The North Dakota R&D tax credit, explained
North Dakota's R&D credit runs 25% on the first $100,000 of qualified research growth, then 8% above that, with a 15 year carryforward.
Last verified July 2026 against North Dakota Office of State Tax Commissioner guidance.
The short answer
Yes, North Dakota has a state R&D tax credit. The Research Expense Credit, under North Dakota Century Code 57-38-30.5, is administered by the North Dakota Office of State Tax Commissioner.
How the North Dakota credit works
Under the standard method, the credit equals 25% of the first $100,000 of qualified research expenses above a base amount, plus 8% of any qualified research expenses above that $100,000 threshold. An alternative simplified method is also available, generally at lower rates, for companies that prefer that calculation.
The credit is nonrefundable for most companies. There is one notable exception: a narrow category of certified small research companies, generally primary sector businesses with less than $750,000 in annual gross revenue, can sell or transfer up to $100,000 of unused credit to another North Dakota taxpayer.
How it stacks with the federal credit
North Dakota's credit stacks with the federal R&D credit, worth roughly 6% to 10% of qualified research spend, since both apply to the same qualified research expenses. North Dakota's tiered rate structure means the first $100,000 of growth earns a much higher rate than research spend above that.
Startups under $5 million in revenue can also apply the federal credit against up to $500,000 a year in payroll taxes. North Dakota's transfer option for small certified research companies gives an early stage company another way to realize value from its state credit before it owes North Dakota tax.
Example: a North Dakota precision manufacturing startup with 11 engineers and an average salary of $108,000 spends about $1,188,000 a year on qualified research. If that is $338,000 more than its base amount, the first $100,000 of that growth earns 25%, or $25,000, and the remaining $238,000 earns 8%, or $19,040, for a state credit of about $44,040. The federal credit on the same spend runs roughly $83,160. Combined, that is about $127,200 in credits for the year.
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Eligibility and how to claim it
Any North Dakota company doing qualified research in the state can claim the credit, using the same four part test that applies to the federal credit. There is no minimum company size to qualify for the standard credit.
The credit flows through the company's regular North Dakota tax filing: Schedule ND-1TC for individuals, Schedule TC on Form 40 for C corporations, or the matching schedule for S corporations, partnerships, and trusts. Only the small business transfer option requires separate certification from the North Dakota Department of Commerce, along with a Form CTS filing for the transfer itself.
Claimship preps the qualified research documentation the North Dakota schedules rely on. The company's CPA files the appropriate schedule with the North Dakota Office of State Tax Commissioner and claims the credit on the state return.
Official source: North Dakota Office of State Tax Commissioner.
Carryforward and deadlines
Unused credit carries forward for 15 years, with a 3 year carryback also available for companies that want to apply it to a prior year's tax instead. Companies whose credits were first earned before January 1, 2007 face a separate $2 million annual cap, though that legacy cap does not apply to most current startups.
There is no separate application deadline for the standard credit, since it is calculated and claimed directly on the North Dakota return. The small business transfer option does have its own timing rule: the transferor and transferee must jointly file Form CTS within 30 days of executing the transfer agreement.