Short answer. Rhode Island research credits earned in tax years beginning on or after January 1, 2026 carry forward 15 years. Credits from earlier tax years keep their original 7-year limit. Because the credit can offset no more than half of your tax in any year, many companies carry a balance for several years even after they turn profitable.
Key facts
| Carryforward (2026 and later credits) | 15 years |
|---|---|
| Carryforward (pre-2026 credits) | 7 years |
| Annual use limit | 50% of tax; corporations cannot go below the minimum tax |
| Refundable | No |
| Law change | P.L. 2025, ch. 278, art. 5, sec. 13 |
| Statute | R.I. Gen. Laws 44-32-3 |
How the carryforward works
The credit is nonrefundable and capped each year, so most of it ends up carried.
Rhode Island's credit is 22.5 percent of the first $111,111 of qualifying research over the base and 16.9 percent above that. It is nonrefundable, and in any year it can offset at most 50 percent of your tax. A corporation also cannot use it to go below the minimum tax. Any credit blocked by those limits carries forward.
The 50 percent cap means even a profitable company may take several years to use one year's credit. That is why the length of the carryforward matters more in Rhode Island than in a state without an annual cap.
Two clocks: 7 years and 15 years
The 2025 budget law lengthened the carryforward only for new credits.
Under P.L. 2025, ch. 278, art. 5, sec. 13, credits from tax years beginning on or after January 1, 2026 carry forward 15 years. Credits from earlier tax years keep the 7-year limit they had when they were earned. A company that claimed the credit in 2024 and again in 2026 is therefore holding two kinds of carryforward that expire on different schedules, and it should track them by year.
Two related incentives ended at the same time. The R&D Property Credit under 44-32-2 and the elective deduction for R&D facilities under 44-32-1 do not apply for tax years beginning on or after January 1, 2026. Amounts from earlier years can still be carried forward.
No refund
Unused research credit waits for Rhode Island tax.
The statute allows unused research credit only to carry over; there is no refund. A pre-profit company holds the credit until it has Rhode Island tax to offset, and then uses it at no more than half that tax each year.
An illustrative example
Round numbers for a pre-profit SaaS company, for illustration only.
A Rhode Island software company earns a $30,000 credit for tax year 2026 and has no tax it can offset that year, so the full $30,000 carries forward on the 15-year clock. In 2028 it owes $20,000 of Rhode Island tax. The 50 percent cap lets it use $10,000, leaving $20,000.
In 2029 it owes $30,000 and can use up to $15,000, leaving $5,000. In 2030 it owes $30,000 again and uses the last $5,000. It took three profitable years to use one year of credit. Under the old 7-year rule the same credit would still have been used in time, but a larger credit or a longer path to profit could easily have run out the clock.
Why the records matter years later
A credit used over several years has to be supported in each of them.
In the example the 2026 credit is still reducing tax in 2030. Each of those returns relies on research done in 2026, and the support for it needs to be there whenever the credit is used. Records made at the time of the work age better than a reconstruction.
Rhode Island's credit uses the federal Section 41 definition of qualified research. R&D Binder produces the federal Section 41 documentation, built from your commit history and payroll, that the state credit rests on. Your CPA files the return, and whether your facts qualify is your CPA's call.
More on Rhode Island'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.
- Rhode Island General Laws 44-32-3 (research and development expenses credit) - Rhode Island General Assembly
- Rhode Island Division of Taxation, ADV 2026-02 (tax changes effective January 1, 2026) - Rhode Island Division of Taxation
- Thomson Reuters, Rhode Island enacts budget bill (July 2025) - Thomson Reuters
- Rhode Island Research and Development Expenses Credit regulation (280-RICR-20-20-2) - Rhode Island Department of State
Get documentation built to survive an exam
R&D Binder produces the federal Section 41 binder and the Rhode Island state workpaper from one engagement, both built to survive an exam.