Short answer. North Dakota pays 25 percent on the first $100,000 of the increase in your in-state research over a base, and 8 percent above that. The credit is non-refundable, but unlike most states it can be carried back 3 years to recover tax you already paid, and forward 15 years.
Key facts
| Rate (first $100k of increase) | 25% of the increase in North Dakota QRE |
|---|---|
| Rate (increase above $100k) | 8% |
| Refundable | No |
| Carryback / carryforward | 3 years back, 15 years forward |
| Statute | N.D.C.C. 57-38-30.5 |
25 percent, then 8 percent
North Dakota's rate is tiered around a $100,000 threshold and rewards growth.
The credit is 25 percent of the first $100,000 of qualified research expenses that exceed the base amount, and 8 percent of the excess above $100,000. It is incremental: only research spending above a base computed under the federal Section 41 method earns credit. The 25 percent first-tier rate is one of the highest in the country.
Only research conducted in North Dakota counts. The qualified expense definition otherwise follows federal Section 41.
The carryback most states do not offer
The credit is non-refundable, but it is rarely lost.
An unused credit carries back 3 tax years and forward up to 15 tax years. The carryback can recover North Dakota tax you already paid, which most state credits do not allow. For a company that was profitable before a heavy research year, that is real cash recovered rather than a credit banked for the future.
A narrow transfer option
One more route exists for very small research companies.
A narrow set of certified small research companies, primary-sector businesses under $750,000 in gross revenue doing first-time research, may transfer up to $100,000 of unused credit. Most established software companies do not qualify, but it is worth knowing the option exists. The credit is computed under N.D.C.C. 57-38-30.5.
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 Office of State Tax Commissioner, Research Expense Credit - North Dakota Office of State Tax Commissioner
- 26 U.S.C. ยง 41 (credit for increasing research activities) - Cornell Law School, Legal Information Institute
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.