North Dakota Research and Development Tax Credit Summary

The North Dakota R&D Tax Credit is very similar to the federal version including the definition of qualifying research. Below are some of the differences between the federal and North Dakota R&D Tax Credit.

The applicable percentage is 25% for the first $100,000 of excess expenses in a tax year. For excess expenses over $100,000 in a year, the applicable percentage for tax years 2007 through 2016 is:

  • 7 ½% for 2007, 11% for 2008, 14 ½% for 2009 and 18% for 2010 through 2016, if qualified research in North Dakota began before 2007; or
  • 8% if qualified research in North Dakota first begins after 2010
  • For tax years after 2016, the applicable percentage for excess expenses over $100,000 in a year is 8% for all taxpayers, regardless of when research firsts begins.
  • For taxpayers who began qualified research in North Dakota before January 1, 2007, the maximum credit allowed in any year is $2 million
  • An unused credit may be carried back three tax years and carried forward up to fifteen tax years.
  • Subject to certain conditions, a taxpayer may sell, transfer, or assign up to $100,000 of its unused tax credit to another taxpayer if the taxpayer selling the credit is certified by the Department of Commerce Division of Economic Development and Finance to be a primary sector business with annual gross revenues of less than $750,000 that conducts qualified research in North Dakota for the first time after December 31, 2006.

North Dakota R&D Tax Credit Case Study

A Fargo Company manufactures farming equipment. It had never before claimed the R&D Tax Credit for the development activities of its software programmers. This project involved a three year study with a two year look back to claim credits for years 2011 through 2013. The Company qualified for the federal R&D Tax Credit of $390,726 and an additional $516,329 in North Dakota state R&D Tax Credit. Summary of credits:

FEDERAL
NORTH DAKOTA
Year
Total QREs
Credit
Total QREs
Credit
2013
$1,842,800
$137,252
$1,842,800
$172,852
2012
2,087,706
96,160
2,087,706
194,894
2011
1,842,800
157,314
1,842,800
148,583
Total $5,503,651 $390,726 $5,503,651 $516,329

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