About this programme
The Research and Development (R&D) Tax Credit is an Arizona income tax credit for increased research and development activity carried out in the state, including research conducted at a state university and funded by the company. The nonrefundable credit was enacted in 1992 for corporations (A.R.S. Section 43-1168) and in 1999 for individuals (A.R.S. Section 43-1074.01), and it's administered by the Arizona Department of Revenue. Its purpose is to encourage Arizona businesses to keep investing in R&D.
In the 2010 legislative session, Senate Bill 1254 added a partial-refund option on top of the base credit, established under A.R.S. Section 41-1507 and administered by the Arizona Commerce Authority (ACA) rather than the Department of Revenue. Starting in 2010, a company that otherwise qualifies for the R&D credit and employs fewer than 150 full-time employees can apply to the ACA for a partial refund of up to 75% of its current year's excess R&D credit.
A further enhancement followed in the 2011 legislative session: an additional credit for taxpayers who made basic research payments during the tax year to a university under the jurisdiction of the Arizona Board of Regents, worth 10% of the basic research payments that count as excess expenses over the base amount. This university R&D credit is administered by the Department of Revenue, but a taxpayer must first get a certification of research payments from the ACA before applying to Revenue or claiming it.
Frequently asked
Is the R&D tax credit refundable?
The base credit is nonrefundable. But a company with fewer than 150 full-time employees that otherwise qualifies can apply to the Arizona Commerce Authority for a partial refund of up to 75% of its current year's excess R&D credit.
How is the credit calculated?
For 2011 through 2030 it's 24% of the first $2.5 million in qualifying R&D expenses, plus 15% of qualifying expenses above $2.5 million. From 2031 onward the rates drop to 20% and 11% respectively.
Does research at a university count?
Yes. Research conducted at a state university and funded by the company counts toward the credit, and basic research payments to a university under the Arizona Board of Regents can earn an additional 10% credit on the excess amount over the base.
Who administers this credit?
The Arizona Department of Revenue administers the base nonrefundable credit and the university research credit. The Arizona Commerce Authority handles applications for the refundable portion and certification of university research payments.
Do I need ACA certification before claiming the university research credit?
Yes. A taxpayer must first apply to the ACA for a certification of research payments before applying to the Department of Revenue for the university R&D tax credit or otherwise claiming it.
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Reviewed 2026-09-25. Programmes change, so check eligibility, amounts and deadlines on the official page before you apply. CapEasy is a private firm and is not part of any government body.