Rhode Island Research and Development Credit

At a glance

• Jurisdiction: Rhode Island (RI)
• Credit name: Research and Development Expense Credit (R.I. Gen. Laws §44-32-3)
• Administering agency: Rhode Island Division of Taxation
• Rate(s) and base: Applied to Rhode Island qualified research expenses (as defined in IRC §41, for research done in Rhode Island) above base period research expenses. The rate is 22.5% for the first $25,000 of credit (about the first $111,111 of excess QREs) and 16.9% for credit above $25,000.
• Refundable? No.
• Transferable? No.
• Carryforward: 15 years for credits from tax years beginning on or after January 1, 2026. Credits from earlier tax years keep the 7-year carryforward.
• Annual cap / proration: No statewide cap. The credit cannot reduce Rhode Island tax by more than 50% in any year. For corporations, it cannot reduce tax below the minimum tax ($400).
• Pre-approval / application and deadline: None. Claim the credit on the annual return.
• Forms: Form RI-7695E (Research and Development Expense Credit), attached to the RI-1120C, RI-1040 or pass-through return.
• Sunset / recent changes: No sunset. The FY 2027 budget (2026-H 7127 Sub A) did not change the credit but permanently decoupled Rhode Island from federal §174A research expensing for tax years beginning on or after January 1, 2026. The FY 2026 budget (P.L. 2025, ch. 278, art. 5) extended the carryforward to 15 years. It also eliminated the separate Research and Development Property Credit (§44-32-2) and the elective deduction for research and development facilities (§44-32-1) for tax years beginning on or after January 1, 2026.

What it is

Rhode Island gives an incremental credit for research done in the state. The credit rate is higher on the first $25,000 of credit. Starting in tax year 2026, the expense credit is Rhode Island's only research incentive. The R&D property credit and the facilities deduction ended after tax year 2025, although carryforwards of those earlier benefits can still be used.

Who can claim it

• Corporations (business corporation tax) and individuals, including owners of pass-through entities, with QREs for research done in Rhode Island.
• QREs and base period research expenses follow IRC §41 definitions but count only expenses incurred in Rhode Island.

How it is calculated

1. Determine current-year Rhode Island QREs and Rhode Island base period research expenses under §41.
2. Excess QREs = current QREs minus the base.
3. Credit = 22.5% of excess QREs until the credit reaches $25,000, plus 16.9% of the remaining excess.
4. Limit the credit used in the year to 50% of Rhode Island tax. Corporations cannot go below the minimum tax.
5. Carry the unused balance forward:
   • 15 years for tax years beginning in 2026 or later
   • 7 years for earlier credits

How to claim it

• Complete Form RI-7695E and attach it to the return.
• Keep §41 workpapers limited to Rhode Island activity, and keep a carryforward schedule by origin year.
• Carryforwards of the repealed R&D property credit from tax years ending on or before December 31, 2025 are still claimed on the applicable Division of Taxation form.

Recent changes

• P.L. 2025, ch. 278, art. 5 (FY 2026 budget), effective January 1, 2026:
  • extends the R&D expense credit carryforward from 7 to 15 years, starting with tax year 2026
  • ends the R&D property credit (§44-32-2) and the R&D facilities elective deduction (§44-32-1) for tax years beginning on or after January 1, 2026; carryforwards of benefits allowed for tax years ending on or before December 31, 2025 remain usable
• 2026 session (FY 2027 budget, 2026-H 7127 Sub A, as amended, art. 6): no change to §44-32-3. The budget permanently decouples Rhode Island from federal §174A expensing of domestic research and experimental expenditures for tax years beginning on or after January 1, 2026, so those costs continue to be amortized over five years for Rhode Island purposes. This affects the deduction for research costs, not the credit.

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 Rhode Island and other locations, how Rhode Island amounts reconcile to federal Form 6765, the Rhode Island credit and carryforward schedule for each year claimed, and whether the claiming entity is the one subject to Rhode Island tax.

• How were Rhode Island QREs and base period expenses separated from other states?
• How was the base computed, and are the prior-year Rhode Island figures documented?
• Was the 50% of tax limit applied, and for corporations, the minimum tax?
• Does the carryforward schedule apply 7 years to pre-2026 credits and 15 years to credits from 2026 onward?
• Were any R&D property credits claimed for property placed in service in tax years beginning in 2026 or later?

Common weak spots

• Applying the 15-year carryforward to credits from before 2026.
• Claiming the repealed property credit for 2026 or later years.
• Base period expenses not limited to Rhode Island.
• Missing Form RI-7695E.

Next steps

• Run a mock audit for Rhode Island
• Official source: Rhode Island General Laws § 44-32-3 (opens in a new tab)
• Run the eligibility checker
• Book a scoping call with Swanson Reed (opens Swanson Reed's booking calendar in a new tab)
• Contact us: +1 (469) 206-4335 or hello@creditarmor.ai

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.