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State program

New Jersey Research and Development Credit

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  • Offset only
  • Transferable

Last reviewed November 2026

At a glance

  • Jurisdiction: New Jersey (NJ)
  • Credit name: Corporation Business Tax Research and Development Credit (N.J.S.A. 54:10A-5.24)
  • Administering agency: New Jersey Division of Taxation. The New Jersey Economic Development Authority (NJEDA) runs the Technology Business Tax Certificate Transfer (NOL) Program, through which eligible companies can sell credits.
  • Rate(s) and base: 10% of New Jersey QREs above the base. Use the same method as the federal return:
    • regular method: base = fixed-base percentage (maximum 16%) × average gross receipts, with a minimum of 50% of QREs; or
    • alternative simplified method: base = one-sixth of the prior three years' QREs.
    • Plus 10% of New Jersey basic research payments above the base period amount, and 10% of qualifying energy consortia amounts.
  • Refundable? No
  • Transferable? Only through the NJEDA NOL Program. Approved technology and biotechnology businesses may sell unused credits (and NOLs) for at least 80% of their value, with NJEDA approval. The credit cannot otherwise be transferred, and S corporations cannot pass it through to shareholders.
  • Carryforward: 7 years. Credits for research in advanced computing, advanced materials, biotechnology, electronic device technology, environmental technology or medical device technology carry forward 15 years.
  • Annual cap / proration:
    • The credit itself has no cap, but it cannot reduce tax below the statutory minimum tax or be used against the Corporate Transit Fee.
    • NOL Program sales: $75 million available each year, of which $15 million is set aside for businesses in Innovation or Opportunity Zones and for certified minority- or woman-owned businesses. There is a $20 million lifetime limit per business.
  • Pre-approval / application and deadline:
    • Claiming the credit: no pre-approval. Claim it on Form 306 with the return. File Form 306 for the year the credit is earned even if you do not use it that year.
    • Selling credits: apply to NJEDA during the annual window. For 2026, it ran May 1 to June 30, 2026, and sales must close by April 15, 2027. The 2027 cycle is expected to open in early May 2027.
  • Forms:
    • Form 306 (Research and Development Tax Credit), filed with CBT-100, CBT-100S or CBT-100U
    • Partnerships complete Parts I–V and attach them to NJ-CBT-1065; corporate partners receive their share on Schedule NJK-1
    • NJEDA NOL Program application, for sales
  • Sunset / recent changes: No sunset.
    • P.L. 2026, c. 21 (A5322) temporarily caps Corporation Business Tax (CBT) NOL deductions at $1 million. NJEDA says the cap does not affect the NOL Transfer Program.
    • S3560 (introduced February 19, 2026) would raise the QRE rate to 15% for targeted industries and the basic research rate to 15%, and would allow refunds. It has not been enacted.

What it is

New Jersey offers a 10% incremental research credit against the Corporation Business Tax for research performed in New Jersey. New Jersey follows IRC §41 as currently in effect for privilege periods beginning on or after January 1, 2018, including the alternative simplified method. The credit has no expiration date, and carryforwards are extended for certain technology sectors. Early-stage, unprofitable technology and biotechnology companies can turn unused credits into cash through the NJEDA NOL Program.

Who can claim it

  • Corporations subject to the Corporation Business Tax with QREs for research performed in New Jersey.
  • S corporations may use the credit only against their own CBT liability and cannot pass it to shareholders.
  • Partnerships compute the credit, but only their corporate partners can use it.
  • Special expense rules:
    • Qualified small businesses may include expenses used for the federal payroll offset (IRC §3111(f)) if those expenses are not used for another New Jersey credit (privilege periods beginning on or after January 1, 2020).
    • Registered cannabis licensees may include expenses disallowed federally (periods ending on or after July 31, 2023).
  • To sell credits through the NOL Program, a company must:
    • be a technology or biotechnology business;
    • own or license protected proprietary intellectual property;
    • have no positive net operating income in its last two full-year GAAP statements;
    • have fewer than 225 U.S. employees; and
    • have at least 1, 5 or 10 New Jersey full-time employees, depending on how long ago it was formed.

How it is calculated

Form 306 part Component
Part I Qualifying amounts paid to New Jersey energy research consortia
Part II Basic research payments less the base period amount
Part III (regular) New Jersey QREs less the greater of (fixed-base % × average gross receipts) or 50% of QREs
Part IV (ASC) New Jersey QREs less one-sixth of the prior three years' QREs
Part V (Part I + Part II + Part III or IV) × 10%, plus carryforwards and NJK-1 credits
Parts VI–VII Limitation: tax liability less minimum tax and other credits, including combined-group rules

How to claim it

  1. Complete Form 306 using the same method (regular or ASC) as the federal return. Attach a copy of the federal Form 6765.
  2. File Form 306 with the CBT-100, CBT-100S or CBT-100U for the year the credit is earned.
  3. On a combined return, the member that earned the credit completes the form, and Part VII applies.
  4. Add back New Jersey–deducted research expenses on Schedule A where required.
  5. Credits purchased through the NOL Program are also claimed on Form 306, with the transfer certificate attached.
  6. To sell credits:
    • apply to NJEDA in the annual window (May–June);
    • pay the $1,000 application fee and, for awards over $100,000, an approval fee of 1% of the award, capped at $20,000;
    • close the sale by the following April 15.

Recent changes

  • P.L. 2026, c. 21 (A5322), signed June 30, 2026:
    • caps CBT NOL deductions at $1 million for privilege periods ending on or after July 31, 2026 and before July 31, 2030;
    • does not change the R&D credit, but may increase CBT liability against which credits are used; and
    • NJEDA states it does not affect the NOL Transfer Program.
  • NJEDA NOL Program 2026 cycle: applications May 1–June 30, 2026; closings by April 15, 2027.
  • Pending, not enacted: S3560, introduced February 19, 2026 and still in the Senate Economic Growth Committee, would raise the QRE credit to 15% for targeted industries and the basic research credit to 15%, and would allow a refund election.

Likely examiner questions

These questions illustrate what an examiner may ask about this credit. They are drafts for illustration and should be reviewed by a specialist before use. Most state claims also face standard questions: where the research was physically performed, how wages, supplies and contract research were apportioned between New Jersey and other locations, how New Jersey amounts reconcile to federal Form 6765, the New Jersey credit and carryforward schedule for each year claimed, and whether the claiming entity is the one subject to New Jersey tax.

  1. Provide Form 306 and federal Form 6765, and show that the same calculation method was used for both.
  2. Show that the research was performed in New Jersey, and reconcile New Jersey QREs to payroll and the general ledger.
  3. For the regular method, provide the fixed-base percentage and gross receipts history. For the ASC, provide the three prior years' New Jersey QREs.
  4. For a 15-year carryforward, show that the research falls in one of the listed technology fields.
  5. Show that the credit did not reduce tax below the minimum tax and was not used against the Corporate Transit Fee.
  6. Provide the carryforward schedule by year of origin, showing amounts used, sold or expired.
  7. For sold or purchased credits, provide the NJEDA approval and transfer certificate, and show that the seller's credits were removed from its carryforward.

Common weak spots

  • Using a different method on Form 306 than on the federal return, or electing the ASC on an amended return after a credit was already claimed for that year.
  • Not filing Form 306 in the year the credit is earned.
  • Claiming a 15-year carryforward without evidence that the research is in a qualifying industry.
  • S corporation credits passed through to shareholders (not allowed).
  • Credits sold through the NOL Program but not removed from the seller's carryforward.
  • Out-of-state research included in New Jersey QREs.

Next steps

Important

This page is general information, not tax advice. Rules change; confirm current requirements with the state revenue agency or a qualified tax professional. creditARMOR is a free service. Passing this mock audit does not guarantee that your claim will pass an IRS or state examination. If needed, Swanson Reed can assist you with representation before the IRS. creditARMOR and TaxTrex are products of Swanson Reed.

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