Are R&D Tax Credits
Available in Utah?
Yes. The state of Utah provides a non-refundable R&D Tax Credit for taxpayers with qualifying research expenditures in Utah. While the credit generally mirrors the federal Section 41 rules, there are some important distinctions:
Permanency:
The Utah R&D Tax Credit is permanent and does not expire.
Qualified Expenses:
Expenses must meet the federal definition under
Gross Receipts:
Only receipts attributable to sources within Utah are considered.
Credit Calculation
5% of qualified research expenses above the base amount
5% of payments to qualified Utah organizations for basic research above the base amount
7.5% of qualified research expenses for the taxable year
Carryforward
Credits calculated at 5% (research expenses and basic research payments) may be carried forward for 14 years.
Credits calculated at 7.5% (QREs for the tax year) cannot be carried forward.
Utah R&D Tax Credit Case Study
A Utah-based sporting goods manufacturer with about 100 employees in Salt Lake City has consistently claimed the R&D tax credit for developing and improving its products, including sporting goods and protective wear. This project involved a multi-year study.
The company qualified for federal R&D Tax Credits of $370,500 and an additional $370,500 in Utah state credits.
FEDERAL | UTAH | |||
Year | Total QREs | Credit | Total QREs | Credit |
2024 | $1,100,000 | $110,000 | $1,100,000 | $110,000 |
2023 | $950,000 | $95,000 | $950,000 | $95,000 |
2022 | $875,000 | $87,500 | $875,000 | $87,500 |
2021 | $780,000 | $78,000 | $780,000 | $78,000 |
Total | $3,705,000 | $370,500 | $3,705,000 | $370,500 |
Federal R&D Tax Credit Summary
| Year | Total QREs | Federal Credit |
|---|---|---|
| 2024 | $1,100,000 | $110,000 |
| 2023 | $950,000 | $95,000 |
| 2022 | $875,000 | $87,500 |
| 2021 | $780,000 | $78,000 |
| Total | $3,705,000 | $370,500 |
Utah R&D Tax Credit Summary
| Year | Utah Credit |
|---|---|
| 2024 | $110,000 |
| 2023 | $95,000 |
| 2022 | $87,500 |
| 2021 | $78,000 |
| Total | $370,500 |
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.