Idaho Research Tax Credit Glossary
What is the Idaho Research Tax Credit?
Answer Capsule: The Idaho Research Tax Credit (Idaho Code § 63-3029G) allows businesses to claim a nonrefundable state tax credit for Qualified Research Expenses (QREs) incurred while conducting technological research physically within Idaho. Administered by the Idaho State Tax Commission (STC), the credit aligns closely with Internal Revenue Code (IRC) § 41 regulations, requiring that activities pass the standard Four-Part Test while explicitly excluding any out-of-state research activities and non-technical studies.
| Glossary Term | Definition |
|---|---|
| Idaho Code § 63-3029G | Idaho state statute establishing the income tax credit for qualifying research and development activities. |
| Idaho State Tax Commission (STC) | The government agency responsible for administering and enforcing Idaho’s state tax laws and business credits. |
| Qualified Research Expenses (QREs) | Costs eligible for the research tax credit, including specific wages, supplies, and contract research expenses. |
| Research Conducted in Idaho | Qualified research activities physically performed within the state boundaries of Idaho to successfully claim credits. |
| Base Amount (for Research Credit) | A historically calculated threshold of research expenses that current year research expenditures must exceed. |
| Gross Receipts Attributable to Sources Within Idaho | Revenue generated from business activities, sales, and services specifically sourced to the state of Idaho. |
| Internal Revenue Code (IRC) § 41 | The federal tax code section outlining rules for the federal Credit for Increasing Research Activities. |
| IRC § 41 (c) | Federal statute subsection defining the precise calculation methods for the research credit base amount. |
| IRC § 41 (d) | Federal statute subsection detailing the specific four-part test required to qualify eligible research activities. |
| IRC § 41 (e) | Federal statute subsection outlining the rules and definitions for basic research payments and university grants. |
| Basic Research Payments | Amounts paid to qualified educational institutions or scientific organizations for fundamental, non-commercial scientific research. |
| Basic Research | Original scientific investigation undertaken for the advancement of scientific knowledge without a specific commercial objective. |
| In-House Research Expenses | Costs incurred directly by a company for its own employee wages and research supplies used. |
| Contract Research Expenses | Sixty-five percent of amounts paid to third-party contractors performing qualified research on the taxpayer’s behalf. |
| Wages for Qualified Services | Compensation paid to employees for directly engaging in, supervising, or supporting qualified research activities. |
| Supplies for Qualified Research | Tangible property consumed or destroyed directly during the process of conducting qualified research activities. |
| Taxable Year | The annual accounting period used by a business for keeping records and reporting income taxes. |
| Tax Imposed by Chapter 30, Title 63 | The specific Idaho state income tax liability against which the research tax credit is applied. |
| Nonrefundable Credit | A tax credit that can reduce tax liability to zero but cannot generate a refund. |
| Credit Carryforward Period (14 Tax Years) | Unused Idaho research credits can be carried forward to offset tax liability for fourteen years. |
| Unitary Group of Corporations | Affiliated corporations operating as an integrated business, required to file a combined Idaho tax return. |
| Sharing of Idaho Research Credit | The ability to distribute earned research credits among eligible members of a unitary corporate group. |
| Start-Up Company Election | Alternative base amount calculation method for newer businesses lacking extensive historical gross receipts or research. |
| Fixed Base Percentage | The historical ratio of qualified research expenses to gross receipts used in the credit calculation. |
| Average Annual Gross Receipts (4 Prior Years) | The average revenue over the preceding four years, used to calculate the current base amount. |
| Qualified Research (Four-Part Test) | The four statutory criteria a specific activity must meet to be considered eligible R&D. |
| IRC § 174 Test | Requires research expenditures to be incurred in connection with the taxpayer’s active trade or business. |
| Technological in Nature Test | The research must fundamentally rely on principles of physical, biological, engineering, or computer sciences. |
| Business Component Test | The research must intend to create or improve a specific product, process, software, or formula. |
| Process of Experimentation Test | The activity must involve evaluating alternatives to resolve technological uncertainty regarding the business component. |
| Substantially All (Process of Experimentation) | At least eighty percent of the research activities must constitute a rigorous process of experimentation. |
| New or Improved Business Component | The end goal of research must be enhanced performance, reliability, quality, or a new product. |
| Elimination of Uncertainty | The research must aim to discover information to overcome specific capability, method, or design unknowns. |
| Exclusion: Research After Commercial Production | Activities conducted after a product meets its basic functional and economic requirements are explicitly excluded. |
| Exclusion: Adaptation of Existing Component | Modifying an existing product for a specific customer without resolving technological uncertainty is strictly excluded. |
| Exclusion: Style, Taste, Cosmetic, or Seasonal Design | Research aimed purely at aesthetic or cosmetic improvements rather than functional enhancements is not eligible. |
| Exclusion: Surveys or Studies | Market research, efficiency surveys, routine data collection, and management studies do not qualify for credits. |
| Exclusion: Government-Funded Research | Research activities financially funded by any grant, contract, or government entity cannot be claimed. |
| Exclusion: Research Outside Idaho | For the Idaho state credit, any research activities performed outside state borders are strictly excluded. |
| Qualified Services (in Idaho) | Direct research, direct supervision, or direct support of activities physically performed within the state. |
| In-House Research Wages | Taxable compensation paid to employees performing qualified research activities directly for the claiming business. |
| Employee (performing Qualified Services) | A W-2 worker who spends time actively engaging in, supervising, or supporting qualified research projects. |
| Tax Cuts and Jobs Act (TCJA) | The 2017 federal tax reform law that significantly altered R&D expense amortization rules starting recently. |
| Amortization of R&D Expenditures (IRC § 174) | The requirement to capitalize and amortize domestic research costs over five years instead of immediate deduction. |
| Alternative Simplified Credit (ASC) – Not Applicable for Idaho | A federal calculation method not adopted by Idaho, which requires the regular calculation method instead. |
| Idaho Form 67 (Credit for Research Activities) | The specific state tax form used to calculate and claim the Idaho research development credit. |
| Idaho Form 44 (Business Income Tax Credits) | The state tax form used to summarize and apply all business income tax credits. |
| Idaho Code § 63-3027(q) and (r) (Source of Receipts) | State statutes determining whether business income and gross receipts are sourced specifically to Idaho. |
| Unitary Taxpayer | A business entity part of a larger integrated group required to file a combined return. |
| Recapture of Credit (If property ceases to qualify) | The requirement to repay previously claimed credits if qualifying property stops meeting statutory eligibility requirements. |
