Key figures
Utah advisory
2026, with sources
The research credit
Utah’s Credit for Increasing Research Activities has three parts: 5% of Utah qualified research expenses above a base amount, 5% of certain basic research payments above a base, and 7.5% of current-year Utah qualified research expenses. Research must be done in Utah and meet the federal four-part test. The first two parts carry forward 14 years; the 7.5% part does not, and none of it is refundable.
For a loss-making startup the arithmetic is simple: the 7.5% current-year piece can only reduce the year’s tax, and a company paying the $100 minimum has almost nothing for it to offset. The 5% incremental piece is the one worth computing every year, because it banks for 14 years against the profitable years to come.
Owner-level planning
Utah lets a pass-through entity elect to pay tax at the entity level, at the individual rate, with members claiming a credit on their own returns, by filing Form TC-75 by the last day of the entity’s tax year. The election is made year by year and is irrevocable for that year once made and paid; the 2026 legislature made the entity-level tax permanent. It matters for founders who run an LLC or S corporation alongside the C corporation — a consulting entity, a holding LLC — not for the Delaware C corporation itself.
QSBS follows the federal rule because Utah starts from federal income, so a Utah-resident founder who excludes gain under Section 1202 excludes it from Utah income too.
Where founders go wrong
Utah is light on payroll — no local payroll taxes, no state paid leave program, the federal minimum wage — so most of the mistakes are on the tax side: the $100 minimum, use tax on software, and an extension that does not extend the payment.
- Assuming SaaS is exempt: Utah taxes prewritten software however it is delivered.
- Forgetting the $100 minimum tax in a loss year.
- Treating the annual renewal as optional: an expired entity loses good standing.
- Expecting to use the 7.5% research credit later: it doesn’t carry forward.
The federal baseline
This page covers what Utah adds. The federal rules underneath it apply here too.
Common questions
Is the Utah research credit refundable?
No. Utah’s research credit offsets tax only. The 5% incremental pieces carry forward 14 years; the 7.5% current-year piece is lost if there is no tax to use it against. For a loss-making startup paying the $100 minimum, the carryforward is the part that matters.
What catches founders out in Utah?
Payroll here is simple. The surprises are sales tax on SaaS, which Utah taxes when the software is used in Utah, and the annual renewal, which is due on the registration anniversary and is easy to lose track of.
Advisory next door
- IDIdaho advisoryIdaho follows federal law closely, including QSBS; its 5% research credit is nonrefundable and, since 2026, can’t be claimed on costs also deducted under §174A.
- WYWyoming advisoryWyoming has no income tax for companies or people, so R&D credits, QSBS and NOL questions don’t arise; the planning issues are sales tax on downloaded software and keeping the registration current.
- COColorado advisoryNo statewide R&D credit, only the Enterprise Zone program. QSBS follows the federal rule. Most mistakes happen at the city level, in Denver especially.
- AZArizona advisoryArizona’s R&D credit is 24% on the first $2.5 million and 15% above, no longer refundable from 2026 but carried forward ten years. QSBS follows the federal rule.
- NVNevada advisoryNo income tax means no R&D credit and no QSBS question. Incentives are GOED abatements, and the real risks are in wage rules and Secretary of State filings.
- NMNew Mexico advisoryNew Mexico’s R&D credit can offset gross receipts and withholding tax and is partly refundable to small businesses. Combined-report elections lock in for seven years.
Founder guides on this
- R&D taxThe R&D tax credit and Section 174A for startupsEngineering salaries can earn a federal R&D credit against payroll tax, and Section 174A lets you deduct US research again. What qualifies, what to track.
- Sales taxSales tax nexus for startups: when you owe tax in a stateSince Wayfair, selling into a state can create a sales tax obligation. How economic nexus works, why SaaS is taxable in some states and when to register.
- ComplianceFirst-year compliance calendar for a Delaware C-corpDelaware franchise tax, 1099s, the federal return, payroll filings, state annual reports and sales tax: the deadlines a young C-corp misses most, by month.
More of the Utah guide
- AccountingAccounting and state tax in UtahCorporate tax, conformity to federal rules, apportionment and what it does to your books
- ReceivablesReceivables and sales tax in UtahSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayablesPayables and contractors in UtahPaying vendors and contractors: 1099 filing, use tax, contractor tests and withholding
- PayrollPayroll taxes and employer rules in UtahWithholding, unemployment insurance, paid leave, minimum wage and the rules on paydays
- ComplianceCompliance and filings in UtahRegistering to do business, annual reports, franchise tax and the filing calendar
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.