Arizona Form 308 - Credit For Increased Research Activities

Arizona Form 308

Arizona qualified research expense and gross receipts amounts

Line 15 -

instead of federal amounts. Other than that, the calculations are

Enter the total of:

the same. Round off the percentage to the nearest one, one

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

hundredth of one percent (four decimal places).

for qualified research performed in Arizona by a qualified

If the percentage computation involves de minimis amounts of

research consortium on the taxpayer's behalf. "Qualified

gross receipts and qualified expenses in a taxable year or short

research consortium" is any qualifying organization as

taxable years are involved, the amounts may be annualized or

defined in IRC § 41(b)(3)(C)(ii). Also include 75% of that

disregarded. Refer to IRC §§ 41(c)(3) and 41(f)(4) for details.

portion of line 9, basic research payments, paid to a

qualified research consortium that does not exceed the line

Existing firms and start-up companies

10 base amount.

Arizona’s definition of whether an organization is an existing

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

firm or a start-up company is also the same as federal, except

qualified research performed in Arizona on the taxpayer's

on an Arizona basis:

behalf, other than such amounts paid to a qualified

•

Existing firms - An existing firm is one that had both

research consortium. Prepaid contract research expenses

Arizona gross receipts and Arizona qualified research

are considered paid in the year the research is actually

expenses for at least three taxable years beginning after

done. Also include 65% of that portion of line 9, basic

December 31, 1983, and before January 1, 1989. The fixed-

research payments, that does not exceed the line 10 base

base percentage is the ratio that the aggregate Arizona

amount, other than amounts paid to a qualified research

qualified research expenses for all taxable years beginning

consortium.

after 1983 and before 1989, bears to the aggregate Arizona

NOTE: If you made basic research payments to an Arizona

gross receipts for such taxable years.

university under the jurisdiction of the Arizona Board of

•

Start-up companies - A start-up company is one that had

Regents, you may be entitled to an additional credit. See

both Arizona gross receipts and Arizona qualified research

Arizona Form 346 for details.

expenses either (1) for the first time in a taxable year

beginning after December 31, 1983, or (2) for fewer than

Line 16 -

three taxable years beginning after 1983 and before 1989.

Add the amounts on lines 12 through 15. Enter the total.

If the percentage computation involves de minimis amounts

Line 17 -

of gross receipts and qualified expenses in a taxable year or

Enter the amount of expenses included on lines 12 through 15

short taxable years are involved, the amounts may be

that are related to solar liquid fuel that will be claimed on Form

annualized or disregarded. Refer to IRC §§ 41(c)(3) and

344. The credit for increased research activities is in lieu of the

41(f)(4) for details.

solar liquid fuel credit claimed on Form 344 with respect to the

NOTE: The maximum percentage that can be entered on

same expenses.

line 20 is 16% (.1600).

Line 18

Lines 21 – 22

Subtract line 17 from line 16. Enter the difference.

Read and follow the directions on the form.

Line 19 -

Line 23 -

Enter the average annual Arizona gross receipts for the four

Multiply line 18 by 50% (.50). The base amount cannot be less

taxable years preceding the taxable year for which the credit is

than 50% of the current year qualified research expenses. This

being determined (the credit year). You may be required to

rule applies to both existing and start-up companies.

annualize gross receipts for any short taxable year.

Line 24 -

If 2016 is the first year you are in business, your average

annual Arizona gross receipts for the preceding taxable years is

Enter the lesser of line 22 or line 23.

zero. If you have been in business in Arizona for less than four

Line 25 –

taxable years prior to the credit year, then the average is the

Add lines 11 and 24. Enter the total.

sum of annual Arizona gross receipts of the applicable period,

divided by the number of taxable years.

NOTE:

If line 25 is $2,500,000 or less, complete line 26 and skip

•

Example:

ABC Corporation began business in Arizona in

lines 27 through 29.

2014. Its annual Arizona gross receipts for 2014 were

If line 25 is more than $2,500,000, skip line 26 and

$100,000. Its annual Arizona gross receipts for 2015 were

•

complete lines 27 through 29.

$200,000. Therefore, ABC Corporation’s average annual

Arizona gross receipts for the 2016 credit year is $150,000

Lines 26 through 29 -

([$100,000 plus $200,000] divided by 2).

The amount of expenses you have determines the amount of

Line 20 -

current year credit you are eligible to claim.

To determine

Fixed base percentage

your proper credit amount, complete lines 26 through 30 as

instructed on the form.

Use the same type of formulas to compute your fixed-base

percentage for Arizona as you would for computing your

Line 30 -

federal fixed-base percentage. The difference is that you use

Enter the amount from line 26 or 29 here.

Arizona Form 308 - Credit For Increased Research Activities - 2016 Page 3

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