North Dakota R&D Tax Credit

Research and development activities are the growth engine for innovative companies and the economy as a whole. In fact, businesses that invest in R&D are more successful than their competitors. Furthermore, companies that claim R&D tax credits have proven to be more profitable and productive. For this reason, the North Dakota R&D Tax Credit program offers qualifying businesses an incentive for their research operations.

North Dakota Research and Development Tax Credit Explained

One of the incentives North Dakota offers to businesses in the area is called Research and Experimental Expenditure Tax Credit. Any LLC, corporation, partnership, trust, estate, or individual carrying out R&D operations in the state is eligible for this credit. North Dakota research tax credit is equivalent to the excess of QREs over the base amount that the state requires. The definition of QREs and base amount are the same as in IRC § 41 (federal income tax legislation).

If your business is a qualifying research and development company (other than an S-corporation or a partnership), you can also assign, transfer, or sell up to $100k of your unused tax credit to another taxpayer. But to qualify for this provision, you must meet specific criteria the North Dakota Department of Commerce sets. In other words, you have to be a primary sector business doing qualifying research in ND for the first time after December 31, 2016. Moreover, your yearly gross revenues need to be less than $750,000.

However, if you started qualifying research before January 1, 2007, please keep in mind that you can only get a maximum of $2 million. Anything above this amount is not permitted in any year.

How to Calculate the North Dakota Research and Development Tax Credit

The credit equals 25% of the first $100k in extra costs and 8% of the remaining costs beyond $100k. Furthermore, you can utilize an alternative simplified method to compute the credit amount for taxable years 2019 and beyond. Simply take 17.5% of the first of $100,000 of QREs, then add 5.6% of the amount over $100,000.

North Dakota Research Tax Credit: Takeaway

You can claim a tax credit for approved research you conduct in North Dakota. The North Dakota R&D tax credit is fairly similar to its federal counterpart, including the description of QREs and the base amount.

FAQs

What kind of companies can apply for an R&D tax credit in North Dakota?

Partnerships, LLCs, S-Corporations, C-Corporations

What is the deadline for applying for an R&D tax credit in North Dakota?

You must submit your application with the North Dakota Tax Return.

What data do I need to calculate credit an R&D tax credit in North Dakota?

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

Is credit carryforward an option in North Dakota?

Yes, up to fifteen years. You can also carry the credit back three tax years.