Are R&D Tax Credits Available in Alaska?
No. While companies located in Alaska may qualify for the Federal Research and Development (R&D) Tax Credit, Alaska no longer offers the credit at the state level at this time. However, Alaska provides a state tax credit equal to eighteen percent (18%) of a company's federal-based credits, which includes the research and development tax credit. This credit provides a dollar-for-dollar offset against Alaska tax liabilities. See IRC § 38 for a complete list of federal-based credits eligible for the state credit. Here is a summary of the credit:
- If the taxpayer is taxable both inside and outside Alaska, the credit is calculated by apportioning the federal credits generated
- A taxpayer may not apply credits attributable to Alaska against Alaska alternative minimum tax or other taxes
- Unused federal-based credits may be carried back & forward as provided under the Internal Revenue Code (1 year up to 20 years, respectively).
- To claim the credit, a company must file Alaska Form 6390 – Alaska Federal-based Credits along with its state tax return.
Alaska R&D Tax Credit Case Study
An Anchorage company designs and manufactures components for the oil & gas industry. The company claims Federal R&D credits 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 Credit of $330,000 and an additional $59,010 of state R&D Tax Credit in Alaska.
| FEDERAL | ALASKA | ||||||
| Year | Total QREs | Credit | Federal Credits | Alaska Credit | |||
| 2021 | $1,300,000 | $130,000 | $130,000 | $23,400 | |||
| 2020 | $900,000 | $90,000 | $90,000 | $16,200 | |||
| 2019 | $650,000 | $65,000 | $65,000 | $11,700 | |||
| 2018 | $450,000 | $45,000 | $45,000 | $8,100 | |||
| Total | $3,300,000 | $330,000 | $330,000 | $59,400 | |||
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.