qualified business establishing a qualifying project involving the development or
creation of intellectual property may benefit from substantial reductions in state corporate
income tax, insurance premium tax, or state sales tax liabilities through the credits
amended and created by the bill.
C. Government Sector Impact:
None.
VI. Technical Deficiencies:
None.
VII. Related Issues:
On line 44 of the bill, cumulative intellectual property investment includes employer-paid taxes
and benefits, regardless of location. On line 119 of the bill, a qualifying copyrightable project is
limited to projects recorded in Florida, in whole or in part.
It is unclear if regardless of location or in whole or in part would allow a qualifying business
establishing intellectual property projects outside of Florida to be eligible for the Florida tax
credits.
VIII. Statutes Affected:
This bill substantially amends sections 220.191 and 288.1089 of the Florida Statutes.
IX. Additional Information:
A. Committee Substitute – Statement of Changes:
(Summarizing differences between the Committee Substitute and the prior version of the bill.)
None.
B. Amendments:
None.
This Senate Bill Analysis does not reflect the intent or official position of the bill’s introducer or the Florida Senate.