Instructions For Arizona Form 308 - Research And Development Expenses Credit

Arizona Form 308

Basic Research Payment (BRP) Credit Computation

maximum allowable credit from the qualified research

expenses in excess of the base amount.

Basic research payments

$ 1,500,000.00 *

The following example illustrates the computation of the

Qualified organization base period amount

600,000.00

allowable credit and the computation of the excess qualified

Excess BRP

900,000.00

research expenses that are subject to the 15 taxable year

.20

carryforward.

Computed BRP credit

$ 180,000.00

EXAMPLE:

Corporation R incurs $3,500,000 in qualified

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

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

the taxpayer are treated as contract research expenses for the qualified

payments for the taxable year ending July 31, 2000. This is

research expense credit computation as provided by IRC § 41.

the second taxable year in which Corporation R is claiming

the credit and, therefore, the maximum allowable credit for

Qualified Research Expense (QRE) Credit Computation

this taxable year is $250,000.

Qualified research expenses

$ 3,500,000.00

The basic research payment credit computation and the

Contract research expenses (65%)

390,000.00

qualified research expense credit computation, as provided

Total QRE

$ 3,890,000.00

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

for ease in illustration of the excess qualified research

Average annual gross receipts

$ 16,000,000.00

expense computation.

Tier 1 credit:

QRE (equal to 1.5% of average annual gross

240,000.00

receipts)

Base amount (1% of average annual gross

160,000.00

receipts)

Excess QRE

80,000.00

.0165

Computed tier 1 QRE credit

1,320.00

Tier 2 credit:

QRE (equal to 2% of average annual gross

320,000.00

receipts)

Base amount (1.5% of average annual gross

240,000.00

receipts)

Excess QRE

80,000.00

.022

Computed tier 2 QRE credit

1,760.00

Tier 3 credit:

QRE

$ 3,890,000.00

Base amount (2% of average annual gross

320,000.00

receipts)

Excess QRE

3,570,000.00

.0275

Computed tier 3 QRE credit

98,175.00

Total computed research credit (BRP + QRE)

281,255.00

Allowable Research Credit

Total computed research credit (BRP +

281,255.00

QRE)

This is the second taxable year in which Corporation R is claiming the

credit, and, therefore, the maximum allowable credit is $ 250,000.00.

Maximum allowable credit (BRP + QRE)

250,000.00

Qualified research expenses that exceed the maximum allowable credit

in a taxable year may be carried forward for not more than 15 taxable

years.

Instructions For Arizona Form 308 - Research And Development Expenses Credit - 1999 Page 6

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