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2021 Additional Credit for Increased Research                                                                         Arizona Form 
Activities          for Basic Research Payments                                                                           346 
                                                                                   Arizona Board of Regents, for research completed by the 
CONTACTS             FOR        FURTHER     INFORMATION
                                                                                   same university. 
REGARDING            THE       ADDITIONAL   CREDIT         FOR
INCREASED  RESEARCH ACTIVITIES FOR BASIC                                     o     The terms  “basic research payments” and  “qualified 
                                                                                   organization base period amount” have the same meanings 
RESEARCH         PAYMENTS                                                          prescribed by IRC § 41(e), without regard to whether the 
Arizona Commerce Authority                                                         taxpayer is, or is not, a corporation. 
Website: www.azcommerce.com                                                  o     The amount of the credit is based on the federal regular 
Program  Manager                     (602) 845-1200                                credit  computation  method for basic research payments.  
                                                                                   Taxpayers cannot use the  federal alternative credit 
Arizona    Department of Revenue  
                                                                                   computation method.  The allowable current taxable year 
Tax forms and instructions    Information and assistance 
                                                                                   credit is 10% of the excess, if any, of the basic research 
Website: www.azdor.gov 
                                                                                   payments  over the  qualified organization base  period 
Taxpayer assistance                         (602) 255-3381 
                                                                                   amount for the taxable year. 
From  area codes 520 and 928, toll-free     (800) 352-4090                   o     If two or more taxpayers, including shareholders of an S 
                                                                                   Corporation  and partners in a  partnership, share in the 
                    General Instructions                                           eligible expenses, each taxpayer is eligible to receive a 
Arizona     Revised     Statutes  §§ 43-1074.01(A)(1)(c)      and                  proportionate share of the credit. 
43-1168(A)(1)(d)  provide an  additional  income tax credit for              o     The termination provisions of IRC § 41 do not apply. 
increased research activities for basic research payments made to a        • If the current taxable  year's credit exceeds the taxpayer’s tax 
                                                                             liability for the taxable year, the taxpayer may carry forward the 
university under the jurisdiction of the Arizona Board of Regents.  
                                                                             unused credit to the next five consecutive taxable years. 
You may be eligible for this credit if you made cash payments in 
                                                                           • This credit is not refundable. 
excess of your base period amount to a qualified Arizona university         
for  research conducted in Arizona.                                        CORPORATE  TAXPAYERS:    If two or more members of  a unitary 
This credit is available to:                                               group, or an Arizona affiliated group incur qualifying basic research 
••  Individuals,                                                           payments, the individual members of the group are not considered 
••   Corporations,                                                         separate taxpayers. When  a combined return,  or a  consolidated 
••   Exempt organizations  with unrelated business taxable income          return is filed, the unitary group, or the Arizona affiliated group is 
    (UBTI),                                                                considered a single taxpayer. 
                                                                            
•    S Corporations using this credit to offset tax incurred at the 
    corporate level.                                                                       Specific Instructions 
                                                                            
••  S Corporations or partnerships may pass the credit through to their    Complete the name and taxpayer identification number (TIN) section 
    shareholders or partners.                                              at the top of the form. Indicate the period covered by the taxable year. 
NOTE:    For an exempt organization to claim this credit against its       Include the completed form with the tax return. 
 UBTI, the credit must result from the activities generating. UBTI         NOTE: 
                                                                           • All returns, statements, or other documents  filed  with the 
                    CLAIMING THE CREDIT                                      department  must  have the taxpayer’s  Employer Identification 
To claim this credit, the taxpayer must first apply for certification from   Number (EIN) or TIN indicated on them. 
the Arizona Commerce Authority (ACA) that the taxpayer’s basic             • Taxpayers who fail to include their EIN or TIN may be subject to 
research payments meet the requirements estabished by statute.  Once         a penalty. 
the taxpayer receives certification from the ACA, the taxpayer then 
applies  to  the  Arizona  Department  of  Revenue  (Revenue)  for         NOTE – To claim this credit: 
determination of the amount of the credit the taxpayer is eligible to      • Individual taxpayers that did not  make the Small Business 
                                                                             Income election, complete this credit form and Arizona Form 
claim. 
                                                                             301,  Nonrefundable Individual Tax Credits and Recapture.  
     IMPORTANT INFORMATION/CREDIT SUMMARY                                    Include both completed forms with your Individual Income Tax 
•    The credit is limited to $10 million in total credits in a calendar     Return, (Form 140, 140PY, 140NR, or 140X). 
     year.                                                                 •  Individual taxpayers that made the Small Business Income 
•    This credit is in addition to the credit for increased research         election, complete this credit form and Arizona Form 301-SBI, 
     activities:                                                             Nonrefundable Individual Tax Credits and Recapture for Form 
     o   Claimed by corporations on Arizona Form 308;                        140-SBI, 140PY-SBI, 140NR-SBI and 140X-SBI.  Include both 
     o   Claimed by individuals on Arizona Form 308-I.                       completed forms  with your  SBI  Tax Return  (Form 140-SBI, 
•    This tax credit is allowed in an amount computed pursuant to            140PY-SBI, 140NR-SBI, or 140X-SBI). 
     Internal Revenue Code (IRC) § 41(e), except for:                      • C Corporations,  S Corporations claiming this credit at the 
     o   Only basic research payments  [defined in IRC §                     corporate level, and exempt organizations with UBTI, complete 
         41(e))]which are made to a university under the jurisdiction        this credit form and Arizona Form 300, Nonrefundable 
         of the Arizona Board of Regents are included.                       Corporate Tax Credits and Recapture.         Include both completed 
     o   The taxpayer must make basic research payments during               forms with your tax return. 
         the taxable year to a university under the jurisdiction of the

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Arizona Form 346

• S Corporations electing to pass this credit through to its Portion Passed Through From Partnerships or S Corporations
shareholders, complete this credit form. Also complete Form
NOTE: If you received a pass through of this credit from more than
346-S for each shareholder of the S Corporation. Provide each
one partnership and/or S Corporation, total the amounts received
shareholder a copy of his or her completed Form 346-S. Include
from all Form(s) 346-P and/or Form(s) 346-S on a separate schedule
Form 346 and one copy of each completed Form 346-S with
and include it with this form. Include a copy of each Form 346-P
your tax return.
and/or Form 346-S as well as copies of each Letter of Approval you
• Partnerships, complete this credit form. Also, complete Form
received with your return.
346-P for each partner of the partnership. Provide each partner
a copy of his or her completed Form 346-P. Include Form 346 Line 10
and one copy of each completed Form 346-P with your tax Enter the total amount of this credit passed through from partnerships
return. on Form 346-P, Part 2, line 4
Part 1 - Qualification for Additional Credit Line 11
Line 1 Enter the total amount of this credit passed through from S
If you received a letter of approval from Revenue for this credit, checkCorporations on Form 346-S, Part 2, line 4.
the “Yes” box. If you did not, check the “No” box and skip line 2. Part 3 – Total Current Year’s Credit
Line 2 Line 12
If you checked the "Yes" box on line 1, enter the credit amount shown
Add the amounts on lines 9 through 11. Enter the total. This is your
on your Letter of Approval from Revenue for taxable year 2021. total current year additional credit for increased research activities for
Line 3 basic research payments.
If you received a pass through of this credit from a partnership or S
Corporation on Form 346-P or Form 346-S, check the “Yes” box andPart 4 - Partnerships
include a copy of each form you received. If you did not, check the A partnership claiming this credit must pass it through to its partners.
"No" box. Skip to the instructions for completing Form 346-P on page 5.
Line 4 • Complete Form 346-P for each partner.
If you answered “Yes” to the question on line 1 and/or the question on • Provide a completed copy of Form 346-P to each partner.
line 3, go to Part 2. Otherwise, go to line 5. • Provide a copy of the Certificate of Renewable Energy
Production Tax Credit received from Commerce to each partner.
Line 5
• Include a copy of each completed Form 346-P with your tax
If you answered “No” to the question on line 1 and to the question on
return.
line 3, STOP! YOU ARE NOT ELIGIBLE TO CLAIM THIS
• Keep a copy of each completed Form 346-P for your records.
CREDIT. • Do not complete the remainder of this form.
Part 2 - Current Taxable Year's Credit Each partner is entitled to only a pro rata share of each credit based on
Calculation the partner’s ownership interest in the partnership. The total of each
credit allowed to all partners may not exceed the amount that would
Portion Earned by the Taxpayer have been allowed for a sole owner.
Line 6 NOTE: Trusts and estates that are partners in a partnership are not
Enter the basic research payments paid to qualified organizations. eligible to claim this credit. However, the share of a partnership
Taxpayers may be eligible for an additional credit for basic research if owned by a grantor trust that is disregarded for federal income tax
their payments made in cash to a qualified university under the purposes is treated as owned by the grantor. The grantor may claim
jurisdiction of the Arizona Board of Regents (pursuant to a written his or her share of the credit.
contract) for research conducted in Arizona exceeds their base period
amount. Part 5 - S Corporation Credit Election and
Line 7 Shareholder’s Share of the Credit
Enter the qualified organization base period amount as defined by Lines 13, 13a, & 13b – S Corporation Credit Election
IRC § 41(e) that is based on qualified basic research payments. The S Corporation must complete line 13 and line 13a or line 13b.
NOTE: The amount on line 7 (but not more than the amount on line The S Corporation must make an irrevocable election either to claim
6), although not eligible for the additional basic research credit, may the current taxable year credit at the corporate level or to pass the
be eligible for the basic research credit for corporations on Form 308 credit through to its shareholders. The S Corporation election is made
and may be eligible to be treated as contract research expenses on by:
Form 308 or Form 308-I. • Entering the date the S Corporation taxable year ends.
•
Line 8 Checking the box on line 13a electing to claim the current
taxable year credit at the corporate level; or,
If line 6 is greater than line 7, subtract line 7 from line 6 and enter the
• Checking the box on line 13b electing to pass the current taxable
difference. If line 7 is greater than line 6, enter “0”. year credit through to its shareholders.
Line 9 • The election statement must be signed by an officer of the S
Enter the lesser of 10% of line 8 or the amount on line 2. Corporation who is also a signatory to Form 120S.

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Arizona Form 346

If the S Corporation elects to claim the credit at the corporate level, Individuals, C Corporations, S Corporations that elected to claim the
continue to Part 6. credit at the corporate level, and exempt organizations with UBTI -
If the S Corporation elects to pass this credit through to its enter the amount from Part 3, line 12.
shareholders, proceed to the instructions for completing Form 346-S Partnershipsenter- “0”.
on page 5.
S Corporations that elected to pass the current year credit through to
If passing this credit through to the shareholders:
its shareholders - enter “0”.
• Complete Form 346-S for each shareholder.
• Provide a copy of completed Form 346-S to each shareholder. Individuals that did not make the Small Business Income election:
Enter this amount on Form 301, Part 1, line 22, column (a).
• Include a copy of each completed Form 346-S with your tax
return. Individuals that made the Small Business election: Enter this amount
on Form 301-SBI, Part 1, line 17, column (a).
• Keep a copy of each completed Form 346-S for your records.
C Corporations, S Corporations that elected to claim this credit at the
Each S Corporation shareholder is entitled to only a pro rata share of
corporate level, and exempt organizations with UBTI : Enter this
pass-through credit based on ownership interest in the S Corporation.
amount on Form 300, Part 1, line 15, column (a).
The total of the credit allowed to all shareholders may not exceed the
amount that would have been allowed for a sole owner. Line 21
NOTE: Trusts and estates that are shareholders of an S Corporation Individuals, C Corporations, S Corporations that elected to claim the
are not eligible to claim these credits. However, the share of an S credit at the corporate level, and exempt organizations with UBTI -
Corporation owned by a grantor trust that is disregarded for federal enter the credit carryover amount from Part 6, line 19, column (d).
income tax purposes is treated as owned by the grantor. The grantor Individuals that did not make the Small Business Income election:
may claim his or her share of these credits. Enter this amount on Form 301, Part 1, line 22, column (b).
Individuals that made the Small Business Income election: Enter this
Part 6 – Available Credit Carryover
amount on Form 301-SBI, Part 1, line 17, column (b).
S Corporations, if this credit was claimed at the corporate level in a
C Corporations, S Corporations that elected to claim this credit at the
prior taxable year and there is a carryover amount available,
corporate level, and exempt organizations with UBTII: Enter this
complete Part 6. amount on Form 300, Part 1, line 15, column (b).
Lines 14 through 18 Line 22
The unused additional credit for increased research activities for basic
research payments may be carried forward to the next five consecutive Individuals, C Corporations, S Corporations that elected to claim the
credit at the corporate level, and exempt organizations with UBTI -
taxable years.
add line 20 and line 21. Enter the total. This is the total available
Use Part 6 to calculate the available credit carryover. Complete lines additional credit for increased research activities for basic research
14 through 18 if you claimed the additional credit on a prior year payments that may be applied to the current taxable year's tax liability.
return and your credit was more than your tax.
Individuals that did not make the Small Business Income election:
If you claimed this credit on a prior year income tax return and your
Enter this amount on Form 301, Part 1, line 22, column (c).
credit was more than your tax, enter this information in the columns
provided for lines 14 through 18: Individuals that made the Small Business Income election: Enter this
(a) Taxable year from which you are carrying over the additional amount on Form 301-SBI, Part 1, line 17, column (c).
credit. C Corporations, S Corporations that elected to claim this credit at the
(b) The amount of the credit originally computed for that taxable corporate level, and exempt organizations with UBTI- enter the total
year. available credit on Arizona Form 300, Part 1, line 15, column (c).
(c) The amount of the credit from that taxable year you have already
used.
(d) Subtract the amount in column (c) from the amount in column
(b) and enter the difference.
Line 19
Add the amounts entered on lines 14 through 18 in column (d). Enter
the total. This is the available credit carryover available for the current
taxable year.
Part 7 – Total Additional Available Credit for
Increased Research Activities for Basic Research
Payments
Complete this section to compute the total available additional credit
for the taxable year. The total available credit is the sum of the credit
for the current taxable year and the available credit carryover(s).
Line 20
Enter the additional credit for the current taxable year from Part 3,
line 12.

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Arizona Form 346

Form 346-P, Distribution to Partners of Form 346-S, S Corporation Distribution
a Partnership to Shareholders of an S Corporation

Enter the taxable year from which this credit is being passed Enter the taxable year from which this credit is being passed
through to your shareholders.
through to your partners.
Complete a separate Form 346-P for each partner of the Complete a separate Form 346-S for each shareholder of the
partnership, except for trust or estate partners. However, a S Corporation, except for trust or estate partners. However,
partnership ownership share that is owned by a grantor trust an S Corporation ownership share that is owned by a grantor
that is disregarded for federal income tax purposes is treated trust that is disregarded for federal income tax purposes is
as owned by the grantor. The grantor may claim his or her treated as owned by the grantor. The grantor may claim his
or her share of the credit.
share of the credit.
The partnership must furnish each partner with their The S Corporation must furnish each shareholder with his or
completed copy of Form 346-P, including additional her completed copy of Form 346-S, including additional
schedules as needed. schedules as needed.

Part 1 - S Corporation and Shareholder
Part 1 – Partnership and Partner Information
Line 1 Information
Enter the partnership name and EIN in the spaces provided. Line 1
Enter the S Corporation name and EIN in the spaces
Line 2
provided.
Enter the partner’s name, EIN, TIN, or Social Security
Number (SSN), and proportionate share of the credit in the Line 2
spaces provided. Enter the shareholder’s name, EIN, TIN, or SSN, and
proportionate share of the credit in the spaces provided.

Part 2 – Distribution of the Credit
Line 3 Part 2 – Distribution of the Credit
Enter the total amount of the partnership’s credit for Line 3
increased research and development from Form 346, Part 3, Enter the total amount of the S Corporation’s credit for
line 12. increased research and development on Form 346, Part 3,
line 12.
Line 4
Multiply line 3 by the percentage reported on line 2, column Line 4
(c). Enter the result. This is the partner’s proportionate share Multiply line 3 by the percentage reported on line 2, column
of the credit. (c). Enter the result. This is the shareholder’s proportionate
share of the credit.
Each partner will use this form to complete his or her own
Form 346. The shareholder will use this form to complete his or her own
Form 346.

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