Form 306 - Research And Development Tax Credit

Form 306-A

Instructions for Form 306

(1-12, R-13)

Research and Development Tax Credit for Taxable Periods Beginning On and After January 1, 2012

ITEMS TO NOTE

See I.R.C. 41(b)(4).

• A credit can be claimed for only those research activities that are

The research and development tax credit is generally not allowed for

performed in New Jersey.

the following types of activities:

• A credit for increased research activities is allowed based on

1. Research conducted after the beginning of commercial production;

qualified expenditures made in taxable years beginning on and after

2. Research adapting an existing product or process to a particular

January 1, 1994.

customer’s need;

• The filing of a consolidated tax return by a controlled group of

3. Duplication of an existing product or process;

corporations is not permitted.

4. Survey or studies;

• Section references are to the Internal Revenue Code unless

otherwise noted.

5. Research relating to certain internal use computer software;

• For periods beginning on and after January 1, 2002, any deductions

6. Research conducted outside the State of New Jersey;

for research and experimental expenditures, to the extent that those

7. Research in the social sciences, arts, or humanities; or

research and experimental expenditures are qualified research

expenses or basic research payments for which an amount of credit

8. Research funded by another person (or governmental entity).

is claimed pursuant to section 1 of P.L.1993, c.175 (C.54:10A-5.24)

unless those research and experimental expenditures are also used

See I.R.C. 41 for other definitions and special rules concerning the

to compute a federal credit claimed pursuant to section 41 of the

research credit.

Federal Internal Revenue Code of 1986, 26 U.S.C. s.41, if

applicable, must be added back on Schedule A of the CBT-100,

WHO MUST FILE

CBT-100S or BFC-1 return on the line for “Other deductions and

A corporation claiming a credit for increasing research activities

additions”. Refer to the Schedule A instructions for the appropriate

should complete this form and attach it to its tax return.

return.

A New Jersey S-Corporation is allowed to claim a credit in

connection with increasing research activities to the extent of its New

PURPOSE OF FORM

Jersey corporation tax liability. Pass through of this credit to shareholders

Use form 306 to calculate and claim the credit for increasing the

is not permitted.

research activities of a trade or business. Complete Parts I through IV to

See I.R.C. 41(f) for special rules related to:

compute the research credit.

1. Adjustments if a major portion of a business is acquired or

QUALIFIED RESEARCH ACTIVITIES

disposed of; and

The research and development tax credit is generally allowed for

2. Short tax years.

qualified research activities. Qualified research activities are limited to

scientific experimentation or engineering activities designed to aid in the

CREDIT CARRYOVER

development of a new or improved product, process, technique, formula,

If the research credit cannot be used because of tax liability

invention, or computer software program held for sale, lease, or license,

limitations, it may be carried forward for either 7 or 15 years. See the

or used by the taxpayer in a trade or business. For in-house research

instructions for Part V. Complete Part V to document any tax credit

expenses (see I.R.C. 41(b)(2)), this trade or business requirement will be

carryover.

met if the principal purpose for conducting the research is to use the

results of the research in the active conduct of a future trade or business.

Specific Instructions for Form 306

PART I

CREDIT CALCULATION FOR BASIC RESEARCH PAYMENTS

Line 7 - Include 65% (.65) of any amount paid or incurred for qualified

research performed on the taxpayer’s behalf. Prepaid tract research

Line 1 - Corporations are eligible for a “basic research” credit if your

expenses are considered paid in the year the research is actually done.

payments in cash to a qualified university or scientific research

Also include 65% (.65) of that portion of the line 1 basic research

organization (under a written contract) exceed a base period amount

payments that does not exceed the line 2 base amount. See I.R.C.

(based on your general university giving and certain other maintenance-

41(e)(1)(B).

of-effort levels for the three preceding years). Enter your payments on

line 1. See I.R.C. 41(e) for details.

Line 9 - Compute the fixed base percentage as follows

Line 2 - Enter the base period amount as defined in I.R.C. 41(e) but not

Existing firms - The fixed base percentage is the ratio that the aggregate

more than the amount on line 1.

qualified research expenses for at least 3 tax years from 1984 to 1988

bear to the aggregate gross receipts everywhere (Schedule A, line 1 of

PART II

the New Jersey Form CBT-100, CBT-100S or BFC-1) for such tax years.

Round off the percentage to the nearest 1/100th of 1% (i.e. four decimal

CREDIT CALCULATION FOR QUALIFIED RESEARCH EXPENSES

places).

Lines 4 through 7 - pertain to qualified research expenditures paid or

incurred.

If taxpayer has research within and outside New Jersey and cannot

determine the amount of New Jersey qualified research expenses for the

IMPORTANT NOTE:

Property and expenditures included in the

period beginning after December 31, 1983 and before January 1, 1989,

calculation of the Research and Development Tax Credit are not

calculate the amount to be used in the numerator of the ratio for line 9 as

permitted to be included in the calculation of the Recycling Equipment Tax

follows: take the figure for qualified research and development expenses

Credit, the Manufacturing Equipment and Employment Investment Tax

everywhere for the period and multiply it by the average of the payroll

Credit or the New Jobs Investment Tax Credit.

fraction and the property fraction used on the corporation business tax

returns for the corresponding years in question. This amount becomes

Line 6 - See I.R.C 41(b)(2)(A) for rules on leased property if the taxpayer

the numerator of a fraction whose denominator is taxpayer’s aggregate

received payments for the rental or lease of substantially identical

gross receipts everywhere for the period.

property.

Form 306 - Research And Development Tax Credit - 2012 Page 3

Related Articles

Related forms

Related Categories