Are R&D Tax Credits Available in Rhode Island?

Are R&D Tax Credits Available in Rhode Island?

The state of Rhode Island provides the Research and Development (R&D) Tax Credit which allows a taxpayer to claim credits for both research and development property and qualified research expenses. Only C corporations may be eligible for the Rhode Island research credit. Here is a summary of the credits:

Research Credit – Research and Development Property

• Rhode Island allows a credit for the cost or other basis of tangible property, including buildings and structural components of buildings, that are acquired, constructed, reconstructed, or erected for certain research and development purposes after July 1, 1994.
• The amount of the credit is equal to 10% of the cost of the research and development property.
• To be eligible for the credit, the property must be:
  • Depreciable under IRC §167 or recovery property with respect to which a deduction is allowable under IRC §168 (MACRS).
  • Classified as having a useful life of three or more years.
  • Acquired by purchase as defined in IRC §179(d), the asset expense election.
  • Used principally for purposes of research and development in the experimental or laboratory sense.
  • Located in Rhode Island.
• The credit is not allowed for tangible personal property and other tangible property, including buildings and structural components of buildings, that is leased to any other person or corporation. Any contract or agreement to lease or rent or for a license to use such property is considered a lease.
• The credit may not reduce the tax below the amount of the minimum tax imposed on corporations.
• Any unused credit may be carried forward up to 7 years.

Research Credit – Qualified Research Expenses

• The federal definition of qualified research expenses (QREs) and base period research expenses applies for purposes of the Rhode Island research credit, provided that such expenses were incurred after July 1, 1994.
• The credit is calculated by multiplying a specified percentage of QREs exceeding the base period research expenses:
  • 22.5% of the first $111,111, and
  • 16.9% of the amount exceeding $111,111.
• The investment tax credit and the credit for research and development property must be used before the credit for qualified research expenses.
• For consolidated return purposes, the credit is only available to the taxpayer that qualifies for the credit. The credit is not available to other corporations joining in the filing of the consolidated return.
• The credit allowed shall not reduce the tax liability by more than 50%, and in the case of corporations, to less than the minimum tax imposed by statute.
• Any unused credit may be carried forward up to 7 years.