Rhode Island R&D Tax Credits

The state of Rhode Island offers a Research and Development Expense Credit which has similar qualification requirements to IRC § 41.

Prior to 1998, Rhode Island was a piggyback state, meaning the Federal Form 6765 had to be calculated to determine the Rhode Island state credit calculation. For today's R&D studies, the credit calculation is based purely on current year R&D expenditures. The credit equals 22.5% of the expenses up to $111,111 (or $25,000) plus 16.9% of the remaining expenses over the $111,111 threshold.

• For example, assuming a company has $465,000 of qualified state expenses for tax year 2020.
• The 2020 credit will be $84,807 --> [$111,111 @ .225% or $25,000] plus $59,807 [16.9% of the remaining $353,889].

Under Rhode Island statute 44-11-2(e), the credit cannot reduce the tax below the minimum fixed tax rate.  Any additional credit can be carried forward seven years. Unlike the federal credit, in Rhode Island, in the instance of consolidated entities, the credit can only go against tax of the specific corporation and cannot be allocated out.

The credit is claimed using forms RI-7695E - Research & Development Expense Credit, and entered on Schedule B-CR, Business Entity Credit Schedule.

Lastly, credit utilization is limited to 50% of the tax due after all other credits available to the taxpayer have been used.

Learn more about Rhode Island R&D Tax Credit law from their Division of Taxation. 

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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 Rhode Island Tax Return

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Data Required to Compute Credit:

Claim period Federal Qualified R&D Expenses (QREs)

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What Information is needed?

Federal Form 6765

Claim period Rhode Island QREs

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Credit Carryforward:

7 years

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The R&D tax credit equals:

• Prior to 1998, the R&D tax credit equals the excess of the qualifying research expenses in the taxable year over the base period expenses.

For tax years after 1998, the credit equals:

• 22.5% of qualified expenditures up to $111,111 (or $25,000)
• 16.9% for the remaining qualified expenditures over $111,111

Attach Schedule B-CR and Form RI-7695E to your return.

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Specific Item to Note:

• Rhode Island also offers a Credit for Research and Development Property which equals 10% of the cost or other basis for federal income tax purposes of tangible personal property, and other tangible property, including buildings and structural components of buildings, acquired, constructed, reconstructed, or erected after July 1, 1994.