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 | |||
What are the Potential Benefits of this Tax Credit?
There are several benefits to realizing the R&D tax credit. These benefits can include the following:
- Receive up to 12-16 cents of federal and state R&D tax credits for every qualified dollar
- Create a dollar-for-dollar reduction in your federal and state income tax liability
- Increase earnings-per-share
- Reduce your effective tax rate
- Improve cash flow
- Carry forward the credit up to 20 years
- Perform look back studies to recognize unclaimed credits for open tax years (generally 3 or 4 years)
- Utilize the federal R&D tax credit against payroll tax (applicable to certain startup companies)
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