Arizona R&D Tax Credit Case Study
The R&D tax credit is one of the most valuable credits leveraged by companies. The R&D credit yields billions of dollars in federal and state benefits to companies engaged in qualifying research. The R&D tax credit can provide a significant reduction to current and future tax liabilities and a source of cash for companies performing R&D in Arizona.
Benefits
- Up to 13.5 cents of R&D tax credit for every qualified dollar
- Dollar-for-dollar reduction in your Arizona income tax liability
- For tax years before 2022, credits can be carried forward for 15 years
- For tax years after 2021, credits can be carried forward for 10 years
Qualifications
More companies in Arizona can now qualify for the R&D tax credit. Companies are able to qualify R&D activities beginning with the development of concepts and extend to the point where a product, process, formula, or other business component is ready to be commercially released. If you are engaged in any research activities in Arizona, looking into the state’s R&D tax credit may be a great benefit. In addition, look back studies can recognize unclaimed credits for the last 3 or 4 open tax years.
Case Study
A chemical manufacturing company in Tucson, Arizona qualified for a substantial credit. The company claims R&D credits each year for the development activities of its engineers. This project involved a multi-year study covering the tax years 2018-2021. The Company qualified for the federal R&D Tax Credits of $255,000 and an additional $306,000 in Arizona state R&D Tax Credits.
|
FEDERAL
|
ARIZONA
|
|||||
|
Year
|
Total QREs
|
Credit
|
Total QREs
|
Credit
|
||
|
2021
|
$750,000
|
$75,000
|
$750,000
|
$90,000
|
||
|
2020
|
$700,000
|
$70,000
|
$700,000
|
$84,000
|
||
|
2019
|
$650,000
|
$65,000
|
$650,000
|
$78,000
|
||
|
2018
|
$450,000
|
$45,000
|
$450,000
|
$54,000
|
||
| Total | $2,550,000 | $255,000 | $2,550,000 | $306,000 | ||