Credit for Increased Research Activities - Individuals.
Arizona Revised Statutes § 43-1074.01 provides an individual income tax credit for increased research activities in a taxable year.
• The Arizona tax credit for individuals is allowed in an amount computed pursuant to Internal Revenue Code (IRC) § 41 with the following exceptions:
• Qualified research includes only research conducted in Arizona. The term "qualified research", for purposes of the Arizona tax credit, means qualified research, as defined in IRC § 41, that is conducted in Arizona.
• The amount of the credit is based on the federal regular credit computation method for Arizona qualified research expenses. Taxpayers cannot use the federal alternative credit computation method. The allowable current taxable year credit is a percentage of the excess, if any, of the Arizona qualified research expenses for the taxable year over the base amount.
• The termination provisions of IRC § 41 do not apply.
• For 2021, if the allowable expenses do not exceed $2,500,000, the allowable credit is 24% of this amount. If the allowable expenses exceed $2,500,000, the allowable credit amount is $600,000 plus 15% of the amount of expenses over $2,500,000.
• If two or more taxpayers, including shareholders of an S Corporation or partners in a partnership, share in the eligible expenses, each taxpayer is eligible to receive a proportionate share of the credit.
• A portion of the current year’s excess credit may be refundable if you qualify