This month we are continuing our “What’s Happening in Your State?” series, where we provide information about the R&D credit in a different state each month. This month, we are focusing on Ohio!
To be eligible for the Ohio R&D credit, you must first have qualified research activities within the state of Ohio. The qualification requirements closely follow the federal definitions contained within Section 41 of the Internal Revenue Code, but only activities occurring within Ohio are capturable towards the Ohio R&D credit.
Unlike the federal credit calculation, Ohio only has one base methodology – the alternative simplified methodology. The credit is equal to 7% of the amount of qualified research expenses in excess of the taxpayer’s investment in qualifying expenses for the current year over the average annual qualified research expenses incurred by the taxpayer in Ohio over the 3 preceding taxable years.
The credit is nonrefundable and can be used to offset the commercial activity tax, commonly referred to as the CAT tax. The deadline to file an amended return to claim the R&D credit is 4 years from the date the return was filed or required to be filed, whichever is later. The credit can be carried forward for up to seven years.
While the Ohio credit can be beneficial, it is still important to work with a provider who is familiar with the nuances of the Ohio credit calculation and can help you determine the most appropriate utilization strategy for your business!
Interested in learning more about how your company may be able to take advantage of the R&D credit? Submit your information here!