North Dakota R&D Tax Credits

North Dakota provides a Research and Experimental Expenditure Tax Credit.  An individual, estate, trust, partnership, corporation, or limited liability company (LLC) is allowed an income tax credit for conducting research in North Dakota. The credit is equal to a percentage of the excess of qualified research expenses in North Dakota over the base amount in North Dakota.

For taxpayers who began qualified research in North Dakota before January 1, 2007, the maximum credit allowed in any year is $2 million, and any credit over this amount is not allowed in any year.

Learn more about North Dakota's R&D Tax Credit law from the North Dakota Tax Commission.

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R&D Tax Credit Available:

Yes

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Eligible Entities:

C-Corporations, S-Corporations, LLCs, Partnerships

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Deadline for Tax Filing:

Due with North Dakota Tax Return

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Data Required to Compute Credit:

Claim Period North Dakota Qualified R&D Expenses (QREs)

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Credit Carryforward:

The unused portion of the credit must be carried back 3 tax years and carried forward up to 15 tax years

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The R&D tax credit equals:

• 25% of the first $100,000 of excess expenses and 8% of remaining expenses over $100,000.
• For tax years 2019 and after, a taxpayer may elect to use an alternative simplified method to calculate the credit. Under this method, the credit is equal to 17.5% of the first $100,000 of North Dakota QREs plus 5.6% of the amount in excess of $100,000.

Specific Items to Note:

"Qualified research expenses" and "base amount" have the same meaning as defined under federal income tax law (I.R.C. § 41).

If a taxpayer is a qualified R&D company (other than partnerships or S corporations), the company may sell, transfer, or assign up to $100,000 of its unused tax credit to another taxpayer. The North Dakota Department of Commerce, has the following requirements to be eligible for this provision:

• Taxpayer is a primary sector business;
• Taxpayer conducted qualified research activity in North Dakota for the first time after December 31, 2006; and
• Taxpayer has annual gross revenue of less than $750,000.