Arizona · research and development · AZ-RD-001
Research and Development Tax Credit
Publication revised September 24, 2026. Sourcebook page 33.
Credit amount / calculation
Through 2030, 24% of the first $2.5 million in the qualifying credit base and 15% above that tier; use the applicable incremental or alternative calculation.
Business fit and eligible activity
Wood-products manufacturers conducting qualified Arizona research and development can earn a state credit. Qualified research activity. Ordinary production, routine quality control and an equipment purchase alone do not qualify.
Eligibility and practical use
A wood-products company can miss this credit by assuming that "research" means white coats and laboratories. In practice, qualifying work can arise in process engineering, product development, automation, drying, recovery, and software. A logging company has a narrower path, but equipment-control, software, or process-development work can sometimes qualify if it satisfies the same technical tests.
Illustrative business benefit
Assume the properly calculated qualifying incremental base is $200,000. At 24%, the credit is $48,000 before use limitations. This is not 24% of all spending labeled engineering.
Timing / first action
Tax-year claim: document the eligible expense, hire or placed-in-service date and meet any separate certification deadline. Identify the technical uncertainty and start contemporaneous project records before trying to calculate the credit.
Official sources
- azleg.gov — Arizona 2026 Chapter 140 (HB 4168) (azleg.gov)
- Arizona Commerce Authority — Arizona Legislature (azcommerce.com)
Related programs
Qualified Facility Income Tax Credit
Lesser of
A qualifying manufacturing facility can receive a substantial credit tied to capital investment and jobs/wages after Arizona Commerce Authority approval.
Clean Electricity Investment Credit (Internal Revenue Code §48E)
Generally
Potentially relevant when a forest-products facility owns qualifying zero-emission generation or energy-storage property.
Credit for Increasing Research Activities (Internal Revenue Code §41)
Regular research-credit method
A sawmill, secondary manufacturer or biomass business can qualify when it performs genuine technological experimentation to improve a product or process.
Rehabilitation Credit (Internal Revenue Code §47)
Generally
A forest-products company rehabilitating a certified historic mill or industrial building for income-producing use may qualify.