Forest ProductsTax Credit Sourcebook

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.

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