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The Arizona Research & Development (R&D) Tax Credit incentivizes businesses to invest in qualified research within the state, offsetting Arizona income tax. Enacted in 1994 and updated through 2030, it supports innovation in technology, aerospace, biotechnology, and manufacturing sectors.
Eligibility requires performing qualified research activities (QRAs) in Arizona, with expenses tied to innovation. Businesses must meet IRC §41 standards, adapted to state rules.
Arizona offers two methods: regular (incremental) and Alternative Simplified Credit (ASC). Both use Arizona-sourced QREs only.
Arizona's R&D credit includes tailored provisions for refunds, startups, and entity types to maximize benefits.
The statewide refund cap is $5 million total for all qualified small businesses on a first-come, first-served basis. Per-taxpayer maximum is $100K annually.
Your business must have fewer than 150 employees and obtain ACA certification before filing your tax return. The refund equals 75% of credit exceeding your tax liability.
ASC simplifies the base calculation to 50% of average QREs over the prior 3 years. The same tiered rates apply (24% and 15%), and the election is irrevocable without approval.
Activities must meet the IRC §41 four-part test, be performed within Arizona, and improve a product/process through experimentation.
Yes. Rental or lease costs for computers and equipment used directly in qualified research can qualify as QREs.
New businesses start at 3% for their first 5 years and phase to 16% by year 10. Only Arizona gross receipts are used in the calculation.
Arizona applies 24% on the first $2.5M of excess QREs and 15% on amounts above $2.5M (until 2030, when rates reduce to 20% and 11%).
Credits generated after 2021 carry forward for 10 years. Credits from before 2022 carry forward for 15 years. University-related credits carry forward for 5 years.
Keep detailed records for at least four years after filing (preferably seven).
No. Only research conducted physically within Arizona qualifies for the state credit.
Use our calculator to estimate your potential federal and state benefits
Schedule a consultation to structure your California research activities
Connect with us to find out how R&D tax credits can boost your organization’s bottom line.
To get an estimate of the potential value of your unclaimed R&D Tax Credits, try out our credit calculator.
Download our R&D Tax Credit Calculator for Android to see how much you can receive from your qualified R&D tax credit expenses.
The statewide refund cap is $5 million total for all qualified small businesses on a first-come, first-served basis. Per-taxpayer maximum is $100K annually.
Your business must have fewer than 150 employees and obtain ACA certification before filing your tax return. The refund equals 75% of credit exceeding your tax liability.
ASC simplifies the base calculation to 50% of average QREs over the prior 3 years. The same tiered rates apply (24% and 15%), and the election is irrevocable without approval.
Activities must meet the IRC §41 four-part test, be performed within Arizona, and improve a product/process through experimentation.
Yes. Rental or lease costs for computers and equipment used directly in qualified research can qualify as QREs.
New businesses start at 3% for their first 5 years and phase to 16% by year 10. Only Arizona gross receipts are used in the calculation.
Arizona applies 24% on the first $2.5M of excess QREs and 15% on amounts above $2.5M (until 2030, when rates reduce to 20% and 11%).
Credits generated after 2021 carry forward for 10 years. Credits from before 2022 carry forward for 15 years. University-related credits carry forward for 5 years.
Keep detailed records for at least four years after filing (preferably seven).
No. Only research conducted physically within Arizona qualifies for the state credit.
