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Arizona Form 308-I

"Qualified research consortium" is any qualifying

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

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

than three taxable years beginning after 1983 and before

1989.

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

Fixed-Base Percentages for Taxable Years Beginning After

for qualified research performed in Arizona on your sole

1993 in Which Start-Up Companies Incurred Arizona

proprietorship’s behalf, other than such amounts paid to

Qualified Research Expenses

a qualified research consortium. Prepaid contract

Taxable Year

Percentages for Taxable Years After 1993

research expenses are considered paid in the year the

After 1993

research is actually done.

1st through

5th

NOTE: If your contract research expenses were made to an

Divide

the

aggregate

Arizona

qualified

Arizona university under the jurisdiction of the Arizona

research expenses for 4th and 5th taxable

Board of Regents and qualify as basic research payments,

6th

years by the aggregate Arizona gross receipts

you may be entitled to an additional credit. See Arizona

for 4th and 5th taxable years. Multiply the

result by 1/6 (.1667).

Form 346 for details.

Divide

the

aggregate

Arizona

qualified

research expenses for 5th and 6th taxable

Line 11 -

7th

years by the aggregate Arizona gross receipts

Enter the amount of expenses included on lines 6 through 9

for 5th and 6th taxable years. Multiply the

result by 1/3 (.3333).

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

Divide

the

aggregate

Arizona

qualified

Arizona Form 344. The credit for increased research

research expenses for 5th through 7th taxable

activities is in lieu of the solar liquid fuel credit, provided by

8th

years by the aggregate Arizona gross receipts

A.R.S. § 43-1085.01 (claimed on Arizona Form 344), with

for 5th through 7th taxable years. Multiply the

result by 1/2 (.50).

respect to the same expenses.

Divide the aggregate Arizona qualified research

Line 13 -

expenses for 5th through 8th taxable years by

9th

the aggregate Arizona gross receipts for 5th

Enter the average annual Arizona gross receipts for the four

through 8th taxable years. Multiply the result by

2/3 (.6667).

taxable years preceding the taxable year for which the credit

Divide the aggregate Arizona qualified research

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

expenses for 5th through 9th taxable years by

annualize gross receipts for any short taxable year.

10th

the aggregate Arizona gross receipts for 5th

through 9th taxable years. Multiply the result by

If 2014 is the first year the taxpayer is in business, the

5/6 (.8333).

average annual Arizona gross receipts for the preceding

Divide the aggregate Arizona qualified research

taxable years is zero. If the taxpayer has been in business in

expenses for any 5 taxable years selected by

All years after

Arizona for less than four taxable years prior to the credit

the taxpayer from among the 5th through 10th

10th

taxable years by the aggregate Arizona gross

year, then the average is the sum of annual Arizona gross

receipts for the selected taxable years.

receipts of the applicable period, divided by the number of

If the percentage computation involves de minimis amounts

taxable years.

of gross receipts and qualified expenses in a taxable year

Example: ABC Corporation began business in Arizona in

or short taxable years are involved, the amounts may be

2012. Its annual Arizona gross receipts for 2012 were

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

$100,000. Its annual Arizona gross receipts for 2013 were

41(f)(4) for details.

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

NOTE: The maximum percentage that can be entered on

Arizona gross receipts for the 2014 credit year is $150,000

line 14 is 16% (.1600).

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

Line 17 -

Line 14 -

Multiply line 12 by 50% (.50). The base amount cannot be less

Round off the percentage to the nearest one, one hundredth of

than 50% of the current year qualified research expenses.

one percent (four decimal places). Compute the fixed-base

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

percentage as follows:



Lines 19 through 23 -

Existing firms - An existing firm is one that had both

Arizona gross receipts and Arizona qualified research

The way you compute the amount of the current year’s credit

expenses for at least three taxable years beginning after

you may receive depends on the amount of expenses you

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

have. To determine your proper credit amount, complete

fixed-base percentage is the ratio that the aggregate

lines 19 through 23 as instructed on the form.

Arizona qualified research expenses for all taxable years

Part 3 - Current Taxable Year’s Credit Passed

beginning after 1983 and before 1989, bears to the

Through From S Corporations and Partnerships

aggregate Arizona gross receipts for such taxable years.



Line 24 -

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

both Arizona gross receipts and Arizona qualified

Enter the aggregate amount you received as a flow through

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

from S corporations (from Form 308, Part 4, line 33) and

Instructions For Arizona Form 308-I - Credit For Increased Research Activities - Individuals - 2014 Page 3

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