Instructions For Arizona Form 308 - Research And Development Expenses Credit

Arizona Form 308

expenses are considered paid in the year the research is

amount.

actually done. Also include 65 percent of that portion of

Part III - Computation of Excess Qualified

line 19, basic research payments that does not exceed

Research Expenses for Current Taxable Year

the line 20 base amount, other than amounts paid to a

for Standard Credit Computation

qualified research consortium.

Complete this section if the standard computation tentative

Line 28 -

credit for current taxable year qualified research expenses

Enter the average annual Arizona gross receipts for the four

(Part I, line 16) is greater than the maximum allowable

taxable years preceding the taxable year for which the credit

credit for the current taxable year (Part I, line 17).

is being determined. The taxpayer may be required to

Qualified research expenses that exceed the maximum

annualize gross receipts for any short taxable year.

allowable credit in a taxable year may be carried forward for

TIER 1 CREDIT COMPUTATION: The tier 1 credit is

not more than 15 taxable years.

equal to 1.65 percent of so much of the qualified research

The amount of qualified research expenses in excess of the

expenses for the taxable year (line 27) as exceeds 1 percent

maximum allowable credit is determined by subtracting the

of line 28 but does not exceed 1.5 percent of line 28. The

total qualified research expenses used to compute the

taxpayer's qualified research expenses for the taxable year

maximum allowable credit from the qualified research

must exceed 1 percent of line 28 to qualify for the tier 1

expenses in excess of the base amount.

credit.

The following examples illustrate the computation of the

Line 29 -

allowable credit and the computation of the excess qualified

If the amount on line 27 is equal to or exceeds 1.5 percent of

research expenses that are subject to the 15 taxable year

the amount on line 28, enter 1.5 percent (.015). If the

carryforward.

amount on line 27 exceeds 1 percent of the amount on line

EXAMPLE 1:

Corporation R incurs $2,500,000 in

28 but is less than 1.5 percent of the amount on line 28,

qualified research expenses and $1,500,000 in basic research

enter the applicable percentage.

payments for the taxable year ending March 31, 2000. This

TIER 2 CREDIT COMPUTATION: The tier 2 credit is

is the second taxable year in which Corporation R is

equal to 2.2 percent of so much of the qualified research

claiming the credit and, therefore, the maximum allowable

expenses for the taxable year (line 27) as exceeds 1.5 percent

credit for this taxable year is $250,000.

of line 28 but does not exceed 2 percent of line 28. The

The basic research payment credit computation and the

taxpayer's qualified research expenses for the taxable year

qualified research expense credit computation, as provided

must exceed 1.5 percent of line 28 to qualify for the tier 2

by IRC § 41, are shown separately in an abbreviated format

credit.

for ease in illustration of the excess qualified research

Line 34 -

expense computation.

If the amount on line 27 is equal to or exceeds 2 percent of

Basic Research Payment (BRP) Credit Computation

the amount on line 28, enter 2 percent (.02). If the amount

Basic research payments

$ 1,500,000.00 *

on line 27 exceeds 1.5 percent of the amount on line 28 but

Qualified organization base period amount

600,000.00

is less than 2 percent of the amount on line 28, enter the

Excess BRP

900,000.00

applicable percentage.

.20

TIER 3 CREDIT COMPUTATION: The tier 3 credit is

Computed BRP credit

$ 180,000.00

equal to 2.75 percent of so much of the qualified research

* $600,000 of the $1,500,000 in basic research payments incurred by

expenses for the taxable year (line 27) as exceeds 2 percent

the taxpayer are treated as contract research expenses for the qualified

of line 28. The taxpayer's qualified research expenses for the

research expense credit computation as provided by IRC § 41.

taxable year must exceed 2 percent of line 28 to qualify for

the tier 3 credit.

Qualified Research Expense (QRE) Credit Computation

Line 44 -

Qualified research expenses

$ 2,500,000.00

Contract research expenses (65%)

390,000.00

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

claiming the credit, the maximum allowable credit is

Total QRE

2,890,000.00

$100,000. If this is the second taxable year in which a

Base amount

1,700,000.00

taxpayer is claiming the credit, the maximum allowable

Excess QRE

1,190,000.00

credit is $250,000. If this is the third taxable year in which a

.20

taxpayer is claiming the credit, the maximum allowable

Computed QRE credit

$ 238,000.00

credit is $400,000. For each taxable year after the third

taxable year in which the taxpayer claims the credit, the

Allowable Research Credit

maximum allowable credit is $500,000. Enter the applicable

Instructions For Arizona Form 308 - Research And Development Expenses Credit - 1999 Page 4

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