Are R&D Tax Credits Available in Alaska?

Taxpayers that claim federal tax income credits can claim part of the credit against Alaska corporation net income tax liability, subject to certain exceptions. Alaska limits the credit to 18% of the federal credit that is from state sources, 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 credits may be carried back one year and forward 20 years.
  • 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.

Research and Development Tax Insights

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