308: Credit for Increased Research Activities – Corporations (2024)

Who files this form

Use Form 308 to claim the Arizona Credit for Increased Research Activities for 2024 if you have qualified research expenses or receive this credit through a partnership.

If you have neither qualified research expenses nor a credit passed through from a partnership, complete the form only if you have credit carryovers. Otherwise, the form says you are not eligible to claim this credit.

Partnerships that qualify must pass the credit through to their partners. S corporations may choose to keep the credit to offset their own tax liability or pass it through to shareholders.

What you'll need

Have the following information and documents ready, as applicable:

• Your name as shown on your tax return and your Employer Identification Number (EIN).
• Amounts for basic research payments, the qualified organization base period, qualified wages, supplies, computer rentals or leases, and contract research expenses.
• Average annual Arizona gross receipts and the fixed-base percentage for the regular credit calculation.
• Qualified research expenses for the prior three years if electing the Alternative Simplified Credit (ASC).
• A copy of your Arizona Commerce Authority (ACA) certification if claiming your own refundable credit, including the maximum refund amount authorized.
• Copies of all Forms 308-P for credits received from partnerships. Include these with your return.
• Carryover information by taxable year, including original credit amounts and amounts previously used or expired.
• Your tax return and Form 300 amounts needed to complete the applicable credit calculations.

Partnerships passing through the credit must include a completed Form 308-P for each partner. S corporations passing through the credit must include a completed Form 308-S for each individual shareholder.

How to file

Include Form 308 with your tax return.

• Complete Part 1 to determine which parts apply to you.
• For the regular credit, complete Part 2, lines 8 through 27a. For the Alternative Simplified Credit (ASC), check the ASC box and complete Part 12, then transfer line 93 to line 27b.
• Include the ACA certification and partnership credit forms when required.
• Complete the applicable refund, carryover, and nonrefundable credit sections, and transfer the amounts to your tax return or Form 300 as directed.

Partnerships must give each partner a completed Form 308-P, include copies with their return, and keep copies for their records. S corporations passing through the credit must give each shareholder a completed Form 308-S and include copies with their return.

The supplied form does not give a mailing address or e-filing directions.

Common mistakes

• Including excluded wages: Do not include wages used to figure the federal work opportunity credit in the qualified wage amounts.
• Electing ASC without the required expense history: The form says you do not qualify for ASC if you had no qualified research expenses in any one of the prior three years.
• Carrying forward credit from a refund year: If you elect a refund of 75% of the excess credit, you cannot carry forward any amount from that year.
• Completing Part 10 when it does not apply: Do not complete Part 10 if you completed Part 7 and are receiving a refund, or if you have no credit carryovers.
• Checking both S corporation election boxes: Check only one box in Part 6. The election for the taxable year is irrevocable.
• Omitting required attachments: Include the ACA certification for your refundable credit and copies of applicable Forms 308-P or 308-S.

Questions people ask

Can I use Form 308 if I have only credit carryovers?

Yes. If you have no qualified research expenses and no credit passed through from a partnership, the form directs you to complete it only if you have credit carryovers and to go to Part 8.

How do I choose the Alternative Simplified Credit?

Check the ASC box and complete Part 12, lines 75 through 93. Transfer line 93 to Part 2, line 27b. You do not qualify for ASC if you had no qualified research expenses in any one of the prior three years.

How is the refundable portion calculated?

Part 7 calculates a tentative refund of 75% of the current year's excess credit. The refundable credit is the lesser of that amount or the combined maximum refundable amounts authorized by the ACA and received through partnerships.

Can an S corporation keep the credit?

Yes. An S corporation may keep the credit to apply against tax liability at the S corporation level or pass it through to shareholders. Its Part 6 election is irrevocable for the taxable year.

What if I receive the credit from several partnerships?

Add the credit amounts from all Forms 308-P, Part 2, line 4, and enter the total on Form 308, Part 3, line 28. Include copies of those Forms 308-P with your return.

Official sources

• https://azdor.gov/forms