Arizona R&D Tax Credit Extended Until 2021
Arizona manufacturers and technology companies can look forward to the continued use of the state’s research and development (R&D) tax credit. On May 22, 2017, Governor Doug Ducey signed Senate Bill 1416, which extends the Arizona R&D tax credit until 2021. Among the most competitive credits in the country, the Arizona credit provides a powerful incentive for companies conducting qualifying research activities in Arizona. The Arizona credit has two different components. The first component, modeled after the standard, non-refundable, Federal R&D tax credit, currently allows companies to receive a tax credit equal to 24% of the first $2.5 million in qualifying R&D expenses plus another 15% of the qualifying expenses exceeding $2.5 million. Under the recently signed bill, the tax credit will remain the same through 2021. In addition, for those companies earning a credit exceeding their tax liability, the tax credit can be carried forward for 15 years.
Arizona also provides a second, refundable, component to their credit. This second component is available only to those companies employing fewer than 150 full-time employees; referred to as Qualifying Companies. Qualifying Companies are able, under the refundable component of the credit, to apply to the Arizona Department of Commerce for a refund of 75% of the amount of their credit exceeding their tax liability. Qualifying Companies choosing this election, however, will not be able to carry forward any part of the credit that exceeds their tax liability. Also, Arizona has currently capped the number of refunds to no more than $5 million dollars each year. So, finding the right partner to help navigate the Arizona credit process is crucial for Qualifying Companies to achieve their best result.
Tri-Merit Specialty Tax Services has extensive experience working with companies on both the non-refundable and refundable components of the Arizona R&D tax credit. Using our proprietary methodology, Tri-Merit can help ensure that you capture and benefit from the most robust and sustainable Arizona credit available. Contact Us today to begin working on your Arizona R&D tax credit.