- Effective for taxable years after December 31, 2003, a state credit against tax is allowed for amounts paid or incurred for research and development in accordance with IRC § 41, as modified by Delaware [Del. Code Ann.30 §2073]
- Under federal law, the research credit is 20% of qualified research expenses for business-based research and 20% of basic research expenses for university-based research for the income year
- Delaware has a statewide cap of $5 million per fiscal year. Whenever statewide applications exceed $5 million, receipts are to be allowed pro rata according to the approved amount so that the total approved credits do not exceed $5 million
Effective for tax periods beginning after December 31, 2013 and subject to the $5 million overall cap and a limitation that the credit cannot exceed 50% of the qualified tax liability for the taxable year, a “small business” taxpayer may elect a credit equal to either:
- 20% of the excess of the taxpayer’s total Delaware qualified research and development expenses for the taxable year over the taxpayer’s Delaware base amount, or
- 100% of Delaware’s apportioned share of the taxpayer’s federal research and development tax credit calculated using the alternative incremental credit method under IRC § 41(c)(4)
For purposes of the credit, a “small business” means any taxpayer with average annual gross receipts not more than $20 million as determined under IRC § 41(c)(1)(B).
How to obtain the credit?
Delaware taxpayers must apply for the state credit by September 15 of each tax year on Form 2070AC.
Refundable/Transferable Tax Credit – No
Unused credits may not be carried back, but may be carried forward fifteen years.
Find out if you qualify for the R&D tax credit
States and the R&D Credit: