Arkansas In-House Research Tax Credit
Arkansas Department of Finance and Administration / Arkansas Economic Development Commission
20% of qualified R&D
20% credit on Arkansas in-house R&D costs
Arkansas businesses that conduct in-house R&D at facilities they operate can claim a 20% income tax credit on qualified research expenditures — with a 9-year carryforward. The credit requires the same activity to qualify for the federal Section 41 R&D credit, making it a natural stack for any company already claiming the federal credit. Unlike larger Arkansas programs, there's no minimum investment or job creation requirement, making it accessible to small technology, manufacturing, and engineering firms doing genuine R&D work in Arkansas.
- Funding type
- Tax Credit
- Level
- State
- Amount
- Income tax credit equal to 20% of qualified in-house research and development expenditures conducted at Arkansas facilities. 9-year carryforward from year earned. Credit may offset up to 100% of annual Arkansas income tax liability.
- Realistic amount
- A small software or engineering firm spending $200,000 annually on qualifying R&D payroll and supplies in Arkansas earns…
- Deadline
- Claimed annually on Arkansas income tax return. No separate application or approval process — credit is self-certified on the tax return.
- Status
- active
- States
- AR
- Payment model
- tax offset
Who qualifies
- Business must conduct in-house research and development at facilities it operates in Arkansas
- Research activities must qualify for the federal Section 41 R&D tax credit (same definitional standards apply)
- Business must pay Arkansas income tax (corporate or individual)
- No minimum investment, employee count, or project size required
- For-profit businesses only
Hard requirements
- Location restriction: Arkansas — R&D must be conducted at Arkansas facilities
What it covers
Eligible expenses
- Wages and salaries for employees conducting qualified research in Arkansas (including supervisory proportion)
- Supplies consumed in the conduct of qualified research
- Rental or lease costs for equipment used exclusively in qualified research
- Contract research conducted at Arkansas facilities on behalf of the applicant
Ineligible expenses
- Research conducted outside Arkansas
- Research after commercial production begins (post-development phase)
- Social sciences, arts, or humanities research
- Research funded by grants or contracts (expenditures must be at taxpayer's risk)
- Capital expenditures for equipment (cost of equipment itself, not depreciation)
- Management studies, market research, or efficiency surveys
How to apply
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1
Confirm qualifying R&D activities
Verify that your in-house research meets the 4-part federal Section 41 test: (1) technological uncertainty, (2) process of experimentation, (3) technical nature, (4) qualified purpose. The same activities qualifying for your federal R&D credit qualify here.
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2
Document qualifying expenditures
Track wages for employees conducting qualified research (including a portion for supervisors), supply costs used in R&D, and contractor R&D payments made to Arkansas facilities. Maintain contemporaneous records — the same documentation used for your federal §41 claim.
-
3
Calculate the 20% credit
Apply 20% to total qualified Arkansas R&D expenditures for the tax year. Complete the applicable Arkansas tax credit schedule and attach to your corporate or individual income tax return.
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4
Claim on Arkansas income tax return
Report the credit on your Arkansas Corporate Income Tax return. Unused credit carries forward for up to 9 years. Credit may offset up to 100% of annual Arkansas income tax liability.
Arkansas uses the same 4-part qualifying test as the federal §41 credit — if you're already claiming the federal R&D credit, the Arkansas credit requires almost no additional documentation. Stack with the federal §41 credit for combined savings of 25–32% of qualifying expenditures.
Deadline & timing
No annual application window — the credit is claimed on the Arkansas Corporate Income Tax or Individual Income Tax return for the tax year in which qualifying R&D expenditures occurred. The 9-year carryforward period begins in the year the credit is earned.
Programs that stack well
Related programs
Last reviewed 2026. GrantCompass is an independent funding-discovery tool and is not affiliated with any government agency. Always confirm details on the official program page.