The time is getting close for the annual race for the Arizona refundable Research and Development (R&D) tax credit. On January 2, 2019, the floodgates open for qualified businesses to apply for the limited amount of funds available as a refundable credit to Arizona taxpayers. In past years, the availability of the refundable credit was used up in a very short window of time. The credit is offered on a first come, first served basis, so proper planning is an important factor in giving your business the best chance possible to get the credit it deserves.
The Arizona Commerce Authority (ACA) offers refunds up to $5 million annually through the refundable R&D program under A.R.S. §41-1507. Applications for 2019, related to 2018 research and development activities, are available to be filed starting on the first business day of 2019 via the ACA’s Electronic Application System (“EASY”). If your business is planning on applying for the refundable credit, the time is now to make sure you are prepared to apply as soon as the ACA application portal opens.
The R&D tax credit is a federal tax credit under Internal Revenue Code (IRC) section 41. The federal tax credit was also adopted by some U.S. states. Arizona is one of the few states that not only offers an R&D tax credit, but is also authorized to issue a refundable credit up to an annual cap. Arizona taxpayers who qualify for the R&D tax credit may be able to elect the refundable credit, in lieu of the non-refundable credit. By electing the refundable credit, businesses can get the benefit of a cash refund, infusing their operations with more funds to be available for continued innovation and technological advances.
If you have any questions regarding the Arizona refundable R&D tax credit or would like to discuss if your business qualifies, please feel free to contact us.