82.04.4452 - Credit -- Research and development spending. - Washington Statutes

Credit — Research and development spending. (Expires January 1, 2015.)

(1) In computing the tax imposed under this chapter, a credit is allowed for each person whose research and development spending during the year in which the credit is claimed exceeds 0.92 percent of the person's taxable amount during the same calendar year.

     (2) The credit is calculated as follows:

     (a) Determine the greater of the amount of qualified research and development expenditures of a person or eighty percent of amounts received by a person other than a public educational or research institution in compensation for the conduct of qualified research and development;

     (b) Subtract 0.92 percent of the person's taxable amount from the amount determined under (a) of this subsection;

     (c) Multiply the amount determined under (b) of this subsection by the following:

     (i) For the period June 10, 2004, through December 31, 2006, the person's average tax rate for the calendar year for which the credit is claimed;

     (ii) For the calendar year ending December 31, 2007, the greater of the person's average tax rate for that calendar year or 0.75 percent;

     (iii) For the calendar year ending December 31, 2008, the greater of the person's average tax rate for that calendar year or 1.0 percent;

     (iv) For the calendar year ending December 31, 2009, the greater of the person's average tax rate for that calendar year or 1.25 percent;

     (v) For the calendar year ending December 31, 2010, and thereafter, 1.50 percent.

     For purposes of calculating the credit, if a person's reporting period is less than annual, the person may use an estimated average tax rate for the calendar year for which the credit is claimed by using the person's average tax rate for each reporting period. A person who uses an estimated average tax rate must make an adjustment to the total credit claimed for the calendar year using the person's actual average tax rate for the calendar year when the person files its last return for the calendar year for which the credit is claimed.

     (3) Any person entitled to the credit provided in subsection (2) of this section as a result of qualified research and development conducted under contract may assign all or any portion of the credit to the person contracting for the performance of the qualified research and development.

     (4) The credit, including any credit assigned to a person under subsection (3) of this section, must be claimed against taxes due for the same calendar year in which the qualified research and development expenditures are incurred. The credit, including any credit assigned to a person under subsection (3) of this section, for each calendar year may not exceed the lesser of two million dollars or the amount of tax otherwise due under this chapter for the calendar year.

     (5) For any person claiming the credit, including any credit assigned to a person under subsection (3) of this section, whose research and development spending during the calendar year in which the credit is claimed fails to exceed 0.92 percent of the person's taxable amount during the same calendar year or who is otherwise ineligible, the department must declare the taxes against which the credit was claimed to be immediately due and payable. The department must assess interest, but not penalties, on the taxes against which the credit was claimed. Interest must be assessed at the rate provided for delinquent excise taxes under chapter 82.32 RCW, retroactively to the date the credit was claimed, and accrues until the taxes against which the credit was claimed are repaid. Any credit assigned to a person under subsection (3) of this section that is disallowed as a result of this section may be claimed by the person who performed the qualified research and development subject to the limitations set forth in subsection (4) of this section.

     (6) A person claiming the credit provided in this section must file a complete annual survey with the department under RCW 82.32.585.

     (7) For the purpose of this section:

     (a) "Average tax rate" means a person's total tax liability under this chapter for the calendar year for which the credit is claimed divided by the taxpayer's total taxable amount under this chapter for the calendar year for which the credit is claimed.

     (b) "Qualified research and development expenditures" means operating expenses, including wages, compensation of a proprietor or a partner in a partnership as determined under rules adopted by the department, benefits, supplies, and computer expenses, directly incurred in qualified research and development by a person claiming the credit provided in this section. The term does not include amounts paid to a person other than a public educational or research institution to conduct qualified research and development. Nor does the term include capital costs and overhead, such as expenses for land, structures, or depreciable property.

     (c) "Qualified research and development" shall have the same meaning as in RCW 82.63.010.

     (d) "Research and development spending" means qualified research and development expenditures plus eighty percent of amounts paid to a person other than a public educational or research institution to conduct qualified research and development.

     (e) "Taxable amount" means the taxable amount subject to the tax imposed in this chapter required to be reported on the person's combined excise tax returns for the calendar year for which the credit is claimed, less any taxable amount for which a credit is allowed under RCW 82.04.440.

     (8) This section expires January 1, 2015.

[2010 c 114 § 114; 2005 c 514 § 1003; 2004 c 2 § 2; 2000 c 103 § 7; 1997 c 7 § 4; 1994 sp.s. c 5 § 2.]

Notes: Application -- Finding -- Intent -- 2010 c 114: See notes following RCW 82.32.585.

Retroactive application -- 2005 c 514 § 1003: "Section 1003 of this act applies retroactively to June 10, 2004." [2005 c 514 § 1311.]

Interest and penalties from additional tax under section 1003(9)(a), chapter 514, Laws of 2005 -- 2005 c 514: "(1) A person who owes additional tax as a result of section 1003(9)(a), chapter 514, Laws of 2005 is liable for interest, but not penalties as provided in RCW 82.32.090 (1) and (2), if the entire additional tax liability is paid in full to the department of revenue before January 1, 2006. Interest shall be assessed at the rate provided for delinquent excise taxes under chapter 82.32 RCW, retroactively to the date the credit was claimed, and shall accrue until the additional tax is repaid.

     (2) Persons who fail to repay the full amount of additional tax owed as a result of section 1003(9)(a), chapter 514, Laws of 2005 before January 1, 2006, are subject to all applicable penalties and interest as provided in chapter 82.32 RCW on the additional tax owing after December 31, 2005.

     (3) This section expires December 31, 2010." [2005 c 514 § 1004.]

Effective date -- 2005 c 514: See note following RCW 82.04.4272.

Part headings not law -- Severability -- 2005 c 514: See notes following RCW 82.12.808.

Savings -- Effective date -- 1997 c 7: See notes following RCW 82.04.255.

Findings -- Effective date -- 1994 sp.s. c 5: See RCW 82.63.005 and 82.63.900.

Additional reporting requirements: RCW 82.32.590 and 82.32.600.