Are R&D Tax Credits Available in Idaho?
Yes. The state of Idaho Research and Development (R&D) Tax Credit allows a taxpayer who incurs expenditures for research and development activities within the state of Idaho to claim an income tax credit. The Idaho R&D Tax Credit is based on the federal section 41 credit for increasing research activities with a few notable exceptions. Below is an overview of the Idaho R&D Tax Credit:
- The definitions of basic research payments, basic research, qualified research expenses (“QREs”), and qualified research are the same as the section 41 credit for increasing research activities except that only the amounts related to research conducted in Idaho qualify for the Idaho research credit.
- Gross receipt calculations include only those gross receipts that are attributable to Idaho using the multistate corporation apportionment rules (referred to in the instructions as Idaho gross receipts).
- The Idaho credit conforms to the federal regular credit calculation method, except the credit rate is 5% of a taxpayer's current year QREs which exceed the base amount.
- The Idaho credit does not include the calculation of the alternative simplified credit that is allowed in computing the federal credit.
- A corporation included as a member of a unitary group of corporations may elect to share the Idaho research credit it earns but does not use with other members of the unitary group.
- The corporation must claim the Idaho research credit to the extent allowable against its Idaho income tax before it can share the credit.
- The credit carryover is limited to 14 tax years.
Idaho R&D Tax Credit Case Study
A Boise food manufacturer develops new formulas for its expanding line of products and improved processing techniques for its manufacturing plant. The company claims the R&D Tax Credit each year for the development activities of its engineers. This project involved a multi-year study.
The company qualified for the federal R&D Tax Credits of $558,833 and an additional $166,300 in Idaho state R&D Tax Credit.
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FEDERAL
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IDAHO
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Year
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Total QREs
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Credit
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Total QREs
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Credit
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||
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2018
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$2,400,000
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$264,833
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$2,400,000
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$71,750
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2019
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$1,400,000
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$143,500
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$1,400,000
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$43,250
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2020
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$1,000,000
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$98,000
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$1,000,000
|
$31,050
|
||
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2021
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$650,000
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$52,500
|
$650,000
|
$20,250
|
||
| Total | $5,450,000 | $558,833 | $5,450,000 | $166,300 | ||
You can read more about this Idaho tax credit case study here.
Get More Information About the R&D Tax Credit
The R&D Tax Credit, first enacted in 1981, has been one of the most valuable credits leveraged by companies. Every year, the R&D credit yields billions of dollars in federal and state benefits to companies engaged in qualifying research. This credit provides much-needed cash to hire additional employees, increase R&D, expand facilities, and more. Thousands of companies take advantage of the credit across several industries. » Learn More
Four-Part Test
Qualified research activities are defined by the four-part test outlined below
Technological in Nature
Activities must fundamentally rely on the principles of physical or biological science, engineering, or computer science.
Permitted Purpose
Activities must be performed in an attempt to improve the functionality, performance, reliability, or quality of a new or existing business component.
Eliminate Uncertainty
Activities intended to discover information that could eliminate technical uncertainty concerning the development or improvement of a product.
Experimentation
All activities must include a process of experimentation including testing, modeling, simulating, and systematic trial and error.