If you are planning to open a new business, relocate or expand an existing business in Florida, it may pay to investigate whether your business can qualify for tax breaks or incentives. One valuable tax break, which is available in a number of Florida counties and cities, is the Economic Development Ad Valorem Tax Exemption. Authorized by Florida Statute 196.1995, this incentive provides an exemption of up to 10 years from the property taxes (both real property taxes and tangible personal property taxes) payable with respect to business improvements such as a new building, building expansion or new equipment purchased in connection with relocating or expanding. For a large capital-intensive new facility or expansion, the tax savings can be millions of dollars. However, not every county and city in Florida offers the exemption. The exemption is only available if a voter referendum has passed in the county or city, authorizing the county or city government to offer the exemption (see the attached map showing the Counties where the exemption is available).
Assuming that the Economic Development Ad Valorem Tax Exemption is available in the county or city where you are locating or expanding, there are requirements set forth in the Florida Statutes which must be met in order to qualify. For a new business facility or the expansion of an existing business in either the manufacturing sector or in a target industry, the business will qualify if it establishes 10 or more new full time jobs paying an average wage that is above the average wage in the area. The Florida Department of Economic Opportunity, in consultation with Enterprise Florida, maintains a list of target industries, including corporate headquarters, life sciences, information technology and aerospace. Most counties and cities also maintain their own lists of target industries.
For a new business facility or expansion which is not in the manufacturing sector or in a target industry, the business may still qualify if it establishes 25 or more new full time jobs, and the new or expanding facility receives less than one-half of its total sales revenue from sales in the State of Florida for each year the exemption is claimed. Furthermore, with respect to an expanding business, the expansion must be on a site located within the same county or municipality as the existing business, and must be colocated with a facility owned by the existing business or under common control with the existing business. Also, it must result in a net increase in employment at that facility of not less than 10 percent or an increase in productive output or sales of not less than 10 percent.
A new business or expansion may also qualify for the exemption by locating in an Enterprise Zone or brownfield area, if the site is clearly separate from any other commercial or industrial operation owned by the same business or organization, or the business increases operations on a site located within the same zone or area colocated with a commercial or industrial operation owned by the same business or under common control with the same business.
A business relocating to Florida can also qualify if it is “newly domiciled” in Florida, and opens an office employing 50 or more full time employees, provided that such office is on a site clearly separate from any other commercial or industrial operation owned by the same business.
If the business qualifies under one of the sets of criteria listed above, then the business can apply to the appropriate county or city for the Ad Valorem Tax Exemption. Pursuant to Florida Statute 196.1995, in considering the application, the county or city is required to take into account the following: (a) the total number of net new jobs to be created by the applicant; (b) the average wage of the new jobs; (c) the capital investment to be made by the applicant; (d) the type of business or operation and whether it qualifies as a target industry as may be identified from time to time by the board of county commissioners or the governing authority of the municipality; (e) the environmental impact of the proposed business or operation; (f) the extent to which the applicant intends to source its supplies and materials within the applicable jurisdiction; and (g) any other economic-related characteristics or criteria deemed necessary by the board of county commissioners or the governing authority of the municipality. The county or city may grant an exemption not to exceed 10 years. Counties and cities that offer the Ad Valorem Tax Exemption may have their own specific sets of criteria for determining whether the exemption will be granted (subject to the statutory requirements listed above) and the duration of the exemption. Also, local rules may determine the percentage of the exemption and may provide for the exemption to be phased out over several years.
Qualifying for the Ad Valorem Tax Exemption can be difficult and time consuming. However, for a large capital-intensive expansion the tax savings can be well worth the effort. If you are considering opening a new business facility, or relocating or expanding an existing facility, and have questions regarding the Ad Valorem Tax Exemption or any other incentives that may be available for your business, please call a member of Dean Mead’s Real Estate Development Industry Team.