§ 44-32-2 - Credit for research and development property acquired, constructed, or reconstructed or erected after July 1, 1994.
SECTION 44-32-2
§ 44-32-2 Credit for research anddevelopment property acquired, constructed, or reconstructed or erected afterJuly 1, 1994. – (a) A taxpayer shall be allowed a credit against the tax imposed by chapters11, 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 tangiblepersonal property, and other tangible property, including buildings andstructural components of buildings, described in subsection (b) of thissection; acquired, constructed or reconstructed, or erected after July 1, 1994.
(b) A credit shall be allowed under this section with respectto tangible personal property and other tangible property, including buildingsand structural components of buildings which are: depreciable pursuant to 26U.S.C. § 167 or recovery property with respect to which a deduction isallowable under 26 U.S.C. § 168, have a useful life of three (3) years ormore, are acquired by purchase as defined in 26 U.S.C. § 179(d), have asitus in this state and are used principally for purposes of research anddevelopment in the experimental or laboratory sense which shall also includeproperty used by property and casualty insurance companies for research anddevelopment into methods and ways of preventing or reducing losses from fireand other perils. The credit shall be allowable in the year the property isfirst placed in service by the taxpayer, which is the year in which, under thetaxpayer's depreciation practice, the period for depreciation with respect tothe property begins, or the year in which the property is placed in a conditionor state of readiness and availability for a specifically assigned function,whichever is earlier. These purposes shall not be deemed to include theordinary 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 similarprojects.
(c) A taxpayer shall not be allowed a credit under thissection with respect to any property described in subsections (a) and (b) ofthis section, if a deduction is taken for the property under § 44-32-1.
(d) A taxpayer shall not be allowed a credit under thissection with respect to tangible personal property and other tangible property,including buildings and structural components of buildings, which it leases toany other person or corporation. For purposes of the preceding sentence, anycontract or agreement to lease or rent or for a license to use the property isconsidered a lease.
(e) The credit allowed under this section for any taxableyear does not reduce the tax due for that year, in the case of corporations, toless than the minimum fixed by § 44-11-2(e). If the amount of creditallowable under this section for any taxable year is less than the amount ofcredit available to the taxpayer, any amount of credit not credited in thattaxable year may be carried over to the following year or years, up to amaximum of seven (7) years, and may be credited against the taxpayer's tax forthe following year or years. For purposes of chapter 30 of this title, if thecredit allowed under this section for any taxable year exceeds the taxpayer'stax for that year, the amount of credit not credited in that taxable year maybe 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 oryears.
(f) With respect to property which is depreciable pursuant to26 U.S.C. § 167 and which is disposed of or ceases to be in qualified useprior to the end of the taxable year in which the credit is to be taken, theamount of the credit is that portion of the credit provided for in this sectionwhich represents the ratio which the months of qualified use bear to the monthsof useful life. If property on which credit has been taken is disposed of orceases to be in qualified use prior to the end of its useful life, thedifference between the credit taken and the credit allowed for actual use mustbe added back in the year of disposition. If the property is disposed of orceases to be in qualified use after it has been in qualified use for more thantwelve (12) consecutive years, it is not necessary to add back the credit asprovided in this subdivision. The amount of credit allowed for actual use isdetermined by multiplying the original credit by the ratio which the months ofqualified use bear to the months of useful life. For purposes of thissubdivision, "useful life of property" is the same as the taxpayer uses fordepreciation 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, asdefined in 26 U.S.C. § 168(c), which is disposed of or ceases to be inqualified use prior to the end of the taxable year in which the credit is to betaken, the amount of the credit shall be that portion of the credit providedfor in this section which represents the ratio which the months of qualifieduse bear to thirty-six (36). If property on which credit has been taken isdisposed 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 foractual use must be added back in the year of disposition. The amount of creditallowed for actual use is determined by multiplying the original credit by theratio 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 buildingand which is disposed of or ceases to be in qualified use prior to the end ofthe taxable year in which the credit is to be taken, the amount of the creditis that portion of the credit provided for in this section which represents theratio which the months of qualified use bear to the total number of months overwhich 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 inqualified use prior to the end of the period over which the taxpayer chooses todeduct the property under 26 U.S.C. § 168, the difference between thecredit taken and the credit allowed for actual use must be added back in theyear of disposition. If the property is disposed of or ceases to be inqualified 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 inthis subdivision. The amount of credit allowed for actual use is determined bymultiplying the original credit by the ratio that the months of qualified usebear to the total number of months over which the taxpayer chooses to deductthe property under 26 U.S.C. § 168.
(g) No deduction for research and development facilitiesunder § 44-32-1 shall be allowed for research and development property forwhich the credit is allowed under this section.
(h) No investment tax credit under § 44-31-1 shall beallowed for research and development property for which the credit is allowedunder this section.
(i) The investment tax credit allowed by § 44-31-1 shallbe taken into account before the credit allowed under this section.
(j) The credit allowed under this section only allowedagainst the tax of that corporation included in a consolidated return thatqualifies for the credit and not against the tax of other corporations that mayjoin in the filing of a consolidated return.
(k) In the event that the taxpayer is a partnership, jointventure or small business corporation, the credit shall be divided in the samemanner as income.