AK Tax Guidance: Form 6390
Research & Development Credit Context
Executive Summary
Core Definition
"Form 6390 is the summary instrument for claiming Alaska Incentive Credits, acting as the aggregate ledger for R&D contributions and education credits to offset Corporate Income Tax liability."
In the context of Alaska's tax environment, Form 6390 does not calculate the credit itself but serves as the clearinghouse where credits generated from specific schedules (like the Education Credit for research contributions under AS 43.20.014) are applied against the tax due. It is the critical mechanism for validating caps, carryforwards, and statutory limits.
The Vehicle
Form 6390 aggregates multiple incentives.
The Law
AS 43.20.014 & AS 43.20.044.
The Benefit
Up to 100% credit on specific tiers.
Regulatory Framework
This section breaks down the relationship between R&D expenses and Form 6390. Select a topic below to explore the guidance.
- Direct instruction.
- Research and development activities within the state.
- Curriculum development.
The Workflow:
- Qualifying R&D contributions are made.
- Amounts are detailed on Form 6310.
- The calculated credit flows to Form 6390, Line 3 (Education Credit).
- Form 6390 compares total credits against tax liability to determine the final allowable deduction.
Key Guidance:
- Cap: $5 million total credit per year per taxpayer.
- Geographic Nexus: Contributions must be for facilities or operations within Alaska.
- Substantiation: Receipts from the university/research institute must be attached to the return.
Credit Utilization Structure
Figure 1: How Form 6390 aggregates various credit streams.
R&D Contribution Simulator
Estimate the credit value flowing to Form 6390 based on AS 43.20.014 tiers.
Enter amount contributed to AK University/Research Center.
Statutory Rates Applied:
- First $100,000: 50% Credit
- Next $200,000: 100% Credit
- Remainder: 50% Credit
- Annual Cap: $5,000,000
Estimated Credit
Amount claimable on Form 6390
Example Case Study
Scenario: Arctic Innovations Inc. contributes $250,000 to the University of Alaska Fairbanks for a geological research project regarding sediment analysis (Qualified R&D).
Calculation for Form 6390:
- Tier 1 (First $100k @ 50%): $50,000
- Tier 2 (Next $150k @ 100%): $150,000
- Total Credit: $200,000
Arctic Innovations files Form 6310 to substantiate the $200,000 credit. This amount is then carried to Form 6390, Line 3. If their tax liability is only $150,000, they use $150,000 to reduce tax to zero, and the remaining $50,000 is tracked on Form 6390 for carryforward to the next tax year.
Filing Checklist
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Attach Receipts: Written confirmation from the institution is mandatory.
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Complete Form 6310: Do not skip the calculation schedule.
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Check Carryforwards: Ensure prior year credits from last year's 6390 are included.
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Watch Dates: Education credit statutes have sunset dates that are frequently extended; verify current tax year statute.
Conclusion
Navigating the Alaska R&D landscape requires understanding that Form 6390 is the final destination, not the starting point. By maximizing the tiered structure of the Education Credit and maintaining rigorous documentation on Form 6310, corporations can significantly reduce their effective state tax rate while funding local innovation.
Analysis of Alaska Form 6390: Compliance and Limitation of the Federal Research & Development Tax Credit
Alaska Form 6390, ‘Alaska Federal-Based Credits,’ is the mandatory compliance mechanism used by the state to calculate and limit the utilization of various federal General Business Credits, including the Research & Development (R&D) credit, against Alaska corporate income tax liability. This form strictly limits the amount claimed to 18% of the federal credit attributable to Alaska sources, subject to rigorous apportionment and tax liability constraints.
Form 6390 acts as the definitive mechanism for integrating qualifying federal credits into the state tax framework, demanding that multi-state corporations manage a complex layering of exclusions, apportionment factors, and statutory percentage limitations to arrive at the final allowable offset against their Alaska corporate income tax liability.
The Statutory and Regulatory Foundation for Federal-Based Credits
The structure of Alaska’s corporate income tax credits relies entirely on the federal framework, subjecting all adopted credits to state-mandated modifications that severely restrict their value.
Alaska’s Adoption of Federal Law and the 18% Limitation
Alaska law establishes its tax calculation by substantially adopting the Internal Revenue Code (IRC), specifically Sections 1–1399 and 6001–7872, with the understanding that Alaska law defines exceptions or modifications.1 The Alaska Department of Revenue (DOR) is further required by statute (AS 43.20.160 and AS 43.20.300) to apply the administrative and judicial interpretations of federal income tax law as far as practical in administering state tax.1
The cornerstone of the state’s approach to federal credits is the critical limitation established in AS 43.20.021(d). This statute dictates that any credit allowed under the IRC that is also allowed in computing Alaska income tax is limited to 18 percent for corporations of the amount of the credit determined for federal income tax purposes.2 This 18% cap applies only to the portion of the federal credit that is definitively attributable to Alaska.4
The federal R&D tax credit, authorized under IRC Section 41, is classified as a component of the General Business Credits (GBC) under IRC Section 38.3 Consequently, the R&D credit is explicitly adopted by Alaska subject to the mandatory 18% limitation. This structure makes the Alaska R&D credit purely derivative; a taxpayer must first fully calculate and claim the federal credit (typically using Federal Form 6765 and Federal Form 3800) before any state benefit can be determined.6 This dependence means the quality of documentation maintained for federal compliance (QREs, the four-part test) directly dictates the defensibility of the state credit claim.8
For research activity to qualify for the underlying federal credit that Alaska adopts, it must meet the federal definition of R&D under IRC Section 41.6 A notable distinction from many state R&D programs is that the qualified activities do not need to be conducted within Alaska borders to be eligible for the federal credit, provided the activities occurred within the United States.3 However, the ultimate state credit benefit remains tightly restricted by the apportionment mechanism (discussed below), which ties the credit value back to the corporation’s economic footprint within Alaska. The combination of the 18% cap and the apportionment requirement ensures that the state views the federal credit as a tool for tax offset proportional to Alaska activity, rather than a broad, aggressive incentive to foster research specifically within the state’s geographic boundaries.
The Mandate of Form 6390 and Its Function
Form 6390, formally titled ‘Alaska Federal-Based Credits,’ serves as the sole compliance instrument for claiming these credits. It is a required attachment to the relevant Alaska corporate income tax returns (Form 6000, 6100, or 6150).1
The form’s specific purpose is to order and limit the use of federal-based credits on an “as-if Alaska basis”.1 It conceptually follows the function of the federal Form 3800, which handles the aggregation and application of the various General Business Credits.1 The structure of Form 6390 imposes three sequential limitations that filter and restrict the potential benefit:
- Filtering: The initial step removes certain federal GBCs that are disallowed by Alaska law (discussed in Section 3).
- Calculation: The remaining credits are subjected to apportionment and the 18% statutory limitation.
- Application: The resulting allowable credit is then applied against the tax liability, subject to the final tax liability constraint (the 25% rule).
Filtering the Credit Pool and DOR Exclusion Guidance
Form 6390 ensures that only those federal credits compatible with Alaska’s tax statutes are included in the state calculation. This requires corporations to meticulously disassemble their federal GBC calculation and apply specific state-level exclusions before commencing the apportionment process.
Initial Disallowance of Specific Federal Credits
Alaska tax law specifically mandates the removal of several federal credits that are aggregated within the GBC framework, as these credits are not deemed allowable for Alaska purposes (15 AAC 20.145(f)).1 These disallowances often target credits viewed by the state as tax reimbursements or those tied to federal policy goals not adopted by Alaska. Examples of credits that must be excluded include credits for backup withholding and the credit for employer social security and Medicare taxes paid on certain employee tips.1 These amounts must be reported on Lines 2a and 2b of Form 6390, effectively reducing the federal credit pool subject to the 18% calculation.10
One significant statutory exception relates to the federal investment credit. Alaska allows this credit only to the extent it is attributable to property located within Alaska, as specified under AS 43.20.036(b).1 This requires a specialized calculation and reporting on Line 2a of Form 6390.10
Furthermore, for credits arising from passive activities, the taxpayer must first complete Alaska Form 6395, which calculates passive activity limitations on an “as-if Alaska basis”.5 The resulting applicable general business credit from passive activity is then carried forward to Form 6390, Line 4.10
The Prohibition on Conflicting State Credits
A critical compliance consideration arises when a taxpayer is eligible for both a federal-based credit (like R&D) and certain Alaska state-specific incentives, such as the Service Industry Credit (SIC) under AS 43.20.049.
The Department of Revenue has clarified that if an expenditure serves as the basis upon which a federal income tax credit was claimed, the taxpayer may not claim attribution of that federal credit on Form 6390.11 This rule prevents taxpayers from receiving a dual benefit (one state-specific credit and one federal-based credit via Form 6390) for the same underlying expenditure.
This mandates a strategic decision for the corporate tax function. For example, if research expenditures qualify for both the federal R&D credit (subject to 18% limitation and a 20-year carryforward) 6 and a state incentive (which may have different percentage caps and shorter carryforward periods, such as the SIC’s five-year carryforward) 11, the taxpayer must evaluate which credit yields the greatest net present value benefit before calculating the credits flowing into Form 6390. This pre-calculation trade-off is essential for maximizing tax efficiency.
Form 6390 Part I: Calculation of the Allowable Apportioned Credit
Part I of Form 6390 implements the core statutory limitations: apportionment for multi-state activity and the 18% limitation on the credit value itself.
Calculating the Federal Credit Attributable to Alaska (Lines 6-7)
The calculation begins after non-allowable credits are filtered out. Lines 3 and 4 determine the net federal General Business Credit applicable to Alaska from non-passive and passive activities, respectively, which aggregate to the total applicable credit on Line 5.10
For corporations that conduct business both within and outside Alaska, the next required step is to apportion the federal credit to determine the portion that is “attributable to Alaska”.7 Alaska utilizes an equally weighted three-factor apportionment formula consisting of the property factor, the payroll factor, and the sales factor.12 The resulting apportionment factor (Line 6) is calculated as a fraction: the sum of the three Alaska-sourced factors divided by three.12
Line 7 calculates the Total Federal Credit Attributable to Alaska by multiplying the total applicable federal credit (Line 5) by the Alaska apportionment factor (Line 6).10
Alaska’s adherence to the equally weighted three-factor formula presents a unique consideration for modern businesses, particularly those in technology or services. Many states have shifted to a single sales factor (SSF) formula to attract or retain capital and employment. By equally weighting property and payroll, Alaska’s formula can result in a smaller portion of the overall federal credit being allocated to the state for companies that have minimal physical assets or payroll in Alaska but high sales sourced there. This structural aspect is key in determining the eventual value of the R&D credit benefit.
Application of the Statutory 18% Limit (Line 8)
Once the federal credit is successfully apportioned to Alaska (Line 7), the statutory limitation is applied. Line 8 requires multiplying the apportioned federal credit (Line 7) by 18% (.18).2 This yields the maximum current year general business credit generated.
This 18% limitation is a stringent measure that fundamentally reduces the economic value of the federal credit at the state level. If a federal R&D credit of $\$100,000$ is 50% apportioned to Alaska, the state benefit is not $\$50,000$; rather, it is limited to $\$50,000 \times 18\% = \$9,000$.
Form 6390, Part I also incorporates mechanisms for managing unused credits. Alaska allows for the carryforward of unused federal-based credits for up to 20 years (Line 9) and permits a carryback of one year (Line 10).3 The sum of the current apportioned credit (Line 8), carryforward, and carryback equals the total Apportioned General Business Credit before the final tax liability limitation (Line 11).10 The 20-year carryforward is a significant benefit, preserving the substantial value of generated R&D credits even if they cannot be utilized immediately due to the restrictive percentage limitations.
The combined effect of apportionment and the 18% rate imposes the initial, and often most substantial, reduction on the potential tax benefit.
Table 1: Form 6390 Part I: Calculating the Available Apportioned Credit (18% Limit)
| Form 6390 Line | Description | Calculation | Amount ($) |
| 1 | Federal GBC (non-passive, R&D credit focus) from Form 3800 | N/A | $300,000 |
| 2c | Federal GBCs not allowable for Alaska | N/A | $0 |
| 5 | Total Current Federal GBC Applicable to Alaska | Line 1 – Line 2c | $300,000 |
| 6 | Apportionment Factor (Alaska % of Total Business Activity) | (AK Property + AK Payroll + AK Sales) / 3 | 0.30 (30%) |
| 7 | Total Federal Credit Attributable to Alaska | Line 5 $\times$ Line 6 | $90,000 |
| 8 | Current Apportioned General Business Credit (18% Limit) | Line 7 $\times$ 18% | $16,200 |
| 11 | Apportioned Credit Before Limitation (Assuming no carryovers) | Line 8 | $16,200 |
Form 6390 Part II: Applying the Credit Against Tax Liability
Part II introduces the final phase of limitation, governing how the calculated, apportioned credit (Line 11) is actually applied against the Alaska corporate tax liability, following a strict ordering of credits.
The Ordering Rule and Application Hierarchy (Lines 12–14)
Alaska mandates a clear hierarchy for credit utilization. Before any federal-based credits can be applied, all state-specific “Alaska incentive credits” must be utilized.1 This rule prioritizes the consumption of credits authorized under specific state economic development statutes over the federal-based credits.
Form 6390, Part II requires the calculation of the Alaska Regular Tax remaining after these incentive credits are applied (Line 12c).10 Similarly, any Net Alaska Alternative Minimum Tax (AMT) must first be reduced by Alaska incentive credits (Line 13b) to determine the residual AMT liability (Line 13c).10 The total tax liability available for offset is the sum of Line 12c and Line 13c (Line 14).
It is specified that federal-based credits may offset Alaska AMT only after Alaska incentive credits have been fully applied.3 This stacking order means that if a corporation has a large liability that is substantially reduced by state incentive programs (such as certain oil and gas credits), the opportunity to use the R&D credit in the current year may be drastically diminished, forcing a reliance on the long 20-year carryforward provision.
The Corporate Tax Liability Constraint: The 25% Rule (Line 15)
Following the application of incentive credits, the remaining federal-based credits are subject to a final utilization limitation, which is calculated on Line 15. This mechanism mirrors the federal limitation on the use of General Business Credits.
Line 15 requires the taxpayer to calculate an amount equal to 25% (.25) of the excess of the Alaska regular tax remaining after incentive credits (Line 12c) over $4,500.10
The combined calculation determines the maximum amount of federal-based credit that can be applied against the tax liability for the current year. The standard rule is that the credit is applied dollar-for-dollar against the first $\$4,500$ of regular tax liability (Line 12c), but then only against 75% of the remaining liability (which is achieved by capping the offset at 25% of the excess liability). This ensures that the corporation is required to pay at least 75% of its regular tax liability above the $\$4,500$ threshold in cash. This restriction often converts a substantial portion of the generated R&D credit (Line 11) into a deferred tax asset, relying on the 20-year carryforward period for eventual utilization.
Case Study: Modeling the Alaska R&D Tax Credit Calculation
To illustrate the layered limitations imposed by Form 6390, a typical multi-state corporation claiming the R&D credit is analyzed.
R&D Credit Generation and Calculation (Part I Review)
A mid-sized Anchorage-based company designs and manufactures components for the oil and gas industry. Over four years, the company generated $\$3,300,000$ in Qualified Research Expenditures (QREs), leading to a total Federal R&D Credit of $\$330,000$.14 The company operates in multiple states and has calculated its Alaska Apportionment Factor to be 30%.
- Federal Credit Attributable to Alaska (Line 7):
- $\$330,000 \times 30\% = \$99,000$
- Apply the Alaska 18% Limit (Line 8):
- $\$99,000 \times 18\% = \$17,820$
The maximum current year potential R&D credit available to the company is $\$17,820$ (Line 11, assuming no carryovers).14 This represents the critical reduction phase imposed by AS 43.20.021(d).
Applying the Credit Against Alaska Tax Liability (Part II Review)
The company’s Alaska tax liability before federal-based credits is substantial, but it has also applied prior Alaska incentive credits:
- Alaska Regular Tax before Incentive Credits (Line 12a): $\$150,000$
- Alaska Incentive Credits Applied (Line 12b): $\$20,000$
Table 2: Form 6390 Part II: Determining Final Allowable Credit (Tax Liability Limit)
| Form 6390 Line | Description | Calculation | Amount ($) |
| 12a | Alaska Regular Tax before Incentive Credits | N/A | $150,000 |
| 12b | Alaska Incentive Credits Applied | N/A | $20,000 |
| 12c | Alaska Regular Tax after Incentive Credits | Line 12a – Line 12b | $130,000 |
| 13c | Net Alaska AMT after Incentive Credits | N/A | $0 |
| 14 | Net Alaska Income Tax | Line 12c + Line 13c | $130,000 |
| 15 | 25% of Excess Regular Tax Over $4,500 | $0.25 \times (\$130,000 – \$4,500)$ | $31,375 |
| 16 | Tentative Tax Liability Limit (Regular Tax Portion) | $\$4,500 + Line 15$ | $35,875 |
| 17 | Allowable Federal-Based Credit | Lesser of Line 11 ($\$17,820$) or Line 16 ($\$35,875$) | $17,820 |
In this case, the calculated 18% apportioned R&D credit of $\$17,820$ (Line 11) is significantly less than the tax liability limitation of $\$35,875$ (Line 16). Therefore, the full apportioned R&D credit of $\$17,820$ is utilized in the current year, providing a dollar-for-dollar offset against the corporation’s Alaska tax liabilities.3
The case demonstrates that, while the 18% rule severely caps the credit value, the tax liability in this scenario is sufficient to absorb the entire reduced credit, preventing the generation of a carryforward balance.
Compliance Best Practices and Audit Defense
The derivative nature of the Alaska credit necessitates that compliance efforts be concentrated on both federal substantiation and precise state apportionment.
Documentation and Record Keeping Requirements
Because the value of the Alaska R&D credit is mathematically derived from the federal calculation, the primary audit defense for Form 6390 claims relies on maintaining impeccable records that adhere to the stringent Qualified Research Expenditure (QRE) and Qualified Research Activity (QRA) documentation standards of IRC Section 41.8
Taxpayers must maintain detailed records supporting every element of the claim, including employee time tracking, project notes demonstrating the process of experimentation, expenditure records for supplies, and contracts for external research. Crucially, the detailed computation of the underlying federal credit (Federal Form 6765) is a prerequisite for the Alaska claim.6
In addition to federal compliance, documentation supporting the state apportionment factor (Line 6) is mandatory. Since Alaska uses a three-factor formula, records supporting the in-state sourcing of sales, the physical location and compensation of employees (payroll factor), and the basis and location of tangible property (property factor) must be maintained to justify the attribution of the credit to Alaska sources.12 Errors in apportionment data are common audit triggers and can lead to incorrect calculations of Line 7.
DOR Contact Information and Assistance
For specific questions regarding corporate income tax and Form 6390 instructions, taxpayers may contact the Alaska Department of Revenue at their main offices. The contact numbers provided in DOR guidance are 907-465-2320 (Juneau) and 907-269-6620 (Anchorage).1
Legislative Outlook and Critical Risk Management
For long-term capital and R&D investment planning, one of the most significant risks surrounding the federal-based credit is its expiration, which is set to occur imminently.
The Critical 2025 Sunset Provision
The statute that authorizes the allowance of the federal-based credit, AS 43.20.021(d), is currently scheduled to sunset on January 1, 2025.4
This sunset provision creates profound uncertainty for corporations engaged in R&D activities in or linked to Alaska. Unless legislative action is taken to extend or repeal the sunset, federal R&D credits generated after this date will no longer be available as an offset against Alaska corporate income tax. Tax Directors managing multi-year R&D projects must calculate the potential loss of this state tax benefit into their contingency planning for 2025 and beyond.
Status of Pending Legislation
The 33rd Alaska State Legislature has actively considered measures to address this expiration, confirming the political importance of retaining the credit structure.16
- Senate Bill 120 (SB 120): This bill was introduced to extend the program, aiming to provide continuity for businesses relying on the credit.16
- House Bill 144 (HB 144): This measure was sponsored with the intent of repealing the sunset provision entirely, thereby establishing the federal-based credit as a permanent feature of Alaska tax law.16
A significant procedural development occurred when HB 144 was incorporated into Senate Bill 140, which is an education omnibus bill.16 Linking the tax credit extension to a broader, essential legislative vehicle, such as school funding, can be interpreted as a strategy to increase the likelihood of its passage. Taxpayers and practitioners seeking certainty regarding the R&D credit’s future must monitor the progress of SB 140, as the credit’s fate is now tied to the resolution of comprehensive state funding priorities. If the credit is allowed to lapse, Alaska would face a competitive disadvantage compared to states that offer permanent R&D tax relief.
Conclusion
Alaska Form 6390 is the mandatory compliance tool for transforming the federal R&D tax credit into a viable state tax offset. The process is governed by stringent statutory constraints that require a layered compliance approach. Taxpayers must meticulously filter non-allowable credits, accurately apportion the credit using Alaska’s three-factor formula, and then apply the mandatory 18% statutory rate reduction. Finally, the resulting credit must satisfy the tax liability constraints, including the rule that caps the offset at 75% of the regular tax liability over $\$4,500$.
For corporate tax planning, the primary actionable insight is the necessity of strong federal documentation to substantiate the underlying claim. However, the most critical element remains the legislative outlook: the impending sunset of AS 43.20.021(d) on January 1, 2025, requires immediate attention and contingency planning to manage the significant financial risk associated with the potential loss of this tax benefit.
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What is the R&D Tax Credit?
The Research & Experimentation Tax Credit (or R&D Tax Credit), is a general business tax credit under Internal Revenue Code section 41 for companies that incur research and development (R&D) costs in the United States. The credits are a tax incentive for performing qualified research in the United States, resulting in a credit to a tax return. For the first three years of R&D claims, 6% of the total qualified research expenses (QRE) form the gross credit. In the 4th year of claims and beyond, a base amount is calculated, and an adjusted expense line is multiplied times 14%. Click here to learn more.
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