State R&D Tax Credits
Credit Name: §6015. Research and Development Tax Credit
Expiration Date: 12/31/2021
Does it apply to C corps and pass-through entities?: Yes
Credit Carry forward: May be carried forward up to 5 years
Description: For tax years beginning on or after Jan. 1, 2017:
- 100+ LA employees: Credit is 5% of the LA research expenses over the base amount; base = 80% of average prior 3 years QREs
- 50-99 LA employees: Credit is 10% of the LA research expenses over the base amount; base = 80% of average prior 3 years QREs
- 1-49 LA employees: Credit is 30% of the LA research expenses over the base amount; base = 50% of average prior 3 years QREs
A taxpayer who receives a federal Small Business Innovation Research Grant, or a Phase I or II grant from the Federal Small Business Technology Transfer Program is eligible for a tax credit equal to 30% of the award received during the tax year.
- Taxpayers who employee at least 50 persons must also claim a federal credit.
- Professional services firms and businesses primarily engaged in custom manufacturing and custom fabricating are only eligible for the credit if they have a pending or issued US patent that is directly related to research expenditures for which the tax credit is sought, unless they are specially invited by the Secretary of the Department of Economic Development to claim the credit.
- Taxpayers seeking the credit shall apply for and obtain a credit certification from the Department of Economic Development, including an application fee.
- Each year, the department randomly selects at least 10% of applications to perform an examination
- In tax year 2018 and later, credits may be transferred or sold subject to certain conditions.