Utah R&D Tax Credit Services
If you own a business in Utah, reducing your state tax burden is a top priority. A powerful but often overlooked tool is the Utah Research and Development (R&D) Tax Credit. While many are familiar with the federal R&D credit, Utah offers its own distinct and valuable incentive to encourage innovation within the state.
Utah R&D Credit Eligibility & Overview
The Utah R&D tax credit is a permanent, non-refundable credit designed to reward businesses for investing in research and experimentation performed within Utah. To claim this credit, your business must understand Utah’s specific rules, as only research expenses incurred in the state are eligible. This credit is calculated differently from the federal credit and is a direct reduction of your Utah corporate or individual income tax liability.
Our Utah R&D tax credit consulting focuses on projects performed in Utah and expenses that meet Utah’s standards. Because the Utah R&D credit is nonrefundable and includes valuable carryforwards for certain components, precise calculations and documentation are essential to maximize benefits.
CMP has invested significant time and resources into helping our clients understand and maximize the benefits of the Utah R&D Tax Credit. We have developed a series of materials and resources that our clients can use to identify qualifying activities, track expenses, and create the robust documentation necessary to prove eligibility.
Our research and development tax credit specialists guide Utah businesses through this complex process.
Utah vs Federal R&D Tax Credit: Key Differences
| Feature | Utah R&D Tax Credit | Federal R&D Tax Credit |
|---|---|---|
| Scope | Only QREs for research conducted within Utah | QREs for research conducted anywhere in the U.S. |
| Calculation | 5% incremental component, 5% basic research payments, and 7.5% current-year QRE component | Regular or Alternative Simplified Credit (ASC) methods |
| Filing | Claimed on Form TC-40A, Part 4, code 12 | Claimed on Form 6765 |
| Interaction | Can claim both Utah and federal credits when requirements are met | Can claim both credits simultaneously |
Additional Notes:
- Utah Credit Carryforward: Unused credits can be carried forward for up to 14 years for the 5% components.
- Federal Credit Flexibility: Offers more flexibility in calculation methods and broader applicability across the U.S.
Businesses & Industries That Qualify for the Utah R&D Tax Credit
Many businesses that qualify for the credit fail to claim it. While companies in over 40 industries may be eligible, the single most important requirement for the Utah credit is that the qualified research activities must be performed within the state of Utah.
Any business that develops new or improved software, products, manufacturing processes, or technologies should conduct an in-depth review of its operations. We have found that many of our clients in the following Utah-based industries have activities that qualify:
- Manufacturers
- Machine Shops / Tool & Die Makers
- Software Developers & SaaS Providers
- Biotechnology & Pharmaceutical Companies
- Architectural & Engineering Firms
- Food Processors
- Aerospace and Defense Contractors
- Other Technology Companies
CMP has a system to help our clients identify and claim the Utah R&D tax credit. Even if you use another firm for tax preparation, our specialized R&D Tax Credit Consulting Service can evaluate your eligibility and provide a detailed report that your preparer can use to properly claim the credit on your Utah tax return.
We frequently help Utah manufacturers, software and SaaS companies, engineering and architecture firms, life sciences, aerospace and defense, and food processors claim the Utah R&D credit. Our team serves clients statewide, from Cache Valley to Southern Utah, and everywhere in between.
The 4-Part Test: What is a Qualifying R&D Activity?
To determine if your activities qualify for the Utah credit, the state uses a four-part test similar to the federal standard. However, this test is applied exclusively to research conducted within Utah. An activity must:
- Permitted Purpose: Be aimed at developing or improving a new product, process, formula, invention, or software.
- Technical Uncertainty: Involve uncertainty at the outset regarding the appropriate design, method, or capability to achieve the result.
- Process of Experimentation: Entail a systematic process of trial and error, such as modeling, simulation, or systematic testing of alternatives.
- Technological in Nature: Be rooted in principles of the hard sciences, such as engineering, physics, computer science, chemistry, or biology
If your Utah-based activities meet these criteria, you may be eligible for significant tax savings.
How to Calculate the Utah R&D Tax Credit
The Utah R&D tax credit has a specific, multi-part calculation. The total non-refundable credit is the sum of the following three components:
- 5% of your company’s qualified research expenses (QREs) in Utah that exceed a base amount.
- 5% of certain payments made to qualified organizations for basic research conducted in Utah.
- 7.5% of your company’s total QREs in Utah for the current year.
It is important to note that any unused credit from the 5% components can be carried forward for up to 14 years. However, the credit generated from the 7.5% component cannot be carried forward and must be used in the current tax year. The experts at CMP can help you calculate this correctly to maximize both current-year benefits and future carryforwards.
How to Claim the Utah R&D Credit and Documentation
The calculated credit is claimed directly on Utah Form TC-40A, Part 4, using code 12.
Because there is no pre-approval process, maintaining meticulous and contemporaneous documentation is essential to substantiate your claim in the event of a state audit. Your documentation should clearly link wages, supply costs, and contractor payments to specific, qualified R&D projects conducted in Utah.
CMP has been our tax advisors for many years. They spend the time necessary to update themselves every year to understand the complex tax code changes and the impact it will have on their clients. Their insight, experience, and candor will steady and sustain the decisions you make financially in this critical part of your business life. I highly recommend you spend time getting to know the people in this professional organization, and the strength they will give to your business ventures.
LeGrand Bingham
Our R&D Tax Credit Services
- Basic Training: We present to your team the qualifications and documentation required to claim the credit.
- Basic Toolkit: Our proprietary toolkit, based on tax code and client feedback, helps you document qualifications and identify overlooked opportunities.
- Consulting: Our services cover tax law compliance, record-keeping, and ensuring your qualifying activities are properly addressed.
- Study and Report: The CMP team will perform a full R&D tax credit study to identify and document qualifying business activities. This report contains the details needed to calculate the credit and ensure compliance with Utah tax law. This report provides the analysis needed to ensure you are maximizing your innovation tax savings.
Frequently Asked Questions about the Utah R&D Tax Credit
Can my software company claim the Utah R&D credit?
Yes, absolutely. Software development, including for internal use, is a primary qualifying industry, provided the activities meet the 4-part test and are performed in Utah.
Is the Utah R&D credit refundable?
No, the Utah credit is non-refundable. This means it can reduce your tax liability to zero, but you will not receive a cash refund for any excess credit. However, portions of the credit can be carried forward for up to 14 years.
What kind of documentation do I need?
You need contemporaneous documentation that links expenses to specific projects. This includes payroll records for qualifying wages, project notes, lab results, testing documentation, and invoices for supplies and contractors. Robust documentation is your best defense in an audit.
Learn More About Our R&D Tax Credit Services
Our tax professionals can review and consult with you on whether your business qualifies for this unique tax benefit. Give us a call today.
Logan, UT: (435) 750-5566,
Layton, UT: (801) 467-4450
St. George, UT: (435) 269-4540.
R&D Tax Credit Advisors Profile
