Utah R&D Tax Credit Overview
This glossary provides a comprehensive breakdown of the technical terms and statutory codes governing the Utah Research Tax Credit. It covers critical definitions from Utah Code § 59-7-612 and IRC § 41, detailing specific incentives such as the Incremental Credit (5%), the Volume Credit (7.5%), and the Basic Research Payments Credit. These definitions clarify eligibility requirements, expense qualifications (QREs), and carryforward rules for businesses operating within the state.
| Glossary Term | Definition |
|---|---|
| Tax Credit for Research Activities Conducted in the State | State incentive reducing tax liability for businesses performing qualified research and development activities within Utah. |
| Utah Code § 59-7-612 (Corporate Tax) | Statute governing the corporate franchise and income tax credits available for qualified research in Utah. |
| Utah Code § 59-10-1012 (Individual and Pass-Through Tax) | Legislation providing research tax credits for individuals, estates, trusts, and pass-through entity partners in Utah. |
| Qualified Research Expenses (QREs) | Eligible expenditures for in-house research wages, supplies, and contract research defined under IRC § 41. |
| Internal Revenue Code Section 41 (IRC § 41) | Federal tax code section adopted by Utah defining qualified research activities and expense calculations. |
| Research Conducted in This State (Utah) | Requirement that eligible research activities and expenses must physically occur within Utah's borders. |
| Incremental Credit (5% Rate) | A 5% tax credit applied to qualified research expenses exceeding a calculated base amount. |
| Volume Credit (7.5% Rate) | Alternative 7.5% credit on qualified research expenses, which cannot be carried forward if unused. |
| Basic Research Payments Credit (5% Rate) | A 5% credit for payments made to qualified organizations for basic research not primarily for profit. |
| Nonrefundable Tax Credit | A credit that can reduce tax liability to zero but does not result in a refund. |
| Base Amount (IRC § 41(c) Calculation) | Benchmark calculated from historical gross receipts and research expenses used to determine incremental credit. |
| Excess Qualified Research Expenses | The amount by which current year qualified research expenses exceed the calculated base amount. |
| Qualified Organization for Basic Research | Universities or scientific research organizations eligible to receive payments for basic research under the credit. |
| Basic Research (IRC § 41(e)(7) Definition) | Original investigation for the advancement of scientific knowledge not having a specific commercial objective. |
| Taxable Year | The 12-month accounting period for which the taxpayer calculates their research credit eligibility. |
| Carryforward Period (14 Years for Incremental and Basic Research) | Allowed period of 14 years to utilize unused incremental or basic research credits against future taxes. |
| Carryforward Prohibition (for Volume Credit) | Rule stating that any unused portion of the 7.5% volume credit cannot be carried forward. |
| Tax Liability Under This Chapter (Corporate or Individual) | The total tax owed by a corporation or individual before applying any tax credits. |
| Tax Administrator (Utah State Tax Commission) | The state body responsible for administering, enforcing, and auditing Utah research tax credit claims. |
| Fixed-Base Percentage | Ratio of historical research expenses to gross receipts, used to calculate the base amount. |
| Aggregate Gross Receipts | Total receipts from all sources, less returns and allowances, for the applicable taxable years. |
| Gross Receipts Attributable to Sources Within This State | Portion of total gross receipts derived specifically from business activities conducted within Utah. |
| Utah Apportionment Rules (Part 3, Chapter 7) | Regulations determining how income and expenses are allocated to Utah for tax purposes. |
| Start-up Company (IRC § 41(c)(3)(B) Election) | Designation for newer companies allowing a fixed-base percentage of 3% for the first five years. |
| Start-up Company Election Irrevocability | Rule stating that once a start-up election is made, it generally cannot be revoked without permission. |
| Historical Ratio of QREs to Gross Receipts | The percentage calculated by dividing qualified research expenses by gross receipts during base years. |
| Minimum Base Amount (50% of Current Year QREs) | Rule ensuring the base amount is never less than 50% of the current year's qualified expenses. |
| Fixed-Base Percentage Cap (16%) | The maximum allowable fixed-base percentage used in calculating the base amount for the credit. |
| Fixed-Base Percentage for Start-ups (3%) | The statutory fixed rate applied to start-up companies for the first five taxable years. |
| Qualified Research (IRC § 41(d) Definition) | Research undertaken to discover technological information for a new or improved business component. |
| In-house Research Expenses Incurred in this State | Wages and supply costs paid for qualified research activities performed directly by the taxpayer in Utah. |
| Contract Research Expenses Incurred in this State | 65% of amounts paid to third parties for qualified research performed within Utah. |
| Wages for Qualified Services | Compensation paid to employees for engaging in, supervising, or directly supporting qualified research. |
| Supplies Used in the Conduct of Qualified Research | Tangible property (excluding land/improvements) used directly in qualified research activities. |
| Unitary Group (Considered One Taxpayer per § 59-7-101) | Affiliated corporations filing a combined return treated as a single taxpayer for credit calculations. |
| Pass-through Entities (Claimant/Taxpayer) | Business entities like S-Corps or partnerships that pass credits through to owners or partners. |
| Alternative Incremental Credit (IRC § 41(c)(4) Exclusion) | A federal calculation method that is explicitly excluded from the Utah research tax credit statutes. |
| Tax Credit for Machinery and Equipment Used to Conduct Research | Separate incentive for purchasing tangible personal property used primarily for qualified research. |
| Carryover of Credit for Machinery and Equipment (14 Years) | Allowance to carry forward unused machinery and equipment research credits for up to 14 years. |
| Revenue and Taxation Interim Committee | Legislative committee responsible for reviewing and studying the effectiveness of tax credits. |
| Commission to Report Modification or Repeal of IRC § 41 | Requirement for the Tax Commission to report federal changes to the state legislature. |
| Elimination of Uncertainty (Qualified Research Test) | Requirement that research must attempt to resolve uncertainty regarding capability, method, or design. |
| Technological in Nature (Qualified Research Test) | Research must rely on principles of physical or biological sciences, engineering, or computer science. |
| Process of Experimentation (Qualified Research Test) | Systematic evaluation of alternatives to eliminate uncertainty and achieve a research result. |
| Permitted Purpose (Qualified Research Test) | Research must intend to create a new or improved function, performance, reliability, or quality. |
| Business Component | Any product, process, computer software, technique, formula, or invention held for sale or use. |
| New or Improved Business Component | The specific item or process being developed or improved through qualified research activities. |
| Claimant, Estate, or Trust | Entities or individuals eligible to claim the research tax credit against their tax liability. |
| Income Tax (Chapter 10, Title 59) | Utah's individual income tax code chapter under which pass-through research credits are claimed. |
| Corporate Franchise and Income Taxes (Chapter 7, Title 59) | Utah's corporate tax code chapter detailing the franchise tax rules and research credit applicability. |
