Instructions For Arizona Form 308 - Research And Development Expenses Credit

Arizona Form 308

2/3 of the percentage which the aggregate

Line 19 -

Arizona qualified research expenses for 5th

Corporate taxpayers (other than S corporations, personal

9th

through 8th taxable years is of aggregate

holding companies and service organizations) may be

Arizona gross receipts for 5th through 8th

taxable years.

eligible for a "basic research" credit if their payments made

5/6 of the percentage which the aggregate

in cash to a qualified university or scientific research

Arizona qualified research expenses for 5th

organization (pursuant to a written contract) exceed a base

10th

through 9th taxable years is of aggregate

period amount. The basic research payments must be made

Arizona gross receipts for 5th through 9th

for research conducted in Arizona. Enter the amount of such

taxable years.

payments on line 19.

Percentage which the aggregate Arizona

qualified research expenses for any 5

Line 20 -

taxable years selected by the taxpayer from

All years after 10th

Enter the base period amount as defined by IRC § 41(e) that

among the 5th through 10th taxable years is

is based on Arizona research activity. The amount on line 20

of the aggregate Arizona gross receipts for

(but not more than the amount on line 19), although not

the selected taxable years.

eligible for the basic research credit, can be treated as

contract research expenses on line 26.

If the percentage computation involves de minimis

amounts of gross receipts and qualified expenses in a

Line 23 -

taxable year or short taxable years are involved, the

Enter total wages paid or incurred for qualified services

amounts may be annualized or disregarded. Refer to IRC

performed in Arizona. Do not include the amount of such

§§ 41(c)(3) and 41(f)(4) for details.

wages paid to employees hired after September 30, 1996,

NOTE: The maximum percentage that can be entered on

that were used in the calculation of the federal work

line 10 is 16 percent (.16).

opportunity credit. Wages include any wages paid or

incurred to an employee for qualified services performed by

Line 13 -

such employee. Qualified services consist of engaging in

Multiply line 8 by 50 percent (.50). The base amount cannot

qualified research or engaging in the direct supervision or

be less than 50 percent of the current year qualified research

direct support of research activities which constitute

expenses. This rule applies both to existing and start-up

qualified research.

companies.

Line 24 -

Line 17 -

Enter the cost of supplies paid or incurred for use in the

Enter the applicable amount.

conduct of qualified research in Arizona. Supplies include

•

expenditures for any tangible property other than land or

If this is the first taxable year in which a taxpayer is

improvements to land, and property of a character subject to

claiming the credit, the maximum allowable credit is

the allowance for depreciation.

$100,000.

•

If this is the second taxable year in which a taxpayer is

Line 25 -

claiming the credit, the maximum allowable credit is

Enter the amount paid or incurred to rent or lease the right

$250,000.

to use computers in the conduct of qualified research in

•

If this is the third taxable year in which a taxpayer is

Arizona.

claiming the credit, the maximum allowable credit is

Line 26 -

$400,000.

Enter the total of:

•

For each taxable year after the third taxable year in

(a) Seventy-five percent (.75) of any amount paid or

which the taxpayer claims the credit, the maximum

incurred for qualified research performed in Arizona by

allowable credit is $500,000.

a qualified research consortium on the taxpayer's behalf.

Part II - Alternative Credit Computation for

"Qualified research consortium" is any qualifying

Current Taxable Year Corporate Research and

organization as defined in IRC § 41(b)(3)(C)(ii). Also

Development Expenses

include 75 percent of that portion of line 19, basic

research payments paid to a qualified research

The taxpayer may elect to compute the credit for current

consortium that does not exceed the line 20 base

taxable year research and development expenses using the

amount.

alternative credit computation for a taxable year beginning

after June 30, 1996. The election applies to the taxable year

(b) Sixty-five percent (.65) of any amount paid or incurred

in which it is made and to all subsequent taxable years,

for qualified research performed in Arizona on the

unless revoked with the consent of the department.

taxpayer's behalf, other than such amounts paid to a

qualified research consortium. Prepaid contract research

Instructions For Arizona Form 308 - Research And Development Expenses Credit - 1999 Page 3

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