Idaho R&D Tax Credits

State and Federal Credits Available

5% Credit on Incremental QREs

Businesses earn 5% on QREs exceeding the base amount, calculated using Idaho gross receipts.

14-Year Carry forward

Unused credits carry forward for up to 14 years, providing long-term tax relief.

Nonrefundable

Offsets Idaho income tax but cannot create a refund; excess passes through for eligible entities.

Irrevocable Start-Up Election

Taxpayers may elect start-up treatment on Form 67, using federal formula with Idaho data (capped at 16%).

The Idaho R&D Tax Credit for Research Activities incentivizes businesses to invest in qualified research conducted in Idaho, offsetting Idaho income tax liabilities through the Idaho State Tax Commission. Enacted under Idaho Code §63-3029G, this credit aligns closely with federal IRC §41 but applies only to Idaho-sourced qualified research expenses (QREs). Idaho also allows a 5 percent credit on basic research payments in excess of the base period amount for basic research conducted in Idaho.

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5% Credit on Incremental QREs

Businesses earn 5% on QREs exceeding the base amount, calculated using Idaho gross receipts.

14-Year Carry forward

Unused credits carry forward for up to 14 years, providing long-term tax relief.

Nonrefundable

Offsets Idaho income tax but cannot create a refund; excess passes through for eligible entities.

Irrevocable Start-Up Election

Taxpayers may elect start-up treatment on Form 67, using federal formula with Idaho data (capped at 16%).

Key Highlights

Applies exclusively to research performed in Idaho, using state-sourced gross receipts for base calculations.
Available to C corporations, S corporations, partnerships, and LLCs; pass-through entities allocate via Schedule K-1.
No alternative simplified credit (ASC) option; regular method only.
Includes 5% credit on basic research payments in excess of the base period amount for Idaho-conducted basic research.
Unitary groups claim credits at the entity level before sharing.

Who Qualifies

Credits are available to businesses conducting qualified research activities in Idaho. Eligibility follows federal IRC §41 standards, adapted for state-specific sourcing, and depends on entity type and qualifying expenses.

Eligible Entities

C Corporation May claim both the regular and basic research credit
S Corporation Limited entity-level use; can pass credits to shareholders
Partnerships / LLCs Credits pass through to owners via Schedule K-1

Qualified Research Expenses (QREs)

How to Calculate the Idaho R&D Tax Credit

Idaho uses the regular incremental method, mirroring federal calculations but limited to Idaho QREs and gross receipts. No ASC is available.

Regular Method

Determine total Idaho QREs for the tax year.
Compute base amount = fixed-base percentage × average Idaho gross receipts for the prior 4 years (minimum 50% of current-year QREs).
Excess QREs = current QREs - base amount.
Credit = 5% × excess QREs.
If applicable, compute the basic research component: multiply basic research payments in excess of the qualified organization base period amount by 5% (for basic research conducted in Idaho; corporations only), then add this to the incremental QRE credit.

Example Calculation

QREs =$1,000,000

Base =$600,000 (e.g., 6% fixed-base × $10M average gross receipts)

Excess =$400,000

→ Credit = 20% × $800,000 =$160,000

Incremental Credit = 5% × $400,000 =$20,000

Basic Research Payments = $10,000 (with $0 base period amount) → Basic Credit = 5% × $10,000 =$500

Total Credit =$20,500

Base Calculation for Idaho R&D Tax Credit

Identify Idaho-sourced gross receipts for the prior 4 tax years using Idaho multistate apportionment rules, including only gross receipts attributable to Idaho (net of returns and allowances).
Compute average annual gross receipts = (sum of prior 4 years' gross receipts) / 4.
Apply fixed-base percentage (historical ratio of QREs to gross receipts; start-ups elect under federal startup rules using Idaho data, capped at 16%).
Base = fixed-base percentage × average gross receipts (minimum 50% of current-year QREs).

Example Calculation

Prior years' average gross receipts =$10M

fixed-base = 6% → Base = 6% × $10M =$600K

If no prior gross receipts: → Base =50% of current QREs (e.g., $1M QREs → $500K base).

Estimate Your Credits

Idaho-Specific Rules

Idaho's R&D credit features provisions tailored to support growing businesses and ensure compliance within unitary structures.

Long Carryforward

Unused credits carry forward for 14 years, offering sustained value for ongoing R&D investments in Idaho's tech and ag sectors.

Start-Up Fixed-Base Election

Taxpayers may elect to be treated as a start-up company on Form 67 (irrevocable), computing fixed-base under federal startup rules using Idaho QREs and Idaho-source gross receipts, capped at 16 percent.

Unitary Groups

Members must exhaust the credit against their Idaho income tax before sharing with affiliates, optimizing group-wide utilization (shared credits reduce the originating member's carryforward).

Other Important Rules

Pass-Through Treatment Credits allocate pro-rata to owners via ID K-1 for claiming on their individual returns; no entity-level refund for S corporations.
Audit GuidelinesMaintain detailed records sufficient to substantiate Idaho QREs, Idaho-source gross receipts, and federal eligibility through the applicable Idaho and federal limitation periods. The Idaho State Tax Commission focuses on sourcing and federal alignment.
In-State OnlyAll QREs and gross receipts must tie to Idaho activities—no out-of-state qualification.

Long Carryforward

Unused credits carry forward for 14 years, offering sustained value for ongoing R&D investments in Idaho's tech and ag sectors.

Start-Up Fixed-Base Election

Unitary Groups

Members must exhaust the credit against their Idaho income tax before sharing with affiliates, optimizing group-wide utilization (shared credits reduce the originating member's carryforward).

Other Important Rules

Pass-Through Treatment Credits allocate pro-rata to owners via ID K-1 for claiming on their individual returns; no entity-level refund for S corporations.
Audit GuidelinesMaintain detailed records sufficient to substantiate Idaho QREs, Idaho-source gross receipts, and federal eligibility through the applicable Idaho and federal limitation periods. The Idaho State Tax Commission focuses on sourcing and federal alignment.
In-State OnlyAll QREs and gross receipts must tie to Idaho activities—no out-of-state qualification.

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Idaho R&D Tax Credits Case Study

A Boise-based software firm unlocked R&D credits to fuel expansion.

$150,000

total state R&D tax credits earned

60%

of wages qualified for credits

$375,000

total R&D tax credits earned (federal + state combined)

Frequent Asked Questions

What is the Idaho R&D tax credit?

The Idaho R&D tax credit, under Idaho Code §63-3029G, provides a 5% credit on incremental QREs exceeding the base amount, plus a 5% credit on basic research payments in excess of the base period amount, for basic research conducted in Idaho, aligned with federal IRC §41 but limited to Idaho-sourced activities.

What activities qualify for Idaho’s R&D tax credit?

Qualified activities must meet the federal four-part test: IRC §174 treatment, technological discovery, business component improvement, and experimentation. Examples include software development or process enhancements conducted in Idaho. Strike Tax verifies eligibility.

How much can my business save with Idaho’s R&D tax credit?

For $1 million in incremental QREs, you could save $50,000, stackable with federal credits. Use Strike Tax’s R&D Credit Calculator for a personalized estimate.

Are Idaho R&D tax credits refundable?

No, credits are nonrefundable but carry forward for 14 years. Pass-through entities can allocate to owners for broader use. Strike Tax maximizes carryforward strategies.

How do I apply for Idaho’s R&D tax credit?

File Form 67 with your Idaho tax return (due with state filing). Ensure federal Form 6765 compliance first. Strike Tax handles documentation and filing.

Can Idaho businesses claim both state and federal R&D credits?

Yes, stack state and federal credits on the same Idaho QREs for amplified savings. Strike Tax optimizes dual claims.

How does Idaho’s start-up fixed-base election work?

A taxpayer can elect on Form 67 to be treated as a start-up company for Idaho purposes (irrevocable). Compute fixed-base under federal start-up rules using Idaho data, capped at 16 percent, often resulting in a lower base and larger early-year credits.