Arkansas Code of 1987 (2023) › Title 15 - NATURAL RESOURCES AND ECONOMIC DEVELOPMENT (§§ 15-1-101 — 15-76-324) › Subtitle 1 - DEVELOPMENT OF ECONOMIC AND NATURAL RESOURCES GENERALLY (§§ 15-1-101 — 15-14-108) › Chapter 4 - DEVELOPMENT OF BUSINESS AND INDUSTRY GENERALLY (§§ 15-4-101 — 15-4-3910) › Subchapter 27 - CONSOLIDATED INCENTIVE ACT OF 2003 (§§ 15-4-2701 — 15-4-2714) › Section 15-4-2708 - Research and development tax credits

(a)
(1)
(A)
Eligible businesses that have not previously been approved for incentives under this subsection and that conduct in-house research that has been approved for federal research and development tax credits may qualify, at the discretion of the Director of the Arkansas Economic Development Commission, for an income tax credit of up to twenty percent (20%) of the incremental amount spent on in-house research that exceeds the baseline established in the preceding year, for a period of five (5) years, subject to extension at the discretion of the director.
(B)
The initial baseline for a qualified business new to the incentives offered under this subsection is the amount of research conducted in the state as claimed for federal research and development tax credits during the most recent year.
(C)
Tax credits for the first year shall be calculated based on the incremental eligible expenditures for research and development at the end of the first year minus the research and development expenditures as reported by the qualified business for research and development tax credits under subdivision (a)(1)(B) of this section.
(D)
Tax credits for succeeding years shall be calculated as the difference between the current year's research conducted in the state and the previous year's research conducted in the state.
(2)
The income tax credit may be used to offset up to one hundred percent (100%) of a qualified business's annual income tax liability.
(3)
Unused tax credits may be carried forward for up to nine (9) years after the year in which the credit was first earned or until the tax credits are exhausted, whichever occurs first.
(4)
A qualified business claiming tax credits earned under this subsection shall not receive the credit granted by §
26-51-1102(b)
for the same expenditures.
(5)
(A)
The term of the financial incentive agreement for in-house research authorized by this subsection is for a period not to exceed five (5) years.
(B)
The financial incentive agreement may be renewed for additional five-year periods upon the submittal to and approval of the director of a new application and project plan for incentives under this subsection.
(C)
The qualified business claiming a tax credit under this subsection shall certify annually to the Arkansas Economic Development Commission the amount expended on in-house research.
(b)
(1)
Targeted businesses may qualify for an income tax credit equal to thirty-three percent (33%) of the amount spent on in-house research per year for the first five (5) tax years following the targeted business's signing a financial incentive agreement with the commission.
(2)
The credits earned by targeted businesses may be sold as authorized in §
15-4-2709
.
(c)
(1)
An Arkansas taxpayer may be offered, at the discretion of the director, an income tax credit equal to thirty-three percent (33%) of the amount spent on the research for the first five (5) tax years following the business's signing a financial incentive agreement with the commission, subject to the limitations established under §
26-51-1103
if the taxpayer invests in:
(A)
In-house research in a strategic research area; or
(B)
Projects under the research and development programs of the Division of Science and Technology of the Arkansas Economic Development Commission when the projects directly involve an Arkansas business and are approved by the director with the advice of the Board of Directors of the Division of Science and Technology of the Arkansas Economic Development Commission under rules promulgated by the commission for those programs.
(2)
However, the maximum tax credit for a qualified business engaged in a research area of strategic value or involved in research and development programs sponsored by the division shall not exceed fifty thousand dollars ($50,000) per year.
(3)
A qualified business claiming tax credits earned under this subsection shall not receive the credit granted by §
26-51-1102(b)
for the same expenditures.
(4)
(A)
A qualified business claiming tax credits earned under this subsection may offset up to one hundred percent (100%) of the business's Arkansas income tax liability annually.
(B)
Any unused income tax credits may be carried forward for up to nine (9) years after the year in which the credit was first earned or until exhausted, whichever occurs first.
(d)
To claim the credit granted under subsections (a)-(c) of this section, the taxpayer shall file with his or her return, as an attachment to the form prescribed by the Secretary of the Department of Finance and Administration, copies of documentation to show that the commission has approved the research expenditure as a part of a qualified in-house research program or under the research and development programs of the division.
Amended by Act 2019, No. 327,§ 1, eff. 7/24/2019.
Amended by Act 2019, No. 910,§ 412, eff. 7/1/2019.
Amended by Act 2019, No. 910,§ 411, eff. 7/1/2019.
Amended by Act 2015EX1, No. 8,§ 98, eff. 7/1/2015.
Amended by Act 2015EX1, No. 7,§ 98, eff. 7/1/2015.
Acts 2003, No. 182, § 1; 2005, No. 1232, § 3; 2005, No. 1296, § 6; 2007, No. 1596, §§ 4, 6; 2009, No. 716, § 9.