Wisconsin R&D Tax Credits

State and Federal Credits Available

5.75% General Rate

(2.875% startups)

11.5% Enhanced Rate

(5.75% startups)

25% Refundable

On unused credit

15-Year Carryforward

Unused nonrefundable portion

No Annual Cap

Unlimited offsets

The Wisconsin R&D Tax Credit, administered by the Wisconsin Department of Revenue under Wis. Stat. § 71.47(4) and modeled on IRC § 41, rewards businesses for increasing qualified research activities in the state. This nonrefundable credit offsets Wisconsin income or franchise tax liabilities, with up to 25% refundable for tax years beginning on or after January 1, 2024, and unused portions carrying forward for 15 years. Ideal for manufacturers, biotech firms, and energy innovators, it supports in-state R&D to drive economic growth.

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5.75% General Rate

(2.875% startups)

11.5% Enhanced Rate

(5.75% startups)

25% Refundable

On unused credit

15-Year Carryforward

Unused nonrefundable portion

No Annual Cap

Unlimited offsets

Key Highlights

Applies to Wisconsin-sourced qualified research expenses (QREs) only
Available to C corps, S corps, partnerships, LLCs, and individuals via Schedule R
Enhanced rates apply to specified internal combustion engine R&D and certain energy efficient products commonly found in automotive, energy, and manufacturing sectors
Refundable increase to 25% effective 2024 boosts cash flow for startups
Stackable with federal R&D credit for maximum savings

Who Qualifies for the Wisconsin R&D Tax Credit

Eligibility requires performing qualified research activities (QRAs) in Wisconsin that meet IRC § 41 standards, including technological uncertainty, experimentation, and business component improvement. Expenses must be incurred for in-state research.

Eligible Entities

C Corporation May claim both the regular and basic research credit
S Corporation Limited entity-level use; can pass credits to shareholders
Partnerships / LLCs Credits pass through to owners via Schedule K-1

Qualified Research Expenses (QREs)

How to Calculate the Wisconsin R&D Tax Credit

Wisconsin uses a single regular incremental method, with tiered rates based on research type. Calculations apply only to Wisconsin-apportioned QREs. No alternative simplified credit (ASC) is available.

Regular Method

Determine total Wisconsin QREs for the current tax year, apportioned by Wisconsin sales factor if multistate.
Compute base amount = 50% × average Wisconsin QREs for the prior 3 taxable years (minimum base is 0 if no prior QREs).
Calculate excess QREs = current-year QREs - base amount.
Apply tiered credit rate:
General research: 5.75% × excess (or 2.875% × current QREs if no prior).
Enhanced (engines/energy-efficient): 11.5% × excess (or 5.75% × current QREs if no prior).
Refundable portion = lesser of (25% × total credit) or (total credit - amount used to offset current tax liability).
Carryforwardunused nonrefundable portion for up to 15 years.

Example Calculation

Assume a manufacturing firm with $2,000,000 in current-year Wisconsin QREs for energy-efficient products, average prior 3-year QREs of $1,200,000 (enhanced eligible).

Base = 50% × $1,200,000 =$600,000

Excess = $2,000,000 - $600,000 =$1,400,000

Credit = 11.5% × $1,400,000 =$161,000

If tax liability is $100,000: Offset $100,000; unused =$61,000

Refundable = lesser of (25% × $161,000 = $40,250) or $61,000 =$40,250 cash refund

Carryforward remaining $20,750 nonrefundable for 15 years

Base Calculation for Wisconsin R&D Tax Credit

Identify Wisconsin QREs for the prior 3 tax years.
Compute average = (Year -1 QREs + Year -2 QREs + Year -3 QREs) / 3.
Apply base amount = 50% × average (if no prior QREs, base = $0).
Ensure Wisconsin-apportioned only; use sales factor for multistate.

Example Calculation

Prior Year -1 QREs = $900K; Year -2 = $700K; Year -3 = $500K; Average = ($900K + $700K + $500K) / 3 = $700K; Base = 50% × $700K =$350K

If no prior: Base = $0 (credit = 2.875% or 5.75% × current QREs)

Apportionment for Multistate Taxpayers

For multistate taxpayers, QREs must be limited to research performed in Wisconsin. Where costs are incurred both inside and outside Wisconsin and cannot be directly traced, a reasonable allocation method tied to the Wisconsin sales factor or other justified method may be used. Follow current apportionment rules and Schedule R instructions.

Startups with no prior QREs benefit from flat-rate calculation on current expenses.

Estimate Your Credits

Wisconsin-Specific Rules

Wisconsin's Research Credit features activity-based tiers and a generous refund mechanism to support innovation in key sectors like manufacturing and clean energy.

Tiered Rates by Research Activity

General R&D earns 5.75% on excess QREs, doubling to 11.5% for internal combustion engines and certain energy efficient products such as lighting systems, building automation and control systems, or automotive batteries for hybrid vehicles, supporting significant annual claims in targeted industries.

25% Refundable Cash Option

Post-2024, claim up to 25% as a direct refund (lesser of percentage or unused credit), providing immediate liquidity for R&D-heavy firms without tax liability.

15-Year Carryforward

Unused nonrefundable credits roll forward for up to 15 years, ensuring long-term value even for cyclical R&D spenders.

Other Unique Rules

Pass-Through Treatment:Credits allocate pro-rata to owners via K-1; S corps and partnerships report on Schedule R.
Audit Guidelines:Maintain detailed project, wage, and cost documentation supporting Wisconsin QREs, consistent with IRC § 41 standards. Retain records for the statute of limitations period for each year the credit or carryforward is used (generally 4–7 years or longer).
In-State Focus:QREs must be performed in Wisconsin; no out-of-state attribution.
No statutory dollar cap on the credit. For combined reporting groups, special rules govern how nonrefundable research credits may be shared among members.

Tiered Rates by Research Activity

25% Refundable Cash Option

Post-2024, claim up to 25% as a direct refund (lesser of percentage or unused credit), providing immediate liquidity for R&D-heavy firms without tax liability.

15-Year Carryforward

Unused nonrefundable credits roll forward for up to 15 years, ensuring long-term value even for cyclical R&D spenders.

Other Unique Rules

Pass-Through Treatment:Credits allocate pro-rata to owners via K-1; S corps and partnerships report on Schedule R.
Audit Guidelines:Maintain detailed project, wage, and cost documentation supporting Wisconsin QREs, consistent with IRC § 41 standards. Retain records for the statute of limitations period for each year the credit or carryforward is used (generally 4–7 years or longer).
In-State Focus:QREs must be performed in Wisconsin; no out-of-state attribution.
No statutory dollar cap on the credit. For combined reporting groups, special rules govern how nonrefundable research credits may be shared among members.

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Wisconsin R&D Tax Credits Case Study

A Wisconsin-based biotech firm specializing in energy-efficient manufacturing processes recovered significant credits to fuel expansion.

$287,500

total state R&D tax credits earned

60%

of wages qualified for enhanced 11.5% rate

$750,000

total R&D tax credits earned (federal + state combined)

Frequent Asked Questions

What is the Wisconsin R&D tax credit?

Wisconsin's Research Credit provides 5.75% on general incremental QREs (11.5% for enhanced activities like engines or energy-efficient products), with up to 25% refundable, modeled on IRC § 41 for in-state innovation.

What activities qualify for Wisconsin’s R&D tax credit?

Eligible activities involve technological experimentation to develop or improve products/processes, such as manufacturing prototypes or energy-efficient designs. Strike Tax identifies qualifying projects under Wis. Stat. § 71.47(4).

How much can my business save with Wisconsin’s R&D tax credit?

For $2 million in incremental QREs at the enhanced rate, you could save $230,000 plus 25% refund potential. Stack with federal credits. Use Strike Tax’s R&D Credit Calculator for estimates.

Are Wisconsin R&D tax credits refundable or carryforward?

Up to 25% is refundable (effective 2024); unused nonrefundable portions carry forward 15 years. Prior year carryforwards remain nonrefundable. Strike Tax maximizes refunds and planning.

How do I apply for Wisconsin’s R&D tax credit?

File Schedule R with your Wisconsin income/franchise tax return (e.g., Form 4 for corps). Ensure federal Form 6765 compliance. Strike Tax handles documentation and filing.

Can Wisconsin businesses claim both state and federal credits?

Yes, claim both for the same QREs to double savings. Wisconsin allocates QREs based on where the research is performed. When costs span locations, allocation may reference the Wisconsin sales factor or another reasonable method per Schedule R instructions. Strike Tax optimizes stacking.

Why is Wisconsin’s R&D credit valuable for manufacturers?

Manufacturers with high QREs in engines or energy products benefit from 11.5% rates and 15-year carryforwards, supporting significant annual sector claims. Strike Tax tailors for manufacturing.