Short answer. Excess North Dakota research credit carries forward up to 15 years, but only after it has first been carried back to the 3 prior years, starting with the earliest. A company with no North Dakota tax in those 3 years simply carries the full amount forward. A small certified company can sell up to $100,000 of credit instead.
Key facts
| Carryback | 3 years, required first, earliest year first |
|---|---|
| Carryforward | Up to 15 years after the carryback |
| Refundable | No |
| Transfer option | Certified qualified R&D companies may sell up to $100,000 in total |
| Purchased credits | Buyer cannot carry them back |
| Statute | N.D.C.C. 57-38-30.5 |
Back 3 years first, then forward 15
The order is set by statute, not chosen by the taxpayer.
North Dakota's credit is 25 percent of the first $100,000 of the increase in North Dakota research over the base and 8 percent above that. It is nonrefundable, so any amount larger than the current year's tax has to go somewhere. The statute sends it back first: the excess is carried to the 3 prior tax years, beginning with the earliest of them. Only what is left after the carryback moves forward, where it can be used for up to 15 years.
For a company that paid North Dakota tax in those earlier years, the carryback can recover some of it. For a company that has been losing money, there is no earlier tax to offset, so the whole excess ends up in the carryforward.
Selling the credit instead
One group of companies has an alternative to waiting.
A company certified by the North Dakota Department of Commerce as a qualified research and development company can sell up to $100,000 of credits in total. To be certified it must be a primary sector business with gross revenue under $750,000. The $100,000 is a total, not an annual allowance, so a company should think about which years' credits it wants to sell.
A buyer can use a purchased credit against its own tax but cannot carry it back. Companies that do not meet the certification test have no sale option and rely on the carryback and carryforward alone.
An illustrative example
Round numbers for a pre-profit SaaS company, for illustration only.
A North Dakota software company earns a $20,000 credit for tax year 2026 and owes no North Dakota tax that year. It also owed none in 2023, 2024 or 2025, so the required carryback absorbs nothing and all $20,000 carries forward.
The company turns profitable in 2029 with $8,000 of North Dakota tax, and the credit wipes that out, leaving $12,000. In 2030 it owes $15,000 and uses the remaining $12,000, paying $3,000. The whole credit is used well inside the 15-year window. Had the company been certified and chosen to sell instead, the sale would have turned credit into cash without waiting for profits.
Why the records matter years later
The year a credit is used can be far from the year it was earned.
In the example the 2026 credit is not fully used until 2030. That is the year the claim actually reduces tax, and the research behind it still has to be supported then. Records made at the time of the work are easier to defend than memories collected four years on.
North Dakota's credit is computed on federal Section 41 qualified research. R&D Binder produces the federal Section 41 documentation, drawn from your commit history and payroll, that the state credit rests on. Your CPA files the return and decides whether your facts qualify.
More on North Dakota's R&D credit
The full state overview, the federal Section 41 work it builds on, and related state guides:
Sources
Every claim on this page traces to a primary authority. Each source below is independent and verifiable.
- North Dakota Century Code 57-38-30.5 (research expense credit) - North Dakota Legislature
- North Dakota 2025 Schedule 38-TC instructions - North Dakota Office of State Tax Commissioner
- North Dakota Office of State Tax Commissioner, Research Expense Credit - North Dakota Office of State Tax Commissioner
- Strike Tax, North Dakota R&D tax credits - Strike Tax Advisory
Get documentation built to survive an exam
R&D Binder produces the federal Section 41 binder and the North Dakota state workpaper from one engagement, both built to survive an exam.