Idaho R&D Tax Credit

Many business owners in Idaho are surprised to discover the savings potential available through federal tax incentives such as the R&D tax credit. However, such benefits can be of great help in helping your business grow. That is why you should learn everything there is to know about applying for the Idaho research and development tax credit.

Idaho Research Tax Credit Explained

Certain QREs (qualified research expenses) that were made in Idaho can apply for the state R&D tax credit using Idaho Form 67. However, the credit is restricted to income tax, and you can use it only after claiming other tax credits.

The Idaho R&D Tax Credit resembles the federal section 41 credit for growing research activities but has a few differences. For instance, it covers the expenses of research activities conducted exclusively in Idaho. But generally speaking, “qualifying research” must fulfill the following four requirements to apply.

1. Expenditures can be regarded as costs, thanks to IRC section 174;

2. Activities must help learn technological information;

3. The application has to assist the taxpayer in establishing a brand-new or better business component; and

4. Almost all actions are parts of an experimenting process for a certain objective.

Companies Eligible for the Idaho R&D Tax Credit

For start-up businesses, Idaho Fixed Base Percent (FBP) comprises only eligible research costs incurred in the state, and aggregate gross receipts include only Idaho gross receipts. Furthermore, a taxpayer can decide to be recognized as a start-up company per Section 41’s federal standards for Qualified Small Businesses (QSBs).

On the other hand, unitary groups follow a slightly different rule. Before sharing the Idaho research credit with other members, a corporation that is a part of a unitary group must first claim it against its state income tax to the degree permitted.

What Doesn’t Qualify

Research in the social sciences, the humanities, the arts, and behavioral sciences can not apply for an Idaho research tax credit. That is because it primarily focuses on technological activities.

Gross Receipt Calculations

Calculations of gross receipts only consider those that can be attributed to Idaho as stated in Idaho Code §63-3027(q) and §63-3027(r). At the same time, you can’t use the simplified credit method (ASC, for short) — taxpayers usually calculate the federal credit with it —  in the computation of the Idaho credit.

Idaho research and development tax credit is equivalent to 5% of QREs over the base amount. You get the base amount by multiplying the fixed base percentage by average annual gross receipts from four prior years.

How to Calculate the Idaho R&D Tax Credit

5% of the amount by which the taxpayer’s QREs (for the current year) surpass a basic sum.

Idaho Research and Development Tax Credit: Takeaway

When calculating this tax credit, you can’t use the ASC method. The basic amount is the amount determined by IRC 41(c) and IRC 41 (h). However, a taxpayer’s gross receipts must link to sources in Idaho. Also, a company can choose to be treated as a start-up but can’t reverse that decision later on.

FAQs

What kind of companies can apply in Idaho?

Partnerships, LLCs, S-Corporations, C-Corporation

What is the deadline for applying in Idaho?

You must submit your application with the Idaho Tax Return.

What data do I need to calculate credit in Idaho?

Idaho QREs for the claim period.

What information do I need to provide?

Gross receipts for the past four years.

Is credit carryforward an option in Idaho?

Yes, for up to 14 years.