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Oregon Enacts New Refundable R&D Tax Credit for Semiconductor Research

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On July 18, 2023, Oregon Governor Tina Kotek signed into law a new refundable research and development (R&D) tax credit for semiconductor research.  Oregon has not had an R&D credit since 2017 when the prior R&D credit expired and was not renewed.

Starting from January 1, 2024 until January 1, 2030, eligible taxpayers can claim an R&D credit for semiconductor research conducted within the state of Oregon. This credit applies to personal income or corporate excise taxes and is based on the increase in qualified research expenses and basic research payments, as determined by the federal rules found in IRC § 41 (credit for increasing research activities).

To be eligible, the research must be carried out in Oregon by a qualified semiconductor company engaged in semiconductor-related trade or business. The applicable percentage for calculating the credit is 15%, which is slightly lower than the standard 20% provided under IRC § 41(a).

The maximum credit that a taxpayer can claim is $4 million. However, the refundable portion of the credit varies depending on the number of employees the taxpayer has in Oregon:

  • For taxpayers with fewer than 150 employees in Oregon, the credit is 75% refundable.
  • For taxpayers with at least 150 employees in Oregon but fewer than 500, the credit is 50% refundable.
  • For taxpayers with at least 500 employees in Oregon but fewer than 3,000, the credit is 25% refundable.

Unused credits can be carried forward for up to five years, allowing taxpayers to utilize them in future tax periods.

To claim the credit, taxpayers must first obtain certification from the Oregon Business Development Department before filing their tax returns. This ensures that the qualifying research activities meet the necessary criteria for the R&D credit.

For more information, please contact:

Tommy Zavieh, Partner & National Practice Leader, Credits & Incentives | tommy.zavieh@frazierdeeter.com

Sheila R. Anderson, Partner, Credits & Incentives | sheila.anderson@frazierdeeter.com

Allen Tobin, Principal, Credits & Incentives | allen.tobin@frazierdeeter.com

Contributors

Tommy Zavieh, Partner & National Practice Leader, Credits & Incentives

Sheila R. Anderson, Partner, Credits & Incentives

Allen Tobin, Principal, Credits & Incentives

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