New Jersey R&D Tax Credit Summary

 

The state of New Jersey R&D Tax Credit leverages off of the federal section 41 rules regarding the calculation and qualification of qualified research activities with some modifications. An R&D Tax Credit against the entire net income component of the corporation business tax is allowed for qualifying research activities performed in New Jersey.  The credit is allowed based on qualified expenditures made in taxable years beginning after 1993.

NJ R&D Credit Summary:

The New Jersey R&D tax credit equals the following as determined under IRC Sec. 41:

  • 10% of the excess of the NJ qualified research expenses for the tax period over the base amount; PLUS

    • NJ Fixed-Base Percentage (FBP) can be calculated using Payroll & Property fraction (Form NJ-NR-A) as an alternative method

  • 10% of basic research payments for the tax period

Eligible Entities: C-Corporations & S-Corporations

  • The R&D Tax Credit is only available to corporations (both C and S corporations).

    • A New Jersey S corporation's credits are limited to its New Jersey corporation tax liability and pass-through of the credit to the individual shareholders is NOT permitted.

  • Credit is not available to partnerships and other pass-thru entities.

Deadline for Tax Filing: Due with New Jersey Tax Return

  • For taxable periods beginning on and after January 1, 2013, complete Form 306.

Data Required to Compute Credit:

  • Claim Period Qualified R&D Expenses (QREs)

  • Gross Receipts for Prior 4 Years

Credit Carryforward:

  • 7 Years

    • In general, any unused R&D Tax Credits can be carried forward for 7 years.

  • May instead carry forward any unused R&D credit up to 15 years for Specific Industries: 

    • advanced computing,

    • advanced materials,

    • biotechnology,

    • electronic device technology,

    • environmental technology, and

    • medical device technology

Refundable/Transferable Tax Credit: Yes

Important Links and Forms:

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