New Jersey Research and Development Tax Credit

Program overview

New Jersey computes its research credit largely by reference to federal Section 41 as it applied before certain federal amendments, and the state made the credit permanent with no expiration. The state's Technology Business Tax Certificate Transfer Program is the standout feature: qualifying emerging technology and biotechnology companies may sell unused research credits and net operating losses to unrelated New Jersey taxpayers, converting paper credits into working capital. The program is administered by the New Jersey Economic Development Authority under an annual pool.

Eligibility

Corporations subject to New Jersey corporation business tax with qualified research expenses in New Jersey. Credit sales require NJEDA approval and technology or biotechnology business status.

Benefits

Non-refundable credit against corporation business tax; qualifying companies may sell unused credits for approximately 80 cents on the dollar.

New Jersey IDR questions

What an examiner is likely to ask about this credit. S1–S7 apply to every state claim; the rest come from this program's own rules.

1. S1Confirm the research was physically performed within New Jersey.
2. S2Provide the New Jersey qualified research expense calculation and base amount.
3. S3Reconcile New Jersey expenses to the federal Form 6765.
4. S4Show how wages and supplies were apportioned between New Jersey and other locations.
5. S5Provide the New Jersey return and credit schedule for each year claimed.
6. S6Show the carryforward schedule for unused New Jersey credits.
7. S7Confirm the entity claiming the credit is the entity subject to New Jersey tax.
8. NJ-1Document any New Jersey credits transferred or sold, with the approval and the buyer.

Draft questions for illustration, reviewed by a specialist before any engagement.