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 a state with a great credit – Utah!
Two R&D Credits available in Utah: flat and incremental
To be eligible for the Utah R&D credit, you must first have qualified research activities within the state of Utah. The qualification requirements closely follow the federal definitions contained within Section 41 of the Internal Revenue Code, so long as the activities happen within Utah.
One of the interesting things about the Utah credit is there are actually two credits – flat and incremental. The flat credit is easier to calculate and is equal to 7.5% of the qualified expenses for the current year. However, the flat credit cannot be carried forward.
The incremental credit on the other hand is equal to 5% of the qualified expenses over a base amount, but any remaining credit can be carried forward up to 15 years.
All entity types are eligible to claim the credit and Utah tax returns can be amended as far as three years to claim the credit and a taxpayer is permitted to one or both of the different types of credits.
Utah is one of the most generous states when it comes to the R&D credit and we always encourage our clients based in Utah to at least calculate the credit to determine their eligible credit amount. This allows us to compare the credit amount with the tax liability for a given year and develop a filing strategy that most closely aligns with the company and shareholders’ tax liability.
While the Utah credit can be beneficial, it is still important to work with a provider who is familiar with the nuances of the Utah 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 Utah R&D credit? Submit your information here!