Can Companies Claim
R&D Tax Credits in Idaho?
Yes. Idaho offers a Research and Development (R&D) Tax Credit for businesses that incur expenses for R&D activities within the state. The Idaho credit is based on the federal IRC §41 credit for increasing research activities, with some notable differences.
Key Details of the Idaho R&D Credit
The definitions of basic research payments, basic research, qualified research expenses (QREs), and qualified research follow the federal IRC §41 rules, but only expenses for research conducted in Idaho qualify
Gross receipts are calculated using only Idaho-based revenue, as determined by multistate corporation apportionment rules.
Taxpayers may elect to be treated as a start-up for Idaho purposes, even if they do not qualify for federal credits. This allows the use of the fixed-base percentage for start-ups. Once chosen, this election cannot be changed.
The credit calculation mirrors the federal regular credit method, but the Idaho credit rate is 5% of QREs above the base amount. Additionally, 5% of basic research payments for research done in Idaho is claimable.
Idaho does not allow the alternative simplified credit method that is available federally.
Corporations in a unitary group can share unused Idaho credits with other group members, but the credit must first be applied against the corporation’s Idaho income tax.
The Idaho credit is nonrefundable and cannot exceed the amount of Idaho income tax owed.
Unused credits can be carried forward for up to 14 years
Idaho R&D Tax Credit Case Study
A Boise-based food manufacturer develops new product formulas and improves processing techniques at its plant. The company claims the R&D credit each year for engineering development work, including a multi-year project.
The company qualified for federal R&D credits totaling $558,833 and an additional $166,300 from the Idaho state R&D credit.
FEDERAL | IDAHO | |||
Year | Total QREs | Credit | Total QREs | Credit |
2024 | $2,400,000 | $264,833 | $2,400,000 | $71,750 |
2023 | $1,400,000 | $143,500 | $1,400,000 | $43,250 |
2022 | $1,000,000 | $98,000 | $1,000,000 | $31,050 |
2021 | $650,000 | $52,500 | $650,000 | $20,250 |
Total | $5,450,000 | $558,833 | $5,450,000 | $166,300 |
Federal R&D Tax Credit Summary
| Year | Total QREs | Federal Credit |
|---|---|---|
| 2024 | $2,400,000 | $264,833 |
| 2023 | $1,400,000 | $143,500 |
| 2022 | $1,000,000 | $98,000 |
| 2021 | $650,000 | $52,500 |
| Total | $5,450,000 | $558,833 |
Idaho R&D Tax Credit Summary
| Year | Idaho Credit |
|---|---|
| 2024 | $71,750 |
| 2023 | $43,250 |
| 2022 | $31,050 |
| 2021 | $20,250 |
| Total | $166,300 |
Criteria for Qualifying Research Activities
The four-part test below defines what counts as qualified research activities
Purpose of the Research
The activity should develop or improve a business component, such as a product, process, software, formula, technique, or invention, by enhancing functionality, performance, reliability, or quality.
Resolving Uncertainty
The work must address technical uncertainties, such as determining the optimal design, method, or approach to achieve the desired outcome. The results should not be known in advance.
Systematic Experimentation
Eligible research must follow a structured experimentation process, including trial and error, modeling, simulation, or testing alternatives to reach the intended improvement.
Technological Basis
The activity must rely on hard sciences such as engineering, physical or biological sciences, or computer science. Artistic, social science, or routine data collection work does not qualify.
Why the R&D Tax Credit Matters ?
Since 1981, the R&D Tax Credit has helped businesses save billions in federal and state taxes. The credit enables companies to hire more staff, expand R&D, invest in facilities, and drive innovation. Thousands of businesses across multiple industries take advantage of this benefit each year.