State R&D Tax Credits

Alaska provides a state tax credit equal to eighteen percent (18%) of a company’s federal-based credits, which includes the research and development tax credit as one. This credit provides a dollar-for-dollar offset against Alaska tax liabilities. To claim the credit, a company must file Alaska Form 6390 – Alaska Federal-based Credits along with its state tax return.

Arizona offers a refundable and non-refundable research tax credit. The credit is equal to $2.5 Million of QREs and 15% of the QREs in excess of $2.5 Million.

To qualify to receive the refundable portion of excess credit: Company must have less than 150 full-time employees and must apply to the ACA and receive a Certificate of Qualification.

Arkansas offers a non-refundable R&D Tax Credit equal to 20% of QREs in excess of base year QREs. There are additional credits available if companies do development work in strategic areas, if research is university based, or if applied for as a strategic business.

California has a permanent R&D Tax Credit that is calculated similar to the Federal R&D Tax Credit’s regular method. The percentage is equal to 15% of QREs over the base amount and has an indefinite carry forward.

Colorado has a credit available to taxpayers equal to 3% of of QREs over a two year base amount for companies that perform work within their Enterprize Zone

Connecticut has an R&D Credit available only for C-Corporations. There are two credits available: First: The Increments Credit – Equal to 20% of incremental development and partially refundable. Second: The Non-Incremental Credit equal to 6% of the current years R&D Tax Credits (depending on the number of employees and gross receipts)

Delaware has multiple calculation methods available and must submit an application by September 15th. There is a statewide cap of $5 Million per year in R&D available.

Florida offers a tax credit for C-Corporations in targeted industries such as Clean Energy, Life Sciences, Information Technology, Homeland Defense, Financial Services, Emerging Technologies, and Other Manufacturing. The Credit is equal to 10% of Qualified Expenditures over a computed base amount, is limited to 50% of the state tax liability, and has a 23 Million Dollar Cap for all state credits.

Georgia offers an R&D Tax Credit that is one of the best in the country due to its ability to be used against state income tax or against Georgia Payroll Tax. The credit is calculated as 10% over the requisite base amount. Of note, if claiming against payroll in Georgia, form ITWH must be filed within 30 days after the due date of the return and filed electronically through the Georgia Tax Center.

Hawaii offers a tax credit for qualified high technology businesses within the following 12 months of the tax year in which expenditures were incurred. Note that the credit is refundable and equates to approximately 10% of qualifying expenditures.

Idaho offers a tax credit of 5% of current year expenditures over a computed base amount and is available for credit carryforward of 14 years.

Illinois offers a non-refundable tax credit in the amount of 6.5% of qualifying expenditures over a computed base amount. Unused credits are available for the carryforward of 5 years.

Under Indiana code 6-3.1-4.1, Indiana offers an R&D Tax Credit on 15% on expenditures over a computed base amount of up to $1Million. The credit is 10% of amounts over excess of $1Million. Unused credits can be carried forward for up to 10 years.

Iowa offers a great benefit as a fully refundable tax credit and is 6.5% of qualifying expenditures over the computed base amount. Iowa does offer an alternative method to compute the tax credit at 4.55% of expenditures. One thing to note with Iowa is the ability to receive additional credits through Iowa’s Economic Development Authority if in the Enterprize Zone Program of a High-Quality Jobs program. The supplemental credit can provide an additional 10% of qualified expenses.

Lousiana offers a tiered tax credit for companies completing qualified work. The credit is computed as 40% for companies that employ up to 50 Louisiana residents,
20% for companies that employ 50-99 employee, and 8% for companies with 100 or more employees. Prior to claiming the R&D Tax Credits, a company must apply for and obtain a credit certification from the Department of Economic Development. The application requires a $250 fee.

Maine offers two credits in a Regular and Super credit. The regular credit is computed as 5% of the current year expenditures over a computed base amount. The super credit expired in 2014.

Maryland offers a basic and growth R&D Tax Credit to facilitate growth within the state. The credits each require an application by September 15th for expenses incurred in the previous calendar year.

The state of Massachusetts maintains a tax credit for 10% of incremental qualified R&D Expenditure. The credits however are limited to reducing the tax liability below $456 and only 75% of any excise tax due in excess of $25,000. Credits in excess of the taxpayer’s liability may be carried over for 15 years. Credits disallowed because of the 75% rule may be carried over indefinitely.

This state does not offer any R&D Tax Credits, therefore Companies completing work within this state are only eligible for the Federal R&D Tax Credit.

Minnesota offers a credit equal to 10% of the qualifying expenses up to $2 Million and 2.5% for expenses above $2 Million. The credit is available for partnerships and corporations and is available to be carried forward for up to 15 years.

This state does not offer any R&D Tax Credits, therefore Companies completing work within this state are only eligible for the Federal R&D Tax Credit.

This state does not offer any R&D Tax Credits, therefore Companies completing work within this state are only eligible for the Federal R&D Tax Credit.

This state does not offer any R&D Tax Credits, therefore Companies completing work within this state are only eligible for the Federal R&D Tax Credit.

Nebraska offers a tax credit of up to 15% of the federal tax credit allowed and prorated to costs incurred within the state of Nebraska. Research Credits are available offset sales tax, income tax, or refundable. The tax credits can be claimed annually for up to 20 years.

This state does not offer any R&D Tax Credits, therefore Companies completing work within this state are only eligible for the Federal R&D Tax Credit.

New Hampshire offers an R&D Tax Credit for manufacturing expenditures incurred within the state. The credit is the lesser of 10% of expenses incurred or $50,000. The state caps aggregate claims to $2 Million. The Credit application (Form DP165) must be submitted to NH DRA and postmarked no later than June 30 following the tax year during which the research and development occurred. The application should be submitted along with Federal Form 6765.

The New Jersey R&D Tax Credit is available to S and C Corporations, but not partnerships. The credit is unable to be passed through to shareholders. Credits are computed as 10% of qualified expenditures over a computed base amount and unused credits can be carried forward for up to 7 years (with some fields allowing carry forward of up to 15 years.)

New Mexico offers two tax credits in which the claiming business may choose either the Small Business R&D Tax Credit or Technology Jobs and Research Credit. The Small Business Credit is equal to the sum of all gross receipts taxes and 50% of withholding taxes paid on behalf of employees and owners with no more than five percent ownership, that are due to the state. Wherein the Technology Jobs credit is equal to 5% (10% if rural) of qualified expenditures and an additional 5% (10% if rural) of expenditures if certain payroll increase benchmarks are met.

New York offers an R&D Tax Credit of 3% of the federal R&D Tax Credit and available for companies in strategic industries who were creating new jobs. Credits are required to be applied for through the Empire State Development office.

This state does not offer any R&D Tax Credits, therefore Companies completing work within this state are only eligible for the Federal R&D Tax Credit.

North Dakota offers an R&D Tax Credit of 25% of the first $100,000 and 8% of expenses over $100,000 over the computed base amount. Credits are able to be carried forward for 15 years and able to be sold, transferred, or assigned IF the taxpayer registers as a qualified research and development Company.

Ohio offers an R&D Tax Credit against the Commercial Activity (CAT) Tax. Ohio’s credit is computed as 7% of qualifying expenses over a base amount and can be carried forward for up to 7 years.

This state does not offer any R&D Tax Credits, therefore Companies completing work within this state are only eligible for the Federal R&D Tax Credit.

This state does not offer any R&D Tax Credits, therefore Companies completing work within this state are only eligible for the Federal R&D Tax Credit.

Pennsylvania offers an R&D Tax Credit that must be applied for to the Department of Revenue by September 15th of the year following the year in which expenses were incurred. The credit is computed as 10% (20% for qualified small businesses) of expenses that exceed the computed base amount.

Rhode Island offers an R&D Tax credit that can reduce the company’s tax liability by up to 50%. Credits are compuited as 22.5% of qualified expenditures up to $111,111 and 16.9% of expenditures over $111,111.

South Carolina offers an R&D Tax Credit of 5% of qualified expenditures over the computed base. Credits can reduce the tax liability of up to 50% of the company’s current-year tax liability. In addition, South Carolina allows a 10 year carry forward.

This state does not offer any R&D Tax Credits, therefore Companies completing work within this state are only eligible for the Federal R&D Tax Credit.

This state does not offer any R&D Tax Credits, therefore Companies completing work within this state are only eligible for the Federal R&D Tax Credit.

Texas offers an R&D Tax Credit of 5% of the qualified epxneses over the computed base amount. Texas’ R&D Tax Credit is used against the Franchise Tax and can be carried forward for up to 20 years.

Utah offers one of the best opportunities for R&D in the country due to the access to two credits. The first credit is equal to 5% of expenditures over the computed base amount (able to be carried forward for 14 years) . The second credit is computed as 7.5% of expenses in the current year (No carry forward available).

Vermont offers an R&D Tax Credit of up to 27% of the federal credit with a 10 year carry forward.

Virginia offers an R&D Tax Credit of $7M for all companies to claim within the state. The computation is 15% of the first $300,000 of QREs. Note that Virginia requires an application submitted by September 1st of the year following the year in which expenses were incurred.

This state does not offer any R&D Tax Credits, therefore Companies completing work within this state are only eligible for the Federal R&D Tax Credit.

This state does not offer any R&D Tax Credits, therefore Companies completing work within this state are only eligible for the Federal R&D Tax Credit.

Wisconsin offers an R&D Tax Credit of 5% of expenses incurred and over a computed base amount. However, the there is an additional 5% credit for companies designing internal combustion engines, or related to the design and manufacturing of energy-efficient lighting systems, building automation and control systems, or automotive batteries for use in hybrid-electric vehicles, that reduce the demands for natural gas or electricity or improve the efficiency of its use. Credits are able to be carried forward for15 years.

This state does not offer any R&D Tax Credits, therefore Companies completing work within this state are only eligible for the Federal R&D Tax Credit.