Arkansas · research and development · AR-RD-003
AR-RD-003
Publication revised September 24, 2026. Sourcebook page 44.
Credit amount / calculation
Up to 33% of qualifying research expenditures; certification required and transferability may be available.
Business fit and eligible activity
Enhanced research credit for qualifying targeted businesses. Qualified research activity. Ordinary production, routine quality control and an equipment purchase alone do not qualify.
Eligibility and practical use
Eligible research can take place at a wood-products business. The credit applies to qualifying research expenses, not the purchase price of production equipment. Obtain approval for the research project and document the work and eligible costs.
Illustrative business benefit
A hardwood mill spends $320,000 on a documented project to improve recovery from low-grade logs using scanner changes, controlled test runs, software adjustments, and revised sawing patterns. Assume $200,000 is ultimately treated as the relevant qualified or excess research base. At 33%, the state credit would be about $66,000 before program caps and tax-liability limits. The company would need records showing the uncertainty, alternatives tested, people involved, and results - not simply a year-end estimate of 'engineering time.' Targeted Business Research and Development Credit
Timing / first action
Seek approval before signing a purchase order, contract, lease or other binding commitment. Confirm the exact point at which a purchase order, contract, lease, or other binding commitment would make the project ineligible.
Official sources
Related programs
Advantage Arkansas Income Tax Credit
Credit based on new qualifying payroll at the applicable
Job-creation credit for qualifying businesses, including manufacturers, with thresholds varying by location.
Apprenticeship Tax Credit
Per-apprentice credit subject to certification
Registered apprenticeship can create a modest credit for forest-products employers.
ArkPlus Income Tax Credit
Generally
Large qualifying manufacturing expansions can receive a credit based on qualified investment after a financial-incentive agreement.
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.