Established in 1992, the Arizona R&D Tax Credit is a powerful tool for companies undertaking research and developing in the state. The credit is mirrored after the federal credit, however, beginning in 2010, Arizona made the state credit partially refundable. The credit also has perks for small businesses wishing to recoup costs from research and development efforts. Highlights for the Arizona R&D Credit include:

  • The 2010 R&D tax credit is equal to 22% of the first $2.5 million in qualifying expenses plus 13% of the qualifying expenses in excess of $2.5 million.
  • The 2011 through 2017 R&D tax credit will be equal to 24% of the first $2.5 million in qualifying expenses plus 15% of the qualifying expenses in excess of $2.5 million.
  • For 2018 and thereafter, the tax credit rates will return to 20% of the first $2.5 million in qualifying expenses plus 11% of the qualifying expenses in excess of $2.5 million.
  • Starting in 2010, a qualifying company may be eligible to claim a partial refund of its current year excess R&D credit.  A company that is otherwise qualified for the R&D tax credit who employs less than 150 full-time employees can apply to the Arizona Department of Commerce for a refund of 75% of the excess credit amount.

What is considered qualified research?

The definition of qualified research mirrors federal qualifications. Specifically, if you attempt to develop or improve any of the following, you may be eligible for the R&D credit:

  • Products
  • Processes (e.g. – manufacturing processes)
  • Computer Sciences
  • Software
  • Formulae
  • Techniques
  • Inventions

Firms in the following industries / sub-industries conducting R&D in Arizona can be eligible for the credit:

  • Manufacturing – Electronics, Tool & Die, Fabrication improvements
  • High – Tech and Software Development – Software systems and high-tech component design and development
  • Life Sciences – Biotechnology, pharmaceuticals, medical device manufacturing
  • Chemicals – Chemical development and production

Why TRCG Advisors?

TRCG actively works with businesses across the state to provide local service and support. TRCG has expertise in sustaining the R&D Credit through an audit process as well as claiming new credits. Our consultants can help you in determining which activities qualify and ensuring accuracy and due diligence.