Arkansas R&D Tax Credit Summary

Arkansas State R&D Tax Credit

The Consolidated Incentives Act of 2003 provides a variety of research and development credits, including the credit for research and development with universities, in-house research credit, and credit for research under programs of the Arkansas Science and Technology Authority. A summary of each credit is listed below:

Arkansas State R&D Tax Credit with Universities

Refundable/Transferable Tax Credit – No

A business that contracts with one or more Arkansas colleges or universities  in performing research may qualify for a 33% income tax credit as authorized by ACA 26-51-1102(b) for qualified research expenditures. The income tax credit may be carried forward for three (3) years beyond the year in which the credit was earned.  In order to qualify for the income tax credit for research and development with universities, an eligible business must submit an application and project plan to the Arkansas Economic Development Commission. The Arkansas Science and Technology Authority will review the application for approval.

Carry Forward

Effective July 31, 2007 Act 1607 of 2007 changed the carry forward to nine (9) years and increased the use of the credit from 50% to 100% of the net tax due after all other credits.

How to obtain the credit?

An eligible business must submit an application and project plan to the Arkansas Economic Development Commission. The Arkansas Science and Technology Authority will review the application for approval. To claim the credits authorized, attach to the tax return a copy of the Certificate of Tax Credit issued by the Arkansas Science and Technology Authority.


Arkansas In-House in Area of Strategic Value Income Tax Credit

Refundable/Transferable Tax Credit – No

The Strategic Value Research and Development incentives are for qualifying businesses that invest in:

  • in-house research in an area of strategic value; or
  • A project under the research and development programs offered by the Arkansas Science and Technology Authority and approved by its Board of Directors.

Research in an area of strategic value means research in fields having long-term economic or commercial value to the state, and that have been identified in the research and development plan approved from time to time by the Board of Directors of the Arkansas Science and Technology Authority.

The income tax credit is equal to 33% of qualified research expenditures. The maximum tax credit that may be claimed by a taxpayer under this program is $50,000 per tax year. he tax credit may be earned for the first five (5) years following the signing of a financial incentive agreement

Carry Forward

Effective July 31, 2007 Act 1607 of 2007 changed the carry forward to nine (9) years  in which the credit was first earned.

How to obtain the credit?

The taxpayer must apply to the Arkansas Economic Development Commission in order to qualify for the income tax credit.To claim the credits authorized, attach to the tax return a copy of the Certificate of Tax Credit issued by the Arkansas Science and Technology Authority.


In-House Research by Targeted Business Income Tax Credit

Refundable/Transferable Tax Credit – Yes

Targeted businesses, that fit within the six (6) business sectors, may enter into a financial incentive agreement for income tax credits equal to 33% of the qualified research and development expenditures incurred each year for up to five years. The application for this income tax credit shall include a project plan, which clearly identifies the intent of the project, the expenditures planned, the start and end dates of the project and an estimate of total project costs.

Qualified research expenditures include in-house expenses for taxable wages paid and supplies used in the conduct of qualified research. Qualified research must satisfy all of the following tests in order to qualify:

  • The activity must be undertaken for the purpose of discovering information which is technological in nature;
  • The application of technological information must be intended to be useful in the new or improved business component; and
  • Substantially all of the activities related to the research effort must constitute elements of a process of experimentation relating to a new or improved function, performance, reliability or quality.

Income tax credit for research and development earned by targeted businesses may be sold. The business must make application to the AEDC within one year of issuance. The credits can only be sold one time. Any unused credits may be carried forward for a maximum of nine (9) years.

A targeted business earning research and development tax credits is prohibited from earning job creation tax credits, as authorized by § 15-4-2709 or research tax credits as authorized by § 15-4-2708(a), for the same expenditure.

Combination with other incentives: The income tax credit for research by a targeted business authorized by 15-4-2708(c) may not be used with:

    • Other in-house research and development incentives as authorized by § 15-4-2708(b) or § 15-4-2708(d)(1)(A); or
    • Any other incentive in Act 182 of 2003 (Consolidated Incentive Act of 2003) for the same expenditures.

How to obtain the credit?

To claim the credits authorized, attach to the tax return a copy of the Certificate of Tax Credit issued by the Arkansas Science and Technology Authority.


In-House Research Income Tax Credit

Eligible businesses that conduct “in-house” research within a research facility that is operated by the eligible business can apply for this income tax credit equal to twenty-percent (20%). The income tax credit may be used to offset one hundred percent (100%) of an eligible business’s annual income tax liability. The maximum credit that can be earned by each qualified business shall not exceed $10,000 per tax year.

Carry Forward

Unused credits may be carried forward for a period not to exceed nine (9) years.

How to obtain the credit?

To claim the credits authorized, attach to the tax return a copy of the Certificate of Tax Credit issued by the Arkansas Science and Technology Authority.


Qualified Research

Refundable/Transferable Tax Credit

Ark. Code Ann. § 26-51-1102(b) authorizes a credit against a taxpayer’s Arkansas corporate income tax or Arkansas individual income tax equal to thirty-three percent (33%) of the qualified research expenditures of a taxpayer in qualified research programs.

How to obtain the credit?

The taxpayer must show that the Arkansas Science and Technology Authority and the Department of Higher Education have approved the qualified research expenditure as a part of a qualified research program.

Find out if you qualify for the R&D tax credit

 

SELL YOUR NOL’s AND R&D CREDITS

If your company hasn’t considered the R&D credit in the past because you have net operating losses (NOLs) and could not utilize the credit contact us today to find out which states allow you to sell your credits and losses for up to 95 cents on the dollar. Also, qualified start-up companies can now take a credit on their payroll taxes for their R&D credit, allowing your company to utilize the R&D credit immediately, even if your company does not have taxable income.
FIND OUT MORE TODAY

 

States Offering R&D Credit:

                             States Without R&D Credit

Alabama
District of Columbia
Missouri
Montana
Nevada
Oklahoma
South Dakota
Tennessee
Washington
West Virginia
Wyoming