Arkansas State R&D Tax Credit
The Consolidated Incentives Act of 2003 provides a variety of research and development credits, including the (1) Credit for Research and Development with Universities, (2) Arkansas In-House in Area of Strategic Value Income Tax Credit, (3) In-House Research Income Tax Credit for Research, and (4) In-House Research by Targeted Business Income under Programs of the Arkansas Science and Technology Authority. A summary of each credit is listed below.
Eligible Entities: C-Corporation, S-Corporations, LLCs, Partnerships
Deadline for Tax Filing: Application for Certificate of Tax Credit issued by the Arkansas Science and Technology Authority to be filed with tax return. The term of the financial incentive agreement for in-house research authorized by this subsection shall be for a period not to exceed five (5) years. However, the financial incentive agreement may be renewed for a period not to exceed five (5) years upon the submittal and approval of a new application and project plan for benefits under this subsection.
Data Required to Compute Credit: Claim Period Arkansas Qualified R&D Expenses (QREs)
Credit Carryforward: 9 Years
Arkansas R&D Credit Summary
The R&D tax credit may equal:
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(1) The sum of the following
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33% of QREs incurred each year regarding the Arkansas State R&D Tax Credit with Universities;
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33% of QREs incurred each year regarding the Research and Development in Area of Strategic Value (not to exceed $50K annually); and
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20% of QREs incurred each year for the In-House Research Income Tax Credit; and
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(2) 33% of QREs incurred each year regarding the In-House Research by Targeted Business Income Tax Credit (ACA §15-4-2708(c)) (which may be sold once) may not be used with
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Other in-house research and development incentives as authorized by § 15-4-2708(b) or § 15-4-2708(d)(1)(A); or
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Any other incentive in Act 182 of 2003 (Consolidated Incentive Act of 2003) for the same expenditures.
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Special Notes:
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The maximum credit that can be earned by a business is $10,000 per tax year and is equal to 20% of QREs.
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Credits can be claimed for up to 100% of the tax liability
(1) Arkansas State R&D Tax Credit with Universities (ACA §15-4-2708(a))
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.
How to obtain the credit?
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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.
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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.
Refundable/Transferable Tax Credit: No
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.
(2) Arkansas In-House in Area of Strategic Value Income Tax Credit (ACA 15-4-2708(d))
The Consolidated Incentive Act 182 of 2003, as amended by Act 1596 of 2007, authorizes an income tax credit equal to 33% of qualified research expenditures for an Arkansas taxpayer that invests in:
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(A) In-house research in an area of strategic value; or
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(B) A project under the research and development programs offered by the Arkansas Science and Technology Authority and approved by its Board of Directors.
The tax credit may be earned for the first five (5) years following the signing of a financial incentive agreement. The maximum tax credit that may be claimed by a taxpayer under this program is $50,000 per tax year.
How to obtain the credit?
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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.
Refundable/Transferable Tax Credit: No
Carry Forward: The carry forward is nine (9) years beyond the year in which the credit was first earned.
(3) In-House Research Income Tax Credit (ACA §15-4-2708(b))
The Consolidated Incentive Act 182 of 2003, as amended by Act 1596 of 2007, authorizes an income tax credit to eligible businesses that conduct “in-house” research within a research facility that is operated by the eligible business.
Prior to July 31, 2007, the credit allowed for approved in-house research is 10% of qualified expenditures. However, the maximum credit that can be earned by each qualified business shall not exceed $10,000 per tax year.
Effective July 31, 2007 Act 1596 of 2007 provides that new or existing eligible businesses that conduct in-house research in a research facility operated by the business and that qualify for federal research and development tax credits may qualify for an 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.
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.
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.
Refundable/Transferable Tax Credit: No
(4) In-House Research by Targeted Business Income Tax Credit (ACA §15-4-2708(c))
The Consolidated Incentive Act 182 of 2003, as amended by Act 1596 of 2007, provides for income tax credits for businesses deemed by the Arkansas Economic Development Commission to fit within the six (6) business sectors classified as “targeted businesses” may enter into a financial incentive agreement for income tax credits based on qualified research and development expenditures. An eligible business may be approved for an income tax credit each year equal to 33% of the qualified research and development expenditures incurred each year for the first five (5) years of the financial incentive agreement.
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:
Any other incentive in Act 182 of 2003 (Consolidated Incentive Act of 2003) for the same expenditures.
- 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?
The business must make application to the AEDC within one year of issuance. 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. 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.
Refundable/Transferable Tax Credit: Yes. As with the job creation income tax credits for targeted businesses, the income tax credit for research and development earned by targeted businesses may be sold. The credits can only be sold one time.
Carryforward: Any unused credits may be carried forward for a maximum of nine (9) years.
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