Comprehensive Analysis of the New Hampshire Research and Development Tax Credit: The Statutory Significance of the September 30 Notification of Award

The Notification of Award Amount issued on September 30 serves as the definitive administrative confirmation of the final New Hampshire R&D tax credit value granted to a taxpayer after the state applies its mandatory proportional reduction. This date concludes the Department of Revenue Administration’s annual review cycle, transforming a taxpayer’s requested credit into an enforceable and verified tax asset for use against business liabilities.

The Legislative Framework of the New Hampshire Research and Development Tax Credit

The New Hampshire Research and Development (R&D) tax credit, codified under RSA 77-A:5, XIII, represents a specialized fiscal instrument designed to bolster the state’s industrial core by incentivizing investment in high-technology manufacturing.1 Unlike many broad-based tax incentives, the New Hampshire credit is characterized by a “hard cap” and a mandatory proration mechanism that necessitates a centralized determination by the Department of Revenue Administration (DRA).1 The legal architecture of the program is built upon the intersection of state-level business tax law and federal research definitions found in Section 41 of the Internal Revenue Code (IRC).1

The credit is specifically targeted at “qualified manufacturing research and development expenditures,” a term of art that distinguishes this credit from the broader federal R&D credit.4 While the federal government provides credits for supplies, contract research, and cloud computing costs, the New Hampshire legislature has restricted the state credit exclusively to wages paid or incurred for services rendered within the state.2 This focus ensures that the tax benefit is directly tied to the creation and retention of high-skilled manufacturing jobs within New Hampshire’s borders.1

The administrative governance of the credit is further defined by the New Hampshire Code of Administrative Rules, specifically Rev 2406.05.5 These rules provide the operational clarity required for taxpayers to transition from the initial expenditure of research funds to the eventual realization of a tax reduction on their Business Profits Tax (BPT) or Business Enterprise Tax (BET) returns.7

Historical Evolution of the Aggregate Funding Cap

The history of the New Hampshire R&D credit is one of gradual expansion, reflecting the state’s increasing reliance on advanced manufacturing as an economic driver. When the credit was first enacted in 2007, the legislature allocated $1,000,000 per fiscal year for a five-year period.4 At this level, the program was chronically oversubscribed, leading to significant proration reductions that diminished the credit’s effectiveness as a planning tool for large enterprises.2

In 2013, recognizing the competitive need to retain manufacturing firms, the legislature passed Senate Bill 1, which increased the annual award limit to $2,000,000.4 This legislation also removed the “sunset” provision, making the R&D tax credit a permanent fixture of the New Hampshire tax code.4 The most significant expansion occurred in 2015 via House Bill 2, which raised the aggregate cap to $7,000,000, effective for fiscal years beginning July 1, 2017.4 This substantial increase was intended to reduce the volatility of the proration process and provide a more meaningful incentive for medium-to-large-scale manufacturing operations.2

The Procedural Timeline: June 30 to September 30

The determination of the R&D credit is a time-bound process that requires the Department of Revenue Administration to aggregate and audit all claims simultaneously to ensure the $7 million cap is not exceeded. This centralized processing creates a strict timeline that taxpayers must follow to secure an award.

The Application Deadline (June 30)

The cycle begins with the filing of Form DP-165, the Research and Development Tax Credit Application.7 The statute requires that this application be postmarked or submitted electronically no later than June 30 following the taxable period in which the research expenditures occurred.4 This deadline is absolute; late submissions are ineligible for the current year’s funding pool regardless of the merit of the research conducted.2

Taxpayers must provide their total qualified manufacturing R&D wages and include a copy of Federal Form 6765.7 If a taxpayer is filing their federal return on extension, the DRA allows the submission of a “pro-forma” or draft Form 6765 with the DP-165 application.4 This administrative flexibility acknowledges the discrepancy between state application deadlines and federal tax filing schedules while still providing the state with the documentation necessary to verify the “Section 41” status of the claimed wages.2

The Review and Acknowledgment Phase (July 31)

Between June 30 and July 31, the DRA conducts an initial intake review of all applications.4 The primary objective during this phase is to ensure each application is complete and that the taxpayer has correctly isolated New Hampshire wages from global R&D expenditures.7 By July 31, the Department sends acknowledgment letters to all applicants, confirming that their request has been received and is being processed for proration.4 This letter is merely procedural and does not indicate the final amount of the credit that will be granted.4

The Determination Deadline (September 30)

The pinnacle of the administrative process is September 30. Pursuant to RSA 77-A:5, XIII(a)(4), the Commissioner must make a final determination on the amount of credit awarded to each taxpayer by this date.1 The resulting “Notification of Award Amount” is the legal document that a business uses to substantiate its tax credit claim on its annual return.4

The three-month period between the application deadline and the award notification is the most critical time for the DRA. During these months, the Department must calculate the aggregate total of all valid requests. If that total exceeds the $7,000,000 cap, the Department applies the proportional share calculation to every applicant.1 This ensures that every eligible business receives a fair, albeit potentially reduced, portion of the available funds.2

Understanding the Notification of Award Amount

The September 30 notification is more than a formality; it is a final adjudication of the taxpayer’s eligible credit. Because of the over-subscription to the program, the “Award Amount” frequently differs from the “Requested Amount” listed on the initial application.2

The Proration Formula

The proration process is a zero-sum calculation mandated by state law to prevent the over-allocation of tax expenditures.1 If the total qualified requests for a given year equal $10,000,000, but only $7,000,000 is available, each taxpayer’s award is reduced to 70% of their qualified request.2 The math is structured to prioritize small-to-mid-sized manufacturers by applying a secondary cap of $50,000 per taxpayer.1

The notification letter specifically details the final dollar amount that the business can “attach” to its tax return.8 This document is essential for the accounting department of any manufacturing firm, as it provides the verifiable data point needed to adjust tax provisions and financial statements for the fiscal year.13

Statutory and Regulatory Applications of the Award

The Notification of Award serves as the taxpayer’s primary defense in an audit. Once the award is issued, the Department has essentially certified that the research was “manufacturing” in nature and the wages were “New Hampshire-based”.1 While the underlying expenditures remain subject to audit for the duration of the state’s statute of limitations, the September 30 letter provides a high level of administrative certainty that the credit will be honored upon filing.2

Furthermore, the award letter is a “cascading” asset.13 This means it can move across different tax liabilities within the New Hampshire business tax structure. The analysis of the tax expenditure report indicates that most taxpayers use the credit to offset their Business Profits Tax (BPT) first, as this tax is based on net income and typically represents a larger liability for profitable manufacturers.2 If the BPT is fully offset, the remaining credit “cascades” down to offset the Business Enterprise Tax (BET), which is a unique New Hampshire tax on the value added by the business (compensation, interest, and dividends).2

Eligibility and Definition: The “Manufacturing Wages” Constraint

To receive a favorable September 30 notification, a business must demonstrate that its activities strictly meet the state’s definition of “qualified manufacturing research and development expenditures”.1 The legal analysis of RSA 77-A:5, XIII(b) reveals a narrower scope than many other state R&D programs.

The Wage-Only Restriction

New Hampshire is one of the few states that limits its R&D credit strictly to wages.2 This means that expenditures for prototyping materials, contract research firms (CROs), or specialized R&D software subscriptions—while fully qualifying for the federal credit—must be excluded from the state calculation.2 This exclusion often creates confusion for businesses that are used to the broader federal definition. The Department’s guidance emphasizes that only wages reported under RSA 77-A:1, XXII and recorded in the enterprise value tax base under RSA 77-E are eligible.1

The Manufacturing Nexus

The second critical constraint is that the research must be related to a “new or improved manufacturing process or business component”.1 In the context of the New Hampshire credit, manufacturing is defined by the physical transformation of materials into new products.2 Research conducted by service-based companies, such as insurance software developers or financial tech firms, generally does not qualify unless the software is an integral part of a physical manufactured good.2

This manufacturing focus is an intentional policy choice by the New Hampshire legislature to support the state’s historical strength in aerospace, medical devices, and precision machining.2 The September 30 notification is the point at which the Department confirms that the taxpayer’s activities fit within this industrial paradigm.1

Mathematical Example of the Award Determination

A detailed example illustrates how the June 30 request is transformed into the September 30 award through the state’s proration process.

Scenario: Precision Aerospace NH

Consider “Precision Aerospace NH,” a fictional medium-sized manufacturing firm. During its 2024 taxable year, the company incurred $1,500,000 in total research wages globally, of which $1,000,000 were paid to employees performing manufacturing R&D in a New Hampshire facility.2

1. Establishing the Base Amount: Following federal rules adopted by the state, the company calculates its New Hampshire base amount at $400,000. This represents the historical baseline of research activity that must be exceeded to qualify for the credit.2
2. Calculating the Excess: The “excess” qualified wages are $600,000 ($1,000,000 current wages – $400,000 base).2
3. Applying the State Rate: New Hampshire law allows a credit of 10% of this excess, resulting in a calculated credit of $60,000.1
4. Applying the Per-Taxpayer Cap: The statute limits each taxpayer to a maximum of $50,000 per year. Therefore, Precision Aerospace NH requests $50,000 on its Form DP-165, filed by June 30.1

The September 30 Proration

Assume that in 2024, the aggregate of all valid R&D credit requests from all New Hampshire companies reached $8,500,000. Because this exceeds the $7,000,000 funding cap, the Department must apply a proration factor.2

• Proration Factor: $7,000,000 (Cap) / $8,500,000 (Total Requests) = 82.35%.
• Final Award for Precision Aerospace NH: $50,000 x 82.35% = $41,175.

On September 30, Precision Aerospace NH receives its formal Notification of Award Amount for $41,175.4 The company then utilizes this award when filing its annual tax return, offsetting its Business Profits Tax first and then its Business Enterprise Tax.2

Local State Revenue Office Guidance and Documentation Requirements

The New Hampshire Department of Revenue Administration provides specific guidance on the documentation needed to survive the review period between June and September. The quality of this documentation directly impacts the likelihood of receiving the full requested award amount.

Federal Compliance and IRC § 41

Because the state credit is “derivative” of the federal credit, the state revenue office requires proof that the research activities meet the federal “four-part test”.3 This test mandates that the research be technological in nature, have a permitted purpose, eliminate technical uncertainty, and involve a process of experimentation.3

Taxpayers are advised to maintain robust project files, including:

• Engineering Logs and Lab Notes: Documentation showing the systematic evaluation of different designs or processes.8
• Prototype Records: Evidence of physical prototypes created and tested during the development phase.8
• Time Tracking Systems: Detailed payroll records that allocate employee time to specific, qualifying R&D projects rather than general manufacturing production.2

The Role of Granite Tax Connect (GTC)

Modern guidance from the DRA emphasizes the use of “Granite Tax Connect” (GTC), the state’s online tax portal.5 Taxpayers are encouraged to submit Form DP-165 through GTC to ensure real-time confirmation of the June 30 postmark requirement.5 The portal also allows the DRA to communicate more efficiently if an application is missing the required Federal Form 6765, potentially saving an application from disqualification during the July review phase.4

Interaction with Other New Hampshire Business Tax Credits

The R&D tax credit does not exist in a vacuum; it is part of a broader menu of incentives that businesses must navigate. The September 30 notification confirms a credit that can interact with, or be restricted by, other programs.

Economic Revitalization Zone Tax Credit (ERZTC)

A critical rule found in RSA 162-N:7 and emphasized in DRA Technical Information Releases is the prohibition of “double-dipping” between the R&D credit and the Economic Revitalization Zone Tax Credit (ERZTC).1 Wages used to calculate the R&D award cannot also be used to claim the ERZTC.1 For a manufacturer located in a designated revitalization zone, the finance department must conduct a comparative analysis to determine which credit provides the higher yield before the June 30 filing deadline.2

Carryforward and Long-Term Value

If the September 30 notification grants an award that the business cannot fully use in the current year, the law allows a five-year carryforward.1 This carryforward is particularly valuable for capital-intensive manufacturers that may have periods of low profitability during the development phase of a new product but anticipate significant growth once the product hits the market.2

Statistical Analysis of the Research and Development Tax Credit Program

The data from the Department of Revenue Administration’s annual reports and tax expenditure studies provide insight into the program’s efficiency and demand.

Participation and Funding Trends

In recent years, the $7,000,000 aggregate cap has been consistently approached, indicating high awareness of the program among New Hampshire’s manufacturing base.2 In the 2024 Tax Expenditure Report, the R&D credit is listed as one of the primary “lost revenue” items for the state, alongside the Net Operating Loss (NOL) deduction and the Business Enterprise Tax credit.13 This “cost” to the state is viewed by policymakers as a strategic investment in the state’s long-term tax base, as manufacturers often have higher property values and payrolls than other sectors.13

Impact on State Revenue

The proration system is an essential tool for state budget stability. By delaying the final determination until September 30, the state ensures that it never pays out more than the $7 million budgeted amount.1 This contrasts with “refundable” credits in other states (like Iowa, which provides a 6.5% refundable credit) where the state’s potential liability is uncapped and unpredictable.15 New Hampshire’s non-refundable, capped system provides a predictable fiscal landscape for the state while still offering significant dollar-for-dollar relief to the business community.2

Future Policy Trends: Expanding the September 30 Milestone

As of late 2025, there is significant legislative discussion regarding the expansion of the R&D credit program. This expansion would fundamentally change the stakes for the September 30 award notification.

Analysis of Senate Bill 276 (2025)

Senate Bill 276, introduced in the 2025 session, seeks to modernize the credit for a post-pandemic economy.16 The proposed changes include:

• Increasing the Total Pool: Raising the $7,000,000 aggregate cap to $10,000,000.16
• Increasing the Individual Limit: Doubling the per-taxpayer cap from $50,000 to $100,000.16

If this legislation passes, the DRA expects a surge in applications, which would maintain the necessity of the proration process.16 For taxpayers, an increase in the individual cap to $100,000 would significantly improve the ROI on New Hampshire research projects, especially for large precision manufacturers whose qualifying NH wages often exceed $1 million per year.2

Global and Federal Interaction (The Pillar Two Effect)

Current research indicates that businesses must also consider the interaction between state R&D credits and global minimum tax standards, such as those introduced by the OECD’s Pillar Two initiative.17 Because New Hampshire’s R&D credit is non-refundable, it may be treated differently under global tax rules than refundable credits.17 This underscores the importance of the September 30 notification as a precise verification of the “tax paid” or “tax offset,” which is increasingly important for multi-national corporations operating within New Hampshire.17

Conclusion: The September 30 Award as a Pillar of NH Industrial Policy

The Notification of Award Amount issued on September 30 is the definitive moment of truth for New Hampshire manufacturers seeking to reclaim a portion of their innovation investment. Through a rigorous statutory process that begins with the June 30 application, the Department of Revenue Administration balances the need for fiscal responsibility with the state’s goal of fostering a world-class manufacturing environment.

The meaning of the September 30 date is rooted in the concepts of finality and administrative certainty. It is the date when the complexities of state-wide proration are resolved, and individual businesses receive the legal authorization needed to apply their credits against Business Profits and Business Enterprise Taxes. By adhering to the guidance provided by the DRA and maintaining meticulous records that meet both federal and state manufacturing standards, New Hampshire businesses can ensure they maximize the benefit of this permanent and vital tax incentive. As the state considers expanding the program to a $10 million cap, the role of the September 30 notification will only grow in significance, serving as a critical benchmark for the health and vibrancy of New Hampshire’s high-tech industrial economy.

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