Key insights
- Iowa businesses seeking R&D tax credits face a new certification requirement and a September 30, 2026, application deadline.
- Several states continue to update their R&D tax credit programs, including changes to refundability, eligibility, and application procedures.
- Credit caps, filing deadlines, and qualification standards vary by state, making early planning increasingly important.
Ready to explore new R&D tax credit opportunities?
Recent federal attention on research incentives has put research and development (R&D) tax credits back in the spotlight.
This year, Iowa moved to the front of the conversation by redesigning its R&D tax credit program and introducing a new certification process businesses must complete before claiming credits. The first certification deadline arrives September 30, 2026.
At the same time, other states continue to update their own incentives through expanded refundability, new filing procedures, and revised credit structures. Understanding these changes can help businesses navigate R&D tax credits and filing requirements, evaluate federal and state tax planning opportunities, and avoid missing important deadlines.
Iowa R&D tax credit: September 30 certification deadline
Iowa has redesigned its R&D tax credit program: For tax years beginning on or after January 1, 2026, companies must first be certified by the Iowa Economic Development Authority as a qualified business before they can apply for the R&D tax credit.
Why the new requirements matter
The initial certification application is due September 30, 2026. Missing this deadline could limit a company’s ability to access the Iowa R&D tax credit for the applicable certification period.
The updated program is more targeted than Iowa’s prior Research Activities Credit. Eligible businesses generally must be primarily engaged in advanced manufacturing, bioscience, insurance and finance, or technology and innovation, with research activities occurring in Iowa.
The process now includes two key steps:
- Qualified business certification through the Opportunity Iowa Portal
- An annual Iowa R&D tax credit application based on eligible Iowa research expenditures
Credits may be refundable, but they are not transferable. Available credits are subject to an annual statewide cap and may be allocated on a pro rata basis if approved applications exceed the available amount.
Key Iowa deadlines to know
- Certification application deadline: September 30, 2026
- Annual report deadline: January 31
- Tax credit application deadline: January 31
- Anticipated credit allocation determination: April 1
- Maximum allowable credit: up to 3.5% of eligible Iowa research expenditures
- Aggregate annual credit amount available: $40 million
Businesses with Iowa-based innovation activities should evaluate eligibility, gather required documentation, and begin the certification process well before the deadline.
Other state R&D tax credit changes
Arizona — Shift to random selection application process
- The Arizona R&D Refundable Credit now uses a random selection process for applications (previously first-come, first-served).
- Application window — Opens on the first business day of the year (January 2, 2026, for tax year 2025), with substantially complete entries accepted for the lottery system until midnight on that first business day. Partial or subsequent applications submitted after that date will be prioritized based on the time received, assuming there are still funds available.
- Eligibility — Companies must have fewer than 150 employees worldwide at year-end.
- Refundable credit amount — Up to $100,000 per taxpayer; $5 million total available statewide.
- Process — Requires a preliminary credit calculation, data collection, and officer signatures. Application fee applies and is non-refundable if not selected.
Practical takeaway
Identify eligibility and assemble documents early so you’re ready when the window opens.
California: New alternative credit calculation available
For tax years beginning on or after January 1, 2025, California taxpayers may elect an Alternative Simplified Credit based on qualified research conducted in the state.
The California calculation generally equals 3% of qualified research expenses exceeding 50% of the average from the prior three tax years. A reduced 1.3% rate applies when the taxpayer had no qualified research expenses in at least one of those years.
California also repealed its Alternative Incremental Credit. Taxpayers that previously used that method must choose either the regular credit or the new alternative calculation on a timely filed original return.
Practical takeaway
Compare both available methods before filing. The election can’t be changed on an amended return, and revoking it in a later year requires state consent.
Michigan — R&D credit reinstated
Michigan has reestablished its R&D credit beginning January 1, 2025 (inactive since 2012) for corporate income tax taxpayers.
- Large taxpayers (250+ employees) — 3% of the base qualified research expenses (QREs) and an additional 10% of the qualifying research expenses exceeding the base (maximum of $2 million/year)
- Small taxpayers (<250 employees) — Same 3% calculation of the base but with an additional 15% of the qualifying research expenditures that exceed the base (maximum of $250,000/year)
- Collaboration bonus — Additional 5% credit for work with Michigan research universities (maximum of $200,000/year)
- Statewide cap — $100 million ($75 million for large, $25 million for small taxpayers)
- Claim timing — The tentative claim for 2025 research expenses was due April 1, 2026. For later calendar years, tentative claims are due March 15 following the research year.
- Michigan may prorate awards if total approved claims exceed the applicable statewide allocations.
Practical takeaway
Build a timeline around the tentative‑claim deadline and consider academic partnerships for the additional 5%.
Minnesota — Partial refundability introduced
- House File 9 (HF 9) makes Minnesota’s Credit for Increasing Research Activities partially refundable.
- Refundability rates:
- 19.2% for tax years starting after December 31, 2024, and before January 1, 2026
- 25% for tax years starting after December 31, 2025, and before January 1, 2028
- Annual cap — There’s a statewide cumulative refund limit of $25 million per year beginning December 15, 2027, and each subsequent year thereafter. The Department of Revenue may adjust future rates if the refundability amount is projected to exceed $25 million.
- The underlying credit calculation remains the same: 10% on the first $2 million of qualifying expenses, 4% above that, with a 15‑year carryforward. Research must be conducted in Minnesota.
Practical takeaway
Refundability may sweeten the pot for startups not impacted by the gross-receipts thresholds. Larger organizations could still face hurdles finding benefits from a Minnesota credit.
Texas — Framework overhaul effective in 2026
Senate Bill 2206 restructures Texas incentives beginning January 1, 2026.
Key changes
- Eliminates the sales and use tax exemption for R&D equipment
- Consolidates incentives into a single, performance-based franchise tax credit
- Eligible expenses more closely match the federal credit qualifications
- Increases the base credit rate to 8.722% (from 5%); 10.903% for research with Texas higher education institutions
- For businesses without a three-year R&D history, standard rates are 4.361% (base) and 5.451% (enhanced)
- Credit capped at 50% of franchise tax due; unused credits can be carried forward for up to 20 tax periods
- Certain non-taxpaying entities may be eligible for a refund
Practical takeaway
Confirm that Texas expenses are included on federal Form 6765 and separately identify the portion tied to research conducted in Texas. Businesses that previously used the sales-tax exemption should review how the new franchise-tax credit affects their 2026 reporting.
Manufacturers refining processes, tech firms advancing software or hardware, and med‑tech companies iterating on devices or diagnostics can all benefit from monitoring these changes and aligning project tracking and filings accordingly.
How businesses can prepare for state R&D tax credit changes
- Map qualifying activities to state‑specific rules (research location, employee thresholds, collaboration bonuses)
- Assemble contemporaneous documentation: project descriptions, technical uncertainties, experimentation steps, and QRE support
- Run a preliminary calculation to gauge potential credits and to meet states requiring it at application
- Track deadlines and caps (e.g., Arizona’s single‑day window; Michigan’s tentative‑claim dates; Minnesota’s refundability cap)
- Coordinate purchases (Texas equipment timing in 2025) and collaboration plans (Michigan university bonus)
How CLA can help with R&D and business tax credits
CLA supports organizations of all sizes in identifying and capturing business tax credits that drive growth and innovation.
Our dedicated team of R&D professionals can help identify and document qualifying research activities to enhance your R&D tax credit potential. They’ll help you calculate qualifying R&D expenditures by identifying research projects, wage costs, and other research-related expenses.
With experience across industries and state lines, our team helps you meet deadlines and stay ahead of regulatory changes — so you can focus on what’s next for your business.