Instructions For Arizona Form 308 - Credit For Increased Research Activities

Arizona Form 308

Line 14 -

If the percentage computation involves de minimis

amounts of gross receipts and qualified expenses in a

Enter the amount of expenses included on lines 9 through 12

taxable year or short taxable years are involved, the

that are related to solar liquid fuel that will be claimed on

amounts may be annualized or disregarded. Refer to IRC

Arizona Form 344. The credit for increased research activities

§§ 41(c)(3) and 41(f)(4) for details.

is in lieu of the solar liquid fuel credit, provided by A.R.S.

§ 43-1164.02 (claimed on Arizona Form 344), with respect to

NOTE: The maximum percentage that can be entered on

the same expenses.

line 17 is 16% (.1600).

Line 16 -

Line 20 -

Enter the average annual Arizona gross receipts for the four

Multiply line 15 by 50% (.50). The base amount cannot be less than

taxable years preceding the taxable year for which the credit is

50% of the current year qualified research expenses. This rule

being determined (the credit year). The taxpayer may be

applies to both existing and start-up companies.

required to annualize gross receipts for any short taxable year.

Lines 23 through 27 -

If 2014 is the first year the taxpayer is in business, the average

The way you compute the amount of current year’s credit you

annual Arizona gross receipts for the preceding taxable years is

may receive depends on the amount of expenses you have. To

zero. If the taxpayer has been in business in Arizona for less

determine your proper credit amount, complete lines 23

than four taxable years prior to the credit year, then the average

through 27 as instructed on the form.

is the sum of annual Arizona gross receipts of the applicable

Part 3 - Current Taxable Year’s Credit Passed

period, divided by the number of taxable years.

Through From S Corporations and Partnerships

Example: ABC Corporation began business in Arizona in

Line 28 -

2012. Its annual Arizona gross receipts for 2012 were

$100,000. Its annual Arizona gross receipts for 2013 were

Enter the aggregate amount you received as a flow through from

$200,000. Therefore, ABC Corporation’s average annual

Form 308, Part 5, line 38 for each partnership. An exempt

Arizona gross receipts for the 2014 credit year is $150,000

organization with UBTI would also include the amount received

([$100,000 plus $200,000] divided by 2).

as a flow through from Form 308, Part 4, line 33 from an

S corporation. Include a copy of Form 308 received from each

Line 17 -

S corporation or partnership with your return.

Fixed base percentage

If you checked the "Yes" box on line 3, complete Part 6 to

Use the same type of formulas to compute your fixed-base

calculate the amount of the current year's excess credit that is

percentage for Arizona as you would for computing your federal

refundable to you.

fixed-base percentage. The difference is that you use Arizona

Complete Parts 7 and/or 8 to compute the available carryover of

qualified research expense and gross receipts amounts instead of

the credit passed through by S corporations or partnerships from

federal amounts. Other than that, the calculations are the same.

prior taxable years. You should complete Parts 7 and/or 8 only if

Round off the percentage to the nearest one, one hundredth of

your allowable credit for increased research activities for prior

one percent (four decimal places).

taxable years exceeded your Arizona income tax liability for those

If the percentage computation involves de minimis amounts

taxable years, and you did not receive a refund of the credit for

of gross receipts and qualified expenses in a taxable year or

increased research activities for those taxable years. The carry

short taxable years are involved, the amounts may be

forward for tax years in which you received a refund of the credit

annualized or disregarded. Refer to IRC §§ 41(c)(3) and

for increased research activities is zero.

41(f)(4) for details.

Line 29 -

Existing firms and start-up companies

Enter the total of line 27 and line 28. This is your current

Arizona’s definition of whether an organization is an existing

year’s total credit for increased research activities.

firm or a start-up company is also the same as federal, albeit

Part 4 - S Corporation Credit Election and

on an Arizona basis:

Shareholder's Share of Credit



Existing firms - An existing firm is one that had both

Line 30 - S Corporation Credit Election

Arizona gross receipts and Arizona qualified research

expenses for at least three taxable years beginning after

S corporations must complete line 30. The S corporation must

December 31, 1983, and before January 1, 1989. The

make an irrevocable election to either claim the current

fixed-base percentage is the ratio that the aggregate

taxable year credit or pass the credit through to its

Arizona qualified research expenses for all taxable years

shareholders. The election statement must be signed by one

beginning after 1983 and before 1989, bears to the

of the officers of the S corporation who is also a signatory to

aggregate Arizona gross receipts for such taxable years.

Arizona Form 120S. If the S corporation elects to claim the



credit itself, it can skip lines 31 through 35 and complete

Start-up companies - A start-up company is one that had

both Arizona gross receipts and Arizona qualified research

Parts 6 through 11, as applicable.

expenses either (1) for the first time in a taxable year

Lines 31 through 35 –

beginning after December 31, 1983, or (2) for fewer than

If an S corporation elects to pass the credit through to its

three taxable years beginning after 1983 and before 1989.

shareholders, it must also complete lines 31 through 33. If the

Instructions For Arizona Form 308 - Credit For Increased Research Activities - 2014 Page 3

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