§ 44-32-2. Credit for research and development property acquired, constructed, or reconstructed or erected after July 1, 1994.
(a) A taxpayer shall be allowed a credit against the tax imposed by chapters 11, 17, or 30 of this title. The amount of the credit shall be ten percent (10%) of the cost or other basis for federal income tax purposes of tangible personal property, and other tangible property, including buildings and structural components of buildings, described in subsection (b) of this section; acquired, constructed or reconstructed, or erected after July 1, 1994.
(b) A credit shall be allowed under this section with respect to tangible personal property and other tangible property, including buildings and structural components of buildings which are: depreciable pursuant to 26 U.S.C. § 167 or recovery property with respect to which a deduction is allowable under 26 U.S.C. § 168, have a useful life of three (3) years or more, are acquired by purchase as defined in 26 U.S.C. § 179(d), have a situs in this state and are used principally for purposes of research and development in the experimental or laboratory sense which shall also include property used by property and casualty insurance companies for research and development into methods and ways of preventing or reducing losses from fire and other perils. The credit shall be allowable in the year the property is first placed in service by the taxpayer, which is the year in which, under the taxpayer’s depreciation practice, the period for depreciation with respect to the property begins, or the year in which the property is placed in a condition or state of readiness and availability for a specifically assigned function, whichever is earlier. These purposes shall not be deemed to include the ordinary testing or inspection of materials or products for quality control, efficiency surveys, management studies, consumer surveys, advertising, promotions, or research in connection with literary, historical or similar projects.
(c) A taxpayer shall not be allowed a credit under this section with respect to any property described in subsections (a) and (b) of this section, if a deduction is taken for the property under § 44-32-1.
(d) A taxpayer shall not be allowed a credit under this section with respect to tangible personal property and other tangible property, including buildings and structural components of buildings, which it leases to any other person or corporation. For purposes of the preceding sentence, any contract or agreement to lease or rent or for a license to use the property is considered a lease.
(e) The credit allowed under this section for any taxable year does not reduce the tax due for that year, in the case of corporations, to less than the minimum fixed by § 44-11-2(e). If the amount of credit allowable under this section for any taxable year is less than the amount of credit available to the taxpayer, any amount of credit not credited in that taxable year may be carried over to the following year or years, up to a maximum of seven (7) years, and may be credited against the taxpayer’s tax for the following year or years. For purposes of chapter 30 of this title, if the credit allowed under this section for any taxable year exceeds the taxpayer’s tax for that year, the amount of credit not credited in that taxable year may be carried over to the following year or years, up to a maximum of seven (7) years, and may be credited against the taxpayer’s tax for the following year or years.
(f)(1) With respect to property which is depreciable pursuant to 26 U.S.C. § 167 and which is disposed of or ceases to be in qualified use prior to the end of the taxable year in which the credit is to be taken, the amount of the credit is that portion of the credit provided for in this section which represents the ratio which the months of qualified use bear to the months of useful life. If property on which credit has been taken is disposed of or ceases to be in qualified use prior to the end of its useful life, the difference between the credit taken and the credit allowed for actual use must be added back in the year of disposition. If the property is disposed of or ceases to be in qualified use after it has been in qualified use for more than twelve (12) consecutive years, it is not necessary to add back the credit as provided in this subdivision. The amount of credit allowed for actual use is determined by multiplying the original credit by the ratio which the months of qualified use bear to the months of useful life. For purposes of this subdivision, “useful life of property” is the same as the taxpayer uses for depreciation purposes when computing his federal income tax liability.
(2) Except with respect to that property to which subdivision (3) of this subsection applies, with respect to three (3) year property, as defined in 26 U.S.C. § 168(c), which is disposed of or ceases to be in qualified use prior to the end of the taxable year in which the credit is to be taken, the amount of the credit shall be that portion of the credit provided for in this section which represents the ratio which the months of qualified use bear to thirty-six (36). If property on which credit has been taken is disposed of or ceases to be in qualified use prior to the end of thirty-six (36) months, the difference between the credit taken and the credit allowed for actual use must be added back in the year of disposition. The amount of credit allowed for actual use is determined by multiplying the original credit by the ratio that the months of qualified use bear to thirty-six (36).
(3) With respect to any recovery property to which 26 U.S.C. § 168 applies, which is a building or a structural component of a building and which is disposed of or ceases to be in qualified use prior to the end of the taxable year in which the credit is to be taken, the amount of the credit is that portion of the credit provided for in this section which represents the ratio which the months of qualified use bear to the total number of months over which the taxpayer chooses to deduct the property under 26 U.S.C. § 168. If property on which credit has been taken is disposed of or ceases to be in qualified use prior to the end of the period over which the taxpayer chooses to deduct the property under 26 U.S.C. § 168, the difference between the credit taken and the credit allowed for actual use must be added back in the year of disposition. If the property is disposed of or ceases to be in qualified use after it has been in qualified use for more than twelve (12) consecutive years, it is not necessary to add back the credit as provided in this subdivision. The amount of credit allowed for actual use is determined by multiplying the original credit by the ratio that the months of qualified use bear to the total number of months over which the taxpayer chooses to deduct the property under 26 U.S.C. § 168.
(g) No deduction for research and development facilities under § 44-32-1 shall be allowed for research and development property for which the credit is allowed under this section.
(h) No investment tax credit under § 44-31-1 shall be allowed for research and development property for which the credit is allowed under this section.
(i) The investment tax credit allowed by § 44-31-1 shall be taken into account before the credit allowed under this section.
(j) The credit allowed under this section only allowed against the tax of that corporation included in a consolidated return that qualifies for the credit and not against the tax of other corporations that may join in the filing of a consolidated return.
(k) In the event that the taxpayer is a partnership, joint venture or small business corporation, the credit shall be divided in the same manner as income.
History of Section.
P.L. 1994, ch. 147, § 2; P.L. 1995, ch. 323, § 34; P.L. 1997, ch. 30, art. 15, § 1;
P.L. 1997, ch. 58, § 1; P.L. 1999, ch. 221, § 2.