How long does Arizona's R&D credit carry forward?

Arizona computes the credit at 24 percent of the first $2.5 million of qualifying expenses over the base and 15 percent above that, for taxable years beginning before December 31, 2030. When that credit is larger than what you owe, the excess does not disappear. It carries forward and can be used against tax in later years, up to 10 years for credits from taxable years beginning after December 31, 2021.

Each year's credit is claimed on Form 308 and keeps its own expiry date. A company that earns credit every year ends up holding several layers, each with a different last year of use, so the running schedule of what was earned, used, and left matters as much as the credit itself.

Credits from taxable years beginning on or before December 31, 2021 carry forward 15 years. Credits from later years carry forward 10. If you still hold credit from 2021 or before, it has more time left than you might assume, and it should not be mixed into the same line as your newer credit when you track expiry.

A taxpayer with fewer than 150 employees could apply to the Arizona Commerce Authority to take 75 percent of its excess credit as a refund, with the other 25 percent waived. The program was capped at $5 million a year statewide. HB 4168 (Laws 2026, chapter 140), signed June 13, 2026, repealed that refund for taxable years beginning after December 31, 2025.

For tax years from 2026 on, there is no refund. Excess credit carries forward, and that is the only way to use it.

A pre-profit SaaS company earns $60,000 of Arizona credit in each of 2026, 2027, and 2028 and owes no Arizona tax in those years, so it carries $180,000 forward. It turns profitable in 2029 with $50,000 of Arizona tax, then $70,000 in 2030 and $90,000 in 2031. For simplicity, the example ignores new credit earned in those years and assumes the carryforward can be applied against each year's full tax. The company uses $50,000 in 2029 (leaving $130,000), $70,000 in 2030 (leaving $60,000), and the last $60,000 in 2031, when it still owes $30,000. Every layer is used well inside its 10-year window. A company that stays pre-profit longer has less room.

The credit is only as good as the documentation behind it on the day you finally use it. R&D Binder produces the federal Section 41 documentation the Arizona credit rests on: the business components, the four-part test analysis, and the qualified research expense workpaper, built from your commit history and payroll. Your CPA files Form 308, and whether your facts qualify is the CPA's call.

• Arizona's R&D credit (full overview)
• Arizona R&D credit rate
• Arizona vs the federal credit
• Arizona R&D credit refund
• The Section 41 four-part test
• What is a qualified research expense (QRE)?
• Form 6765 and Section G
• California R&D credit
• Idaho R&D credit

• A.R.S. 43-1168 (Credit for increased research activities) - Arizona Legislature
• Arizona HB 4168 as enacted (Laws 2026, ch. 140) - Arizona Legislature
• Arizona Department of Revenue, 2025 Form 308 instructions - Arizona Department of Revenue
• Eide Bailly, Arizona House Bill 4168 alert (July 13, 2026) - Eide Bailly
• KBKG, Arizona R&D tax credit - KBKG