Rhode Island Research and Development Tax Credit
Rhode Island Division of Taxation
22.5%/16.9% of RI R&D
Tiered 22.5%/16.9% Rhode Island R&D credit
Rhode Island provides an income tax credit of 22.5% on the first $111,111 of qualified Rhode Island research expenses (QRE) above the base amount, and 16.9% on QRE above that threshold — using an incremental calculation based on a prior 3-year average. The credit is non-refundable but unused amounts may be carried forward up to 7 years. Rhode Island follows federal IRC §41 QRE definitions but restricts the credit to research physically conducted within Rhode Island.
- Funding type
- Tax Credit
- Level
- State
- Amount
- 22.5% on the first $111,111 of incremental Rhode Island-located QRE above the base amount (3-year average); 16.9% on incremental QRE above $111,111. The credit is non-refundable — offsets Rhode Island income tax only. Annual usage is limited to 50% of the credit available in any one year (the remaining 50% carries forward). Unused credits may be carried forward up to 7 years. Rhode Island follows the federal IRC §41 four-part test and QRE definitions but requires Rhode Island-located expenses.
- Realistic amount
- A Providence biotech company with $300,000 of incremental Rhode Island QRE (above its 3-year average) earns approximatel…
- Deadline
- Rolling — claimed annually on Rhode Island income tax return
- Status
- active
- States
- RI
- Payment model
- tax offset
Who qualifies
- Must conduct qualified research activities physically located within Rhode Island following federal IRC §41 four-part test
- Credit uses incremental structure: applies only to Rhode Island-located QRE above the average of the 3 prior taxable years. Startups with fewer than 3 years of Rhode Island QRE history use a proportional startup base calculation
- Qualified research expenses include: wages of Rhode Island-based employees performing, supervising, or supporting research; supplies consumed in Rhode Island; 65% of Rhode Island contract research payments
- All Rhode Island income-tax-filing entities eligible: C-corporations, S-corporations, LLCs, partnerships, sole proprietors
- Credit is non-refundable. Annual usage is capped at 50% of the credit available in any one year — the unused 50% automatically carries forward. Total carryforward period: up to 7 years. Cannot reduce Rhode Island income tax liability below zero
- No minimum revenue, employee count, or project size requirements
- Research must satisfy all four prongs of the §41 test
What it covers
Eligible expenses
- Wages of Rhode Island-based employees directly performing qualified research activities
- Wages of Rhode Island-based employees directly supervising or supporting qualified research
- Supplies and materials consumed or destroyed in Rhode Island-located research
- 65% of payments to contractors for qualified research conducted in Rhode Island
- Computer rental for Rhode Island-located qualified research
Ineligible expenses
- Research conducted outside Rhode Island
- Research funded or reimbursed by a third party (government contracts, client-funded R&D)
- Social sciences, arts, humanities, cosmetic design changes
- Market research and consumer preference testing
- Post-production quality assurance and routine data collection
- Capital equipment purchases
- Rhode Island QRE below the 3-year average base
How to apply
-
1
Calculate Rhode Island-located QRE for current and prior 3 years
Determine your Rhode Island-located QRE for the current taxable year and the 3 preceding years using federal IRC §41 expense categories (wages, supplies, 65% of contract research). For companies with fewer than 3 years of Rhode Island QRE history, use the startup base calculation proportional to the years available.
~6 hrs
-
2
Compute the incremental base and excess QRE
Average the Rhode Island-located QRE from the 3 prior years to establish the base. Subtract this average from your current-year Rhode Island QRE. The positive difference is the incremental QRE. If current-year QRE does not exceed the 3-year average, no credit is earned.
~2 hrs
-
3
Apply the tiered credit rates
Apply 22.5% to the first $111,111 of incremental QRE. Apply 16.9% to any incremental QRE above $111,111. Sum the two tiers to get the total credit for the year.
~1 hrs
-
4
Complete Rhode Island Form RI-7695
File Form RI-7695 (Research & Development Credit) with your Rhode Island income tax return. The form guides the base calculation, incremental QRE, tiered credit rates, and carryforward tracking. Attach to Form RI-1120C (C-corps), Form RI-1040 (individuals), or applicable pass-through return.
~3 hrs
-
5
Apply credit and track 7-year carryforward
The credit offsets Rhode Island income tax liability. Unused credits carry forward up to 7 years — maintain a vintage-year carryforward schedule and apply oldest-vintage credits first. Credits from a given year expire after 7 years if not used.
~2 hrs
-
6
Retain supporting documentation
Keep Rhode Island-specific QRE documentation: employee timesheets by project with Rhode Island location confirmation, supply invoices, contractor agreements. Retain records for at least 3 years from the return due date for Rhode Island Division of Taxation audits.
~3 hrs
Rhode Island's 22.5% top rate on the first $111K of incremental QRE is competitive. Note the 50% annual usage cap: only half of the credit can be used in the year it is earned — the rest carries forward automatically. Biotech and defense companies should plan R&D spending to maximize the $111K lower tier (higher rate) each year, and build a carryforward schedule to ensure 7-year expirations are managed.
Deadline & timing
Claimed on Form RI-7695 (Research & Development Credit) filed with the Rhode Island income tax return. Rhode Island corporate income tax returns are due by the 15th day of the 4th month following the close of the fiscal year (April 15 for calendar-year filers). Extensions available. Carryforward credits must be tracked year-by-year with a 7-year expiration from the credit vintage year.
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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.