State program
Arizona Credit for Increased Research Activities
A two-tier state credit modeled on the federal research credit, with a partial refund available to small companies.
Program Overview
Arizona offers one of the more generous state research incentives. The credit is calculated on Arizona-based qualified research expenses in excess of a base amount and is tiered so that spending above a threshold earns a lower marginal rate. Companies with fewer than 150 full-time employees may apply to the Arizona Commerce Authority for a partial refund of the unused credit, which turns the incentive into cash for pre-profit businesses. An additional credit is available for basic research payments made to Arizona universities.
Eligibility
C corporations and pass-through entities with qualified research expenses incurred in Arizona that also qualify under IRC Section 41. Refund applications require Arizona Commerce Authority certification and fewer than 150 full-time employees.
Benefits
Non-refundable credit against Arizona income tax, with up to 75% of the excess credit refundable for qualifying small businesses.
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