Arkansas 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 in Arkansas.
Benefits
- Dollar-for-dollar reduction in your state income tax liability
- Arkansas Credit carried forward up to 9 consecutive tax periods
Qualifications
More companies in Arkansas 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, looking into a potential 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.
Arkansas R&D Tax Credit Case Study
A medical research company in Forth Smith, Arkansas had never claimed the R&D Tax Credits before. This project involved the tax year 2021. The Company qualified for the federal R&D Tax Credit of $75,000 and an additional $99,000 of state R&D Tax Credit in Arkansas.
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FEDERAL
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ARKANSAS
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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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2021
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$750,000
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$75,000
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$300,000
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$99,000
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Four-Part Test
Qualified research activities are defined by the four-part test outlined below
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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.
Research and Development Tax Insights
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