State R&D Tax Credits

New Jersey

Credit Name: 54:10A-5.24. Taxpayer credit for certain research activities

Expiration Date: None

Does it apply to C corps and pass-through entities?: No direct restrictions to entity type, however, pass-through to shareholders is not allowed, so credit is of very limited use to S-corps and flow through entities

Credit Carry forward: Carry forward: 7 years; 15 years for research conducted in NJ in the fields of advanced computing, advanced materials, biotechnology, electronic device technology, environmental technology, and medical device technology.

Description:

Calculation:

• 10% of the excess of the qualified research expenses over the base amount; and
• 10% of the basic research payments determined in accordance with section 41 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.41, as in effect on June 30, 1992, and provided that subsection (h) of 26 U.S.C. s.41 relating to termination shall not apply. Provided however, that the terms “qualified research expenses,” “base amount,” “qualified organization base amount period,” “basic research” and any other terms determined by the Director of the Division of Taxation to affect the calculation of the credit shall include only expenditures for research conducted in NJ.
• For tax years beginning on or after January 1, 2018, the New Jersey Base amount is computed using the traditional, start-up, or alternative simplified method according to the company’s federal filing.

Other Notes: Beginning January 1, 2012 The R&D credit may be used to eliminate state tax completely (down to the statutory state minimum of $500-$2000). As outlined in SB2980 credits earned in prior periods are not separated from those earned in 2012 and beyond, therefore corporation with a credit carryforward will be allowed to use these credits to reduce tax burden below the prior 50% limit as long as they are within the 7 year carryforward window.