The definition of qualifying research activities in each state is based on the federal tax credit regulations; however, the calculation methodology varies significantly from state to state. For example:
- Some states provide a refund or exchange of unused R&D Tax Credits, so that even if a taxpayer has no tax liability it can still derive a cash benefit.
- The R&D Tax Credits in some states have not been permanently adopted, and may expire in the future.
- Most states require that the research activities must be conducted within their borders to qualify.
- Some states do not offer the alternative simplified credit calculation.
- In some states, basic research payments made to universities and certain non-profit organizations can be included in the calculations.
There are 38 states that currently allow taxpayers to claim the R&D Tax Credit. Below is the list of states that DO NOT offer the R&D Tax Credit:
- District of Columbia
- South Dakota
- West Virginia
Refer to our state pages for state-specific information.