PDF document

- 1 -

New Jersey Corporation Business Tax
Research and Development Tax Credit
FORM 306 The previous version of this schedule is available on the Division of Taxation’s website (njtaxation.org)
2022 Do not recompute tax credits for prior
privilege periods or tax years on this form.
Name as Shown on Return Federal ID Number Unitary ID Number, if applicable
NU
Read the instructions before completing this form
Note: Amounts included in the calculation of the Research and Development Tax Credit are not permitted to be included in the calculation of the Recycling
Equipment Tax Credit, the Manufacturing Equipment and Employment Investment Tax Credit, the New Jobs Investment Tax Credit, or the Angel
Investor Tax Credit.
Attach copy of federal Form 6765 as filed with the IRS
Combined Return Filers
The taxpayer is included as a taxable member on a New Jersey combined return. See instructions.
Fill in oval if member is not sharing its credit with other members of the group.
Part I Credit Calculation for Amounts Paid or Incurred to Energy Consortia
1. Enter certain amounts paid or incurred to energy consortia ................................................................................... 1.
Part II Credit Calculation for Basic Research Payments
2. Enter the basic research payments paid or incurred to qualified organizations ..................................................... 2.
3. Enter the base period amount ............................................................................................................................... 3.
4. Subtract line 3 from line 2. If zero or less, enter zero ............................................................................................. 4.
For New Jersey purposes, you must use the same method that you used to calculate qualified research expense portion of your federal credit.
1. Did you calculate the qualified research expense portion of your federal credit using the regular credit method?
Yes. Complete Part III.
No. Continue to question 2.
2. Did you use the alternative simplified credit method to calculate your credit for federal purposes?
Yes. Complete Part IV (do not make any entries in Part III).
No. You must have used one of the two federal calculation methods in order to complete this form.
Part III Credit Calculation for Qualified Research Expenses
5. Wages for qualified services (do not include wages used to compute the Federal Jobs Credit) ............................. 5.
6. Cost of supplies ....................................................................................................................................................... 6.
7. Rental or lease costs of computers ......................................................................................................................... 7.
8. Enter the applicable percentage of contract research expenses (see instructions) ................................................ 8.
9. Total qualified research expenses – Add lines 5 through 8 ..................................................................................... 9.
10. Enter fixed-based percentage, but not more than 16% ........................................................................................... 10.
11. Enter average annual gross receipts ....................................................................................................................... 11.
12. Base amount – Multiply line 11 by line 10 ............................................................................................................... 12.
13. Subtract line 12 from line 9 ...................................................................................................................................... 13.
14. Enter 50% of line 9 .................................................................................................................................................. 14.
15. Enter the lesser of line 13 or 14. (Skip Part IV and continue with Part V) ............................................................... 15.
Part IV Credit Calculation for Qualified Research Expenses (Alternative Simplified Credit Method)
16. Wages for qualified services (do not include wages used to compute the Federal Jobs Credit) ............................. 16.
17. Cost of supplies ....................................................................................................................................................... 17.
18. Rental or lease costs of computers ......................................................................................................................... 18.
19. Enter the applicable percentage of contract research expenses (see instructions) ................................................ 19.
20. Total qualified research expenses. Add lines 16 through 19 ................................................................................... 20.
21. Enter your total qualified research expenses for the prior 3 privilege periods or tax years. If you had no qualified
research expenses in any one of those years, skip lines 22 and 23 and enter the amount from line 20 on line 24 21.
22. Divide line 21 by 6.0 ................................................................................................................................................ 22.
23. Subtract line 22 from line 20. If zero or less, enter zero. Include here and on line 24 ............................................ 23.
24. Enter amount from line 23 or if you skipped lines 22 and 23, enter amount from line 20 ....................................... 24.

- 2 -

Enlarge image

Name as Shown on Return Federal ID Number Unitary ID Number, if applicable
NU
Part V Total Research and Development Tax Credit

25a. Enter the amount from line 1 .................................................................................................................................. 25a.

25b. Enter the amount from line 4 .................................................................................................................................. 25b.

25c. Total – Add lines 25a and 25b ............................................................................................................................... 25c.

26. Enter either line 15 or line 24 (whichever method was used for federal purposes) ............................................... 26.

27. Add lines 25c and 26 ............................................................................................................................................. 27.

28. Multiply line 27 by 10% .......................................................................................................................................... 28.

29. Research and Development Tax Credit carried forward from prior year (do not recompute) ................................ 29.

30. Total credit available – Add lines 28 and 29 .......................................................................................................... 30.
Part VI Calculation of the Allowable Credit Amount and Carryover
(Combined return filers DO NOT complete Part VI. Continue with Part VII.)

31. Enter tax liability from page 1, line 2 of CBT-100, CBT-100S, or BFC-1 ................................................................ 31.

32. Enter the required minimum tax liability (see instructions) .................................................................................... 32.

33. Subtract line 32 from line 31 .................................................................................................................................. 33.
34. Other tax credits used by taxpayer on current year’s return (see instructions):
(a)
(b)
(c)
(d) .......................................... Total 34.

35. Subtract line 34 from line 33. If zero or less, enter zero ........................................................................................ 35.
36. Allowable credit for the current tax period. Enter the lesser of line 30 or line 35 here and on
Part I, Schedule A-3 of the CBT-100, CBT-100S, or BFC-1 .................................................................................. 36.
Note: Generally, this credit may be carried over for 7 years following the credit’s privilege period or tax year;
however, certain types of research qualify for a 15 year carryover. See instructions for more information.

37. Amount of credit carryover to following year’s return (subtract line 36 from line 30) ............................................. 37.

- 3 -

Enlarge image

Name as Shown on Return Federal ID Number Unitary ID Number, if applicable
NU
Part VII Calculation of Allowable Credit Amount and Carryover – Combined Return Filers ONLY
Section A – ALL Combined Return Filers

38. Enter the group tax liability from Schedule A, Part III, line 5, column (a) of Form CBT-100U ............................... 38.

39. Enter the aggregate minimum tax of combined group members (see instructions) ................................................... 39.

40. Subtract line 39 from line 38 .................................................................................................................................. 40.
41. Other tax credits used by this taxpayer on current year’s return (see instructions):
(a)
(b)
(c)
(d) .......................................... Total 41.

42. Subtract line 41 from line 40. If zero or less, enter zero ........................................................................................ 42.
43. Allowable credit for the current tax period. Enter the lesser of line 30 or line 42. If sharing, also enter in the
member’s column of Part I, Schedule A-3 of the CBT-100U ................................................................................. 43.
If SHARING credit, complete line 44.
If NOT sharing credit, skip line 44 and complete Section B.
44. Amount of credit carryover to following year’s return (subtract line 43 from line 30) ............................................. 44.
Section B – Combined Return Filers NOT Sharing Credit

45. a) Enter combined group tax liability from line 38 ....................................... 45a.
b) Divide line 45a by the combined group allocation factor from
Schedule J, line 9 .................................................................................... 45b.
c) Member’s share of combined group tax liability – Multiply line 45b by member’s allocation factor from
Schedule J, line 9 .................................................................................... 45c.

46. Required minimum tax liability ................................................................................................................................ 46. 2,000

47. Subtract line 46 from line 45c ................................................................................................................................. 47
48. Other tax credits used by taxpayer on current year’s return (see instructions):
(a)
(b)
(c)
(d) .......................................... Total 48.

49. Subtract line 48 from line 47. If zero or less, enter zero ......................................................................................... 49.
50. Allowable credit for the current tax period. Enter the lesser of line 43 or line 49 here and in the member’s
column of Part I, Schedule A-3 of the CBT-100U ................................................................................................... 50.

51. Amount of credit carryover to following year’s return (subtract line 50 from line 30) .............................................. 51.

- 4 -

Enlarge image

Instructions for Form 306
Research and Development Tax Credit

Items to Note Purpose of Form
• There have been major changes to the New Jersey R&D Credit, pursu- Use Form 306 to calculate and claim the credit for increasing the research
ant to section 6 of P.L. 2018, c. 48, amended by N.J.S.A. 54:10A-5.24 activities of a trade or business. Complete Parts I through VII (as applicable)
and pursuant to N.J.S.A. 54:10A-5.24(d), which was added as part of to compute the research credit. Parts VI and VII are used to calculate the
P.L. 2020, c. 118. These changes were prospective only. If you are filing allowable credit and carryover. Taxpayers filing Forms CBT-100, CBT-100S,
a return for a privilege period or tax year beginning prior to 2020, you or BFC-1 complete Part VI and CBT-100U filers complete Part VII.
must use the version of Form 306 that corresponds with the tax period
for which you are filing. Previous versions are available on the Division’s Taxpayers must include the appropriate credit form in the
website (refer to N.J.A.C. 18:7-3.23 for information on how the credit year the credit was earned even if they are not claiming the
was previously calculated). credit on their tax return.
• For tax years beginning on and after January 1, 2020, a qualified small
business within the meaning of section 41(h)(3) of the federal Internal Qualified Research Activities
Revenue Code (26 U.S.C. s.41) can include qualified expenses and pay- Generally all of the federal rules and methods for the federal corporate in-
ments used for the separate federal payroll credit under I.R.C. § 3111(f) come tax R&D Credit apply when computing the New Jersey R&D Cred-
to calculate their New Jersey R&D credit (see N.J.S.A. 54:10A-5.24(d)). it. However, the New Jersey credit is fixed at 10%. The expenses are for
Note: Taxpayers cannot recalculate their R&D credit for prior years. research in New Jersey. A taxpayer must use the same method that the
The qualified expenses and payments used for the separate fed- taxpayer used for federal purposes and must enclose a copy of the federal
eral payroll credit under I.R.C. § 3111(f), can only be included in Form 6765 as filed with the IRS.
the R&D credit calculation for tax years beginning on and after
January 1, 2020. Additionally, if the qualified expenses and pay- Who Must File
ments are used in the calculation of another New Jersey Corpora- A corporation claiming a credit for increasing research activities should
tion Business Tax credit, those amounts cannot be used to calcu- complete this form and submit it with the tax return.
late the R&D credit.
A New Jersey S corporation is allowed to claim a credit in connection with
• For privilege periods or tax years beginning on and after January 1, increasing research activities to the extent of its New Jersey Corporation
2018, New Jersey has recoupled to I.R.C. § 41 currently in effect, but Business Tax liability. Pass through of this credit to shareholders is not per-
only the federal corporate income tax credit. The intent was to allow the mitted.
new calculation methods (e.g., the alternative simplified credit), to make
it easier for a business to qualify for the New Jersey R&D Credit, and See I.R.C. § 41(f) for special rules related to:
to allow amounts paid or incurred to energy consortia in New Jersey to 1. Adjustments, if a major portion of a business is acquired or disposed of;
qualify. Previously the New Jersey R&D Credit was based on I.R.C. § and
41 in effect on June 30, 1992, which was nonrefundable for federal pur-
poses and not refundable for New Jersey Corporation Business Tax pur- 2. Short tax years.
poses. The New Jersey credit made it clear that despite being coupled
to the current federal corporate income tax credit under I.R.C. § 41, any Credit Carryover
subsequent changes by Congress (e.g., terminating the federal credit or If the research credit cannot be used because of tax liability limitations, it
making the federal credit refundable) would not have any impact on the may be carried forward for either 7 or 15 years. See the instructions for Part
New Jersey credit. VI or Part VII, as applicable.
• A credit can be claimed for only those research activities that are per-
formed in New Jersey. Combined Return Filers
• For privilege periods or tax years ending on and after July 31, 2019, If filing a combined return, the form must be completed by the member
combined group members included on the same New Jersey combined that earned (purchased) the credit. All combined return filers must check
return will follow the federal consolidated control group rules applicable the combined return filers box at the top of the form and complete Part VII,
to qualified research expenditures and qualified payments for research Section A.
performed in New Jersey. Each member must complete a separate Members Opting Not to Share. In general, tax credits are earned by
schedule to claim their portion of the New Jersey R&D credit. Members a member of the combined group and are shareable with the combined
of the same consolidated group must use the same credit calculation group. However, members are not required to share their credits. See
method N.J.S.A. 54:10A-4.6.i and TB-90(R), Tax Credits and Combined Returns.
• Section references are to the Internal Revenue Code unless otherwise In addition to Section A, members that choose not to share must also com-
noted. plete Part VII, Section B and fill in the oval at the top of the form to indicate
• For periods beginning on and after January 1, 2002, any deductions for they are not sharing the credit.
research and experimental expenditures, to the extent that those re-
search and experimental expenditures are qualified research expenses Specific Instructions for Form 306
or basic research payments for which an amount of credit is claimed Part I – Credit Calculation for Amounts Paid or Incurred
pursuant to section 1 of P.L.1993, c.175 (C.54:10A-5.24) unless those
research and experimental expenditures are also used to compute a to Energy Consortia
federal credit claimed pursuant to I.R.C. § 41, if applicable, must be Line 1 – Enter certain amounts paid or incurred to energy consortia in New
added back on Schedule A of the CBT-100, CBT-100U, CBT-100S, or Jersey. See I.R.C. § 41.
BFC-1 on the line for “Other additions.” Refer to the Schedule A instruc-
tions of the appropriate return. Part II – Credit Calculation for Basic Research Payments
Line 2 – Corporations are eligible for a “basic research” credit if their pay-
ments in cash to a qualified university or scientific research organization
(under a written contract) exceed a base period amount (based on their
general university giving and certain other maintenance-of-effort levels for
the three preceding years). Enter payments on line 2. See I.R.C. § 41(e)
for details.
Line 3 – Enter the base period amount, as defined in I.R.C. § 41(e), but not
more than the amount on line 2.

- 5 -

Enlarge image

Part III Alternative Simplified Credit (ASC) election can be made on an amended
Complete Part III if you used the regular method to calculate your federal return for a tax year only if you have not previously claimed the research
corporate income tax credit. Otherwise, complete Part IV. credit on an original return or amended return for that tax year. An extension
of time to make the ASC election will not be granted.
Credit Calculation for Qualified Research Expenses
Lines 5 through 8 pertain to qualified research expenditures paid or in- Credit Calculation for Qualified Research Expenses Us-
curred. See I.R.C. § 41.
ing the Alternative Simplified Credit Method
Do not include expenses and payments that were taken as part of the feder- Line 16 through 20 pertain to qualified research expenditures paid or in-
al Orphan Drug Credit to calculate the New Jersey R&D Credit. curred in New Jersey. See I.R.C. § 41.
Note: Amounts included in the calculation of the Research and Develop- Do not include expenses and payments that were taken as part of the feder-
ment Tax Credit are not permitted to be included in the calculation of al Orphan Drug Credit to calculate the New Jersey R&D Credit.
the Recycling Equipment Tax Credit, the Manufacturing Equipment
and Employment Investment Tax Credit, the New Jobs Investment Note: Amounts included in the calculation of the Research and Develop-
Tax Credit, or the Angel Investor Tax Credit. ment Tax Credit are not permitted to be included in the calculation of
the Recycling Equipment Tax Credit, the Manufacturing Equipment
Line 8 – Use the applicable percentage. This is the percentage that would and Employment Investment Tax Credit, the New Jobs Investment
apply for federal purposes based on the amounts paid or incurred for qual- Tax Credit, or the Angel Investor Tax Credit.
ified research performed on the taxpayer’s behalf in New Jersey. Prepaid
tract research expenses are considered paid in the year the research is Lines 21 through 24 – Use the applicable percentage. This is the percent-
actually done. age that would apply for federal purposes based on the amounts paid or
incurred for qualified research performed on the taxpayer’s behalf in New
Line 10 – The fixed-base percentage depends on whether you are an ex- Jersey. Prepaid tract research expenses are considered paid in the year the
isting company or a start-up company. The fixed-base percentage for all research is actually done.
companies (existing and start-up) must be rounded to the nearest 1/100th
of 1% (i.e., four decimal places) and cannot exceed 16%. Any subsequent Part V – Total Research and Development Tax Credit
change to the federal fixed based percentages will also be reflected here. This is the portion where the actual credit amount is calculated. Unlike the
Start-Up Company federal corporate income tax credit, which has percentage rates that vary
A start-up company is a taxpayer that had both gross receipts and qualified depending on the credit method, the New Jersey credit is fixed at 10%.
research expenses either: You must report the credit you carried over from prior privilege periods or
• For the first time in a tax year beginning after 1983, or tax years on line 29. Do not recompute your tax credit for previous privilege
• For fewer than 3 tax years beginning after 1983 and before 1989. periods or tax years on this form. All credit carryovers must be calculated
using the laws that were in effect for that tax period. Previous versions of the
For start-up companies with qualified research expenses for tax years be- form are available on the Division of Taxation’s website.
ginning after 1993, the fixed-base percentage for a start-up company is
figured as follows: PART VI – Calculation of the Allowable Credit Amount
• For the first 5 tax years, the percentage is 3%. and Carryover (for CBT-100, CBT-100S, and BFC-1 Filers
• For the 6th tax year, divide the aggregate qualified research expenses only)
for the 4th and 5th tax years by the aggregate gross receipts for those For CBT-100, CBT-100S, and BFC-1 filers, the allowable Research and
tax years, then divide the result by 6. Development Tax Credit for the current year is calculated in Part VI. Com-
• For the 7th tax year, divide the aggregate qualified research expenses bined return filers do not complete Part VI, and must complete Part VII in-
for the 5th and 6th tax years by the aggregate gross receipts for those stead. The amount of the credits applied cannot reduce the tax liability to an
tax years, then divide the result by 3. amount less than the statutory minimum.
• For the 8th tax year, divide the aggregate qualified research expenses Line 32 – The minimum tax is assessed based on the New Jersey Gross
for the 5th, 6th, and 7th tax years by the aggregate gross receipts for Receipts as follows:
those tax years, then divide the result by 2.
• For the 9th tax year, divide the aggregate qualified research expenses New Jersey Gross Receipts CBT-100/
for the 5th, 6th, 7th, and 8th tax years by the aggregate gross receipts BFC-1 CBT-100S
for those tax years, then divide the result by 1.5. Less than $100,000 $ 500 $ 375
• For the 10th tax year, divide the aggregate qualified research expenses $100,000 or more but less than $250,000 750 562
for the 5th through 9th tax years by the aggregate gross receipts for $250,000 or more but less than $500,000 1,000 750
those tax years, then divide the result by 1.2.
$500,000 or more but less than $1,000,000 1,500 1,000
• For the 11th and later tax years, divide the aggregate qualified research
expenses for any 5 of the 5th through 10th tax years by the aggregate $1,000,000 or more 2,000 1,500
gross receipts for those tax years. If a taxpayer is filing a separate return and is a member of an affiliated or
Existing Company controlled group that has a total payroll of $5,000,000 or more for the re-
The fixed-base percentage for an existing company (any company that is turn period, the minimum tax is $2,000. Tax periods of less than 12 months
not a start-up company) is figured by dividing the aggregate qualified re- are subject to the higher minimum tax if the prorated total payroll exceeds
search expenses for the tax years beginning after 1983 and before 1989 by $416,667 per month.
the aggregate gross receipts for those tax years. Line 34 – Taxpayers claiming multiple credits must list any credits already
Line 11 – Enter the average annual gross receipts (reduced by returns and applied to the tax liability to ensure accuracy of the calculation for maximum
allowances) for the 4 tax years preceding the tax year for which the credit is credit allowable.
being determined. You may be required to annualize gross receipts for any Carryover Time Frame. Although there is a limitation of the amount of
short tax year. This is determined by using line 1 (less returns and allowanc- credit allowed in any one privilege period or tax year, generally the amount
es) from Schedule A of the 4 preceding tax years. of unused tax credit may be carried forward to each of the 7 account-
For a tax year that the credit terminates, the average annual gross receipts ing years following the credit’s privilege period or tax year (N.J.S.A. Sec.
for the 4 tax years preceding the termination tax year is prorated for the 54:10A-5.24). A taxpayer that has been allowed a Research and Develop-
number of days the credit is applied during the tax year. ment Credit for the fiscal or calendar accounting period (privilege period or
tax year) in which the qualified research expenses have been incurred and
basic research payments have been made for research conducted in New
Part IV Jersey in the fields of advanced computing, advanced materials, biotech-
Complete Part IV if you used the alternative simplified credit method to cal-
culate your federal corporate income tax credit. Otherwise, use Part III. An nology, electronic device technology, environmental technology, and medi-

- 6 -

Enlarge image

cal device technology, are allowed to carry over the amount of the privilege Line 41 – Combined groups claiming multiple credits must list any credits
period or tax year credit that could not be applied for the privilege period or already applied to the group tax liability to ensure accuracy of the calcula-
tax year to each of the 15 privilege periods or tax years following the credit’s tion for maximum credit allowable.
privilege period or tax year. (N.J.S.A. Sec. 54:10A-5.24b).
Carryover Time Frame. Although there is a limitation of the amount of
Part VII – Calculation of the Allowable Credit Amount credit allowed in any one privilege period or tax year, generally the amount
of unused tax credit may be carried forward to each of the 7 account-
and Carryover for Combined Return Filers ing years following the credit’s privilege period or tax year (N.J.S.A. Sec.
For CBT-100U filers, the allowable Research and Development Tax Credit 54:10A-5.24). A taxpayer that has been allowed a Research and Develop-
for the current year is calculated in Part VII. All combined return filers must ment Credit for the fiscal or calendar accounting period (privilege period or
complete Section A. Members that choose not to share their credit must tax year) in which the qualified research expenses have been incurred and
also complete Section B. basic research payments have been made for research conducted in New
Section A – To be completed by ALL combined return filers Jersey in the fields of advanced computing, advanced materials, biotech-
This section calculates the amount of credit allowable for the group. If a nology, electronic device technology, environmental technology, and medi-
member chooses not to share their credit with the group, Section A must still cal device technology, are allowed to carry over the amount of the privilege
be completed to ensure the credit allowed for the member does not exceed period or tax year credit that could not be applied for the privilege period or
the amount that would otherwise be allowed against the group tax liability. tax year to each of the 15 privilege periods or tax years following the credit’s
privilege period or tax year. (N.J.S.A. Sec. 54:10A-5.24b).
The amount of the credit calculated in this section cannot reduce the tax
liability to an amount less than the aggregate statutory minimum tax of the Section B
group members. This section is used to calculate the amount of credit allowable for members
that choose not to share their credit with the group. Section B is completed
Line 39 – Multiply the number of taxable group members by $2,000 and based on the member’s share of the group tax liability. The amount of the
enter the result. credit calculated in this section cannot reduce the tax liability to an amount
less than $2,000. The amount of the credit is also limited to the amount that
would otherwise be allowed against the group tax liability if the member had
been sharing the credit.
Line 48 – Members claiming multiple credits must list any credits already
applied to the member’s tax liability to ensure accuracy of the calculation for
maximum credit allowable.

PDF file checksum: 731763253

(Plugin #1/9.12/13.0)