Arizona R&D credit rules for TY2026
Each row is a field from the registry entry our engine applies. A blank field says so; it is never filled in.
- Credit for TY2026
- Current credit Yes. Our rules registry carries a current Arizona research credit for tax year 2026.
- Structure
- Incremental: the credit applies to qualified research expenses above a state base amount
- Credit rate
- 24% on the first $2,500,000 of the credit base, then 15% above it A two-tier slab, applied by the engine in that order.
- Base method
- The base amount is the federal §41(c) computation with Arizona qualified research expenses and Arizona gross receipts substituted; the state statute adopts that formula and modifies it. The registry carries that formula and the preparer notes that go with it; both are set out below. The registry carries a base percentage of 50%: the statutory minimum base amount (§41(c)(2) as incorporated by the Arizona statute), a floor under the base and therefore a ceiling on the credit, not the base itself. The preparer notes below say when the engine applies it.
- Carryforward
- 10 years
- Carryback
- None recorded
- Refundable?
- Not refundable An affirmative determination in the registry, carried against the statute cited below.
- State form
- Form 308 (Form 308-I for individuals)
- Statute
- A.R.S. §43-1168 (corporate) / §43-1074.01 (individual), as amended by Ch. 140, Laws 2026 (H.B. 4168)
How the Arizona credit is computed
The Arizona credit is incremental: it applies to the qualified research expenses that exceed a state base amount, not to the whole year's spending. The registry carries a two-tier rate: 24% on the first $2,500,000 of the credit base and 15% on the amount above it.
The base amount is the federal §41(c) computation with Arizona qualified research expenses and Arizona gross receipts substituted; the state statute adopts that formula and modifies it. The registry carries that formula and the preparer notes that go with it; both are set out below. The registry carries a base percentage of 50%: the statutory minimum base amount (§41(c)(2) as incorporated by the Arizona statute), a floor under the base and therefore a ceiling on the credit, not the base itself. The preparer notes below say when the engine applies it.
Unused credit carries forward 10 years. Refundability: not refundable.
Ricerca computes the Arizona figure from the same substantiated expenses as the federal §41 credit, under the registry entry for the year claimed. Where the registry is silent, the study says so and the point is resolved with your return preparer, not assumed.
What changed for TY2026
The registry carries a separate Arizona entry for each regime, so a study for TY2025 and a study for TY2026 are computed under different rules. These are the fields that differ.
| Field | TY2025 | TY2026 |
|---|---|---|
| Registry preparer notesThe preparer notes the registry carries for this state changed. The TY2026 set is reproduced in full below. | 7 notes | 7 notes (2 added, 2 removed) |
| RefundableThe registry no longer records the credit as refundable for TY2026. | Yes | No |
| Refund employee-count conditionThe registry no longer records an employee-count condition on a refund. | 150 | Not recorded |
| Refund pre-approval citationThe registry no longer records a refund pre-approval citation. | A.R.S. §41-1507 (Arizona Commerce Authority pre-approval; fewer than 150 full-time employees; 75% of the excess credit, in lieu of carryforward) | Not recorded |
| Verified nonrefundableFor TY2026 the registry carries an affirmative determination that the credit is nonrefundable, against the statute cited below. | No | Yes |
| Refundable percentageThe share of excess credit the registry records as refundable changed. | 75% | 0% |
| StatuteThe governing citation the registry carries for TY2026 is not the one it carries for TY2025. | A.R.S. §43-1168 (corporate) / §43-1074.01 (individual) | A.R.S. §43-1168 (corporate) / §43-1074.01 (individual), as amended by Ch. 140, Laws 2026 (H.B. 4168) |
| Registry regime versionThe registry moves Arizona onto a new regime entry for TY2026. | 2024.2 | 2026.1 |
Claiming it alongside the federal credit
The federal §41 credit comes first: it is computed from the qualified research expenses the study substantiates and filed on Form 6765 with the return. The Arizona credit is then computed from that same base under the state's own rules.
State credits generally reach only research performed in the state, so the study records where each expense was incurred as it is built, not at filing time.
One base, two computations
- 1 Qualify the activities under the four-part test and total the year's QREs.
- 2 Compute the federal §41 credit and file it on Form 6765.
- 3 Apply the Arizona entry above to the Arizona share of that base, and file it on Form 308 (Form 308-I for individuals).
What the registry tells the preparer
These notes travel with the Arizona entry inside the platform, reproduced verbatim for the person signing the return.
- CITE THE STATUTE THAT GOVERNS THIS TAXPAYER. A.R.S. §43-1168 is the credit for increased research activities against the CORPORATE income tax; A.R.S. §43-1074.01 is the separate individual-income-tax credit claimed by individuals and by the owners of pass-through entities (Form 308 vs. Form 308-I). This registry entry carries both because it is entity-blind - the return preparer must cite the one that governs, and a C corporation's workpapers and report should carry §43-1168 alone.
- NO 1984-1988 BASE PERIOD IS NOT A REASON THE FIXED-BASE PERCENTAGE CANNOT BE COMPUTED. IRC §41(c)(3)(B) exists for exactly that taxpayer: a START-UP company's fixed-base percentage is 3% for each of its first five taxable years with qualified research expenses, then a prescribed fraction of the ratio of aggregate QRE to aggregate gross receipts for specified later years, and from the eleventh such taxable year forward it is computed from the taxpayer's OWN 5th-through-10th-year history. Arizona's base applies that federal formula with ARIZONA QRE and ARIZONA gross receipts substituted. So a company incorporated after 1984 has a computable Arizona fixed-base percentage from its own records; what may genuinely be missing is the QRE and Arizona-source gross receipts HISTORY those computations run on, and that - not the absence of a base period - is what the workpaper should say.
- NOT MODELED - THE UNIVERSITY BASIC-RESEARCH ADD-ON. §43-1168(A)(1)(d) allows an ADDITIONAL credit, for taxable years beginning after 12/31/2011, of 10% of the excess of basic research payments made to a university under the jurisdiction of the Arizona Board of Regents over the qualified organization base period amount (IRC §41(e)(3) - not the §41(c) base amount). It is certified by the Arizona Commerce Authority under A.R.S. §41-1507.01 - a different statute from the §41-1507 partial-refund program - draws on a $10,000,000 aggregate calendar-year statewide cap shared with §43-1074.01 claimants, is nonrefundable, and carries forward five taxable years rather than the ten the main credit gets. This engine models the excess-QRE component only; a taxpayer with qualifying Arizona university basic-research payments should evaluate the add-on separately.
- REFUND REPEALED: H.B. 4168 (Ch. 140, Laws 2026) repealed the A.R.S. §41-1507 partial-refund program, applicable to taxable years beginning after 12/31/2025 - the credit is nonrefundable for TY2026+ and unused amounts carry forward 10 consecutive years. Carryforwards earned under prior law survive: the enrolled act retains §43-1168(B)'s 15-/10-year carryforward text unstruck (the Sec. 36 saving clause addresses the credits the act repealed, not §43-1168, which was amended).
- Rates hold at 24% / $600,000 + 15% above the $2,500,000 slab through taxable years beginning before 12/31/2030, then step down to 20% / $500,000 + 11% (§43-1168(A)(1)(b)-(c)).
- The $2,500,000 slab is tested against excess QRE PLUS the §41(e) basic research payments Arizona cross-references (Form 308 line 22); basic research payments are not separately modeled here.
- The base uses the federal §41(c) formula with ARIZONA QRE and gross receipts substituted; the engine's 50%-of-QRE proxy is the §41(c)(2) minimum-base CEILING (Form 308 lines 20-21) - the maximum possible credit, blocked from unqualified issuance until Arizona base data is substantiated.
Registry sources
The citations the Arizona registry entry carries, verbatim: what the study cites and a reviewer can check.
- Statute
- A.R.S. §43-1168 (corporate) / §43-1074.01 (individual), as amended by Ch. 140, Laws 2026 (H.B. 4168)
- Form
- Form 308 (Form 308-I for individuals)
Registry entry version 2026.1, exported from services/study-api/app/engines/rules_engine.py (STATE_RULES_2024 + STATE_RULES_REGIME_OVERRIDES via RulesEngine.get_state_rules) on September 10, 2026. The entry above governs TY2026; a study for an earlier year uses that year's entry.
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