Are R&D Tax Credits
Available in North Dakota?
Yes. North Dakota provides a Research and Development (R&D) Tax Credit very similar to the federal version, including the definition of qualifying research. Below are key details and differences for North Dakota:
Calculation Methods
Regular Method:
8% of all QREs exceeding $100,000 over the base amount.
Alternative Simplified Method:
5.6% of excess QREs over $100,000.
Additional Highlights
Qualified Research Expenses (QREs) must be for research conducted within North Dakota.
Unused credits may be carried back 3 years and forward up to 15 years.
For taxpayers who earned a credit before January 1, 2007, the maximum credit allowed in any year is $2 million.
Subject to conditions, up to $100,000 of unused credit may be sold, transferred, or assigned to another taxpayer if the seller is certified as a primary sector business with annual gross revenues under $750,000 and conducting research in North Dakota for the first time after December 31, 2006.
North Dakota Tax Credit Case Study
A Fargo-based company manufactures farming equipment. It had never claimed the R&D Tax Credit before. The project involved a three-year study with a two-year look back.
The company qualified for:
Federal R&D Tax Credit: $390,726
North Dakota State R&D Tax Credit: $516,329
FEDERAL | NORTH DAKOTA | |||
Year | Total QREs | Credit | Total QREs | Credit |
2024 | $1,842,800 | $137,252 | $1,842,800 | $172,852 |
2023 | $2,087,706 | $96,160 | $2,087,706 | $194,894 |
2022 | $1,842,800 | $157,314 | $1,842,800 | $148,583 |
Total | $5,503,651 | $390,726 | $5,503,651 | $516,329 |
Federal R&D Tax Credit Summary
Year | Total QREs | Credit |
2024 | $1,842,800 | $137,252 |
2023 | $2,087,706 | $96,160 |
2022 | $1,842,800 | $157,314 |
Total | $5,503,651 | $390,726 |
North Dakota R&D Tax Credit Summary
Year | North Dakota Credit |
2024 | $172,852 |
2023 | $194,894 |
2022 | $148,583 |
Total | $516,329 |
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.