Day 32 - R&D Tax Credit
Utah will become a more attractive state for research and development if SB171 passes. Sponsored by Sen. Stephenson, SB171 improves Utah's R&D tax credit as follows:
- A new tax credit without carry forward equal to 5% of all qualified research expenses (QRE) as defined by the IRS
- An increased credit equal to 8% of incremental QRE above a base year, up from the existing 6%.
The R&D tax credit calculation is far too complicated to fully explain here, but Utah's current credit is tied to the federal R&D credit which is based on incremental R&D expenditures over a base year. Sales volume is also a component of the formula. Unfortunately, the federal credit calculation penalizes companies with rapidly growing sales. SB171 corrects this problem by adding the additional 5% credit based on total QRE, independent of incremental R&D expenditures and sales volume.
Research and development activity creates high-wage jobs, improves productivity, and is export-oriented, all of which are critical elements in Utah's economic development.
Disclaimer: Like all legislation, SB171 may eventually be modified, meaning that the above points may no longer be 100% relevant.