Short answer. You can claim both. North Dakota runs its own credit, 25 percent on the first $100,000 of your North Dakota research over a base and 8 percent above, separate from the federal Section 41 credit, so the same in-state work earns both. The North Dakota credit is nonrefundable, but it is unusual in allowing a three-year carryback in addition to a 15-year carryforward.
Key facts
| Claim both? | Yes, on the same North Dakota research |
|---|---|
| Federal rate | 20% regular / 14% ASC |
| North Dakota rate | 25% on the first $100,000 over a base, 8% above |
| North Dakota refundable? | No (a narrow credit sale exists for small primary-sector startups) |
| Forms | Form 6765 (federal) + the North Dakota credit schedule |
Two credits on the same research
North Dakota computes its own credit on North Dakota expenses; the federal credit runs on your nationwide expenses.
The federal Section 41 credit is claimed on Form 6765 with your federal return. North Dakota's credit is claimed on the state tax credit schedule with your North Dakota return, and the same research performed in North Dakota can support both in the same year.
North Dakota uses the federal Section 41 definition of qualified research but applies its own tiered rates to the North Dakota portion, so the federal work is the basis for the state claim.
Federal Section 41 vs. North Dakota, factor by factor
North Dakota has a high first-tier rate and the unusual ability to carry the credit back three years.
| Factor | Federal Section 41 | North Dakota |
|---|---|---|
| What it is | Credit for increasing research activities | North Dakota research expense credit |
| Credit rate | 20% regular / 14% ASC | 25% on the first $100,000 of QRE over a base, 8% above |
| Refundable | No - a QSB may offset up to $500,000 of payroll tax under Section 41(h) | No, but a small primary-sector startup may sell a limited amount of credit |
| Carryforward | 20 years, with a 1-year carryback | 15 years, with a 3-year carryback |
| Where research must occur | United States | North Dakota only |
| How you claim it | Form 6765 with the federal return | The North Dakota tax credit schedule with the state return |
| Claim alongside the other? | Yes, on the same underlying QRE | Yes, on the same underlying QRE |
| Documentation | Four-part test and QRE substantiation (Treas. Reg. 1.41-4) | Uses the Section 41 definition, North Dakota research only |
Where North Dakota differs from federal
Two features set North Dakota apart from the federal credit.
A high first tier, and a carryback. North Dakota pays 25 percent on the first $100,000 of the increase in your North Dakota research, well above the federal 20 percent, then 8 percent above. Unusually, unused credit can be carried back three years as well as forward 15, while the federal credit allows only a one-year carryback.
A narrow sale route. The credit is not refundable, but a certified primary-sector company with under $750,000 in revenue that began North Dakota research after 2006 can sell a limited lifetime amount of unused credit. Only research conducted in North Dakota counts.
One evidence base for both
The records that prove the federal claim are what North Dakota relies on too.
Because North Dakota uses the Section 41 definition of qualified research, the four-part test analysis and the wage, contractor, and supply records that substantiate your federal credit under Treas. Reg. 1.41-4 support the North Dakota claim, limited to the in-state share. You build the evidence once.
R&D Binder documents the federal Section 41 four-part test that both credits stand on, with North Dakota handled as a state add-on from the same evidence. Whether your facts qualify, and which credits to claim, is a determination for your CPA.
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. § 41 (credit for increasing research activities) - Cornell Law School, Legal Information Institute
- IRS, About Form 6765 - Internal Revenue Service
- Treas. Reg. § 1.41-4 (recordkeeping and substantiation of qualified research) - 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.