State R&D Tax Credit Updates to Watch in 2025

As 2025 begins, many states continue to offer valuable R&D tax incentives that can be layered on top of the federal credit. While no major new laws have taken effect yet this year, several state provisions remain important for businesses planning their 2025 filings.

California

California’s 2024 budget changes still apply: businesses can use no more than $5 million in credits per year, and net operating losses (NOLs) remain suspended through 2026. For companies with large R&D credit carryforwards, this continues to be a key cash flow planning consideration.

Missouri

Missouri’s reinstated R&D credit program is active for 2025, with a 15% credit on additional Qualified Research Expenses (QREs) (20% if done in partnership with a Missouri university). The program has a $300,000 per-taxpayer cap and a $10 million statewide cap. Updated guidance issued in 2024 remains in effect, underscoring the importance of detailed documentation.

Connecticut

Connecticut continues to support biotech companies by offering up to a 90% refund value on unused R&D credits for qualifying small businesses. This provides an important cash benefit for early-stage firms still building toward profitability.

Looking Ahead

Although no new state-level changes have taken effect as of February 2025, legislatures are active and updates are always possible later in the year. Businesses with multi-state R&D activities should continue to track state-specific rules and coordinate them with their federal credit strategy.