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.

FEDERAL
ARKANSAS
Year
Total QREs
Credit
Total QREs
Credit
2021
$750,000
$75,000
$300,000
$99,000

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.

Research and Development Tax Insights

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