North Carolina's R&D credit: repealed, with carryforwards still walking around

North Carolina is the honest entry in this cluster: there is no state research and development credit to claim. The general R&D credit under former Article 3F of Chapter 105 — which paid tiered percentages of in-state qualified research expenses, with enhancements for small businesses and research in economically distressed areas — expired for tax years beginning on or after January 1, 2016, and the General Assembly has not revived it as of mid-2026. What survives is residue: pre-2016 carryforwards still usable within their statutory life, and the federal Section 41 credit, which cares nothing about state borders.

What existed, and what the repeal left behind

The former credit was a conventional state design: percentages of North Carolina qualified research expenses (borrowing federal definitions), rates tiered by spending level, with sweeteners for small businesses, university research, and research in lower-tier counties. It sunset on schedule as part of the tax overhaul North Carolina began in 2013, which systematically traded credits and preferences for rate cuts.

The repeal was prospective. Credits earned in pre-2016 years carry forward under the law that created them, and the former statute's carryforward periods were long enough that some taxpayers are, even now, absorbing old credits against current liability. Those carryforwards are real assets — they should be tracked, scheduled by expiration year, and preserved in any M&A diligence — but they are a closed population. No new ones are being minted. The North Carolina Department of Revenue is the authority on remaining carryforward mechanics.

The rate-cut trade

The context that makes North Carolina coherent rather than merely stingy: the state has been cutting its corporate income tax rate for a decade and has legislated a phase-down to zero over the coming years (as of mid-2026; the schedule has been adjusted before and could be again). A research credit offsets corporate income tax; as the rate approaches zero, so does the value of any credit against it. The state's implicit position is that a disappearing corporate tax is a better incentive than a targeted credit — debatable as policy, but internally consistent.

The table compares what a North Carolina research company gets versus a peer in a credit state (illustrative, as of mid-2026).

What North Carolina companies should actually do

Three practical points. First, the federal claim is untouched: Research Triangle companies compute Section 41 QREs exactly as they would anywhere, including the payroll tax offset for qualified small businesses — the absence of a state credit changes nothing federally. Second, inventory old carryforwards: companies that claimed the credit through 2015 should confirm what remains and when it dies; these are found money in profitable years and routinely overlooked after staff turnover. Third, multistate companies should mind the contrast: research performed by the same company in Virginia or South Carolina does generate state credits, so the state-of-performance sourcing discipline described in how state credits differ still matters — just with North Carolina as a zero row.

The trap here is the inverse of the usual one: providers occasionally market "North Carolina R&D credit studies" on the strength of the repealed statute or of narrow remaining programs that are not general research credits. A company being pitched a current-year North Carolina research credit should ask for the statutory citation. For the broader set of states where the answer is "there isn't one," see states without R&D credits.