State R&D Tax Credits

Arizona

Credit Name: Form 308 – Credit for Increased Research Activities

Expiration Date: Unknown

Does it apply to C corps and pass-through entities?: Yes

Credit Carry forward: 15 years before 01/01/22, with varying restrictions based on tax year credit was earned. For tax years beginning after 12/31/2021, carryforward is 10 years.

Description:

For tax years beginning before 12/31/2030: Credit is 24% of the first $2.5M in excess QREs, 15% of excess QREs over $2.5M.

For tax years beginning from and after 12/31/2030: Credit is 20% of the first $2.5M in excess QREs, 11% of excess QREs over $2.5M.

Effective for tax years beginning from and after December 31, 2022, Arizona will permit taxpayers to compute the AZ credit using either the regular method or the Alternative Simplified Credit. To be eligible to claim the simplified credit, the taxpayer must claim the ASC on its federal return.

Other Notes: Partially refundable beginning tax year 2011. If taxpayer has less than 150 employees, they may elect to receive 75% of excess credit refunded and waive the remaining 25% instead of carrying all excess credit forward. Taxpayer must apply to the Arizona Commerce Authority and receive a Certificate of Qualification related to the credit for increased research activities to be eligible for a refund.