What states qualify for the R&D Tax Credit?

Thirty-five states currently have an R&D credit to offset state income taxes. State credits generally follow the same form and requirements of the federal version of the code, as provided in IRC Section 41. However, the following states do not offer R&D credits to offset state taxes: Washington D.C. (District of Columbia), Missouri, Montana, Nevada, North Carolina, Oklahoma, Oregon, South Dakota, Tennessee, Washington, West Virginia, and Wyoming.

Some states, such as Virginia, have a limited pool of R&D funds that require taxpayers to apply and wait for state taxing authorities to award a portion of claimed credits to taxpayers. Most states allow for R&D credits to be carried forward for between three and twenty years, whereas federal credits have a R&D tax credit carry-forward period of 20 years. It is imperative to understand the nuances of each state’s R&D tax credit code prior to claiming and filing in that state.