Indiana R&D Tax Credits
Find out if you qualify for R&D tax credits in Indiana and recharge your business
The state of Indiana offers two tax incentives targeted at encouraging investments in research and development. Taxpayers may receive a credit against their Indiana state income tax liability calculated as a percentage of qualified research expenses. In addition, taxpayers may be refunded for sales tax paid on purchases of qualified R&D equipment. The Indiana Department of Revenue oversees these incentive programs.
Research Expense Credits
Under Indiana Code § 6-3.1-4-1, the state of Indiana offers a research credit that is calculated under similar requirements as IRC § 41. The Indiana credit is worth 15% of the qualified expenditures over a base amount of $1 million. Starting in 2009, Indiana now allows taxpayers to compute the credit using an alternative method or a regular method. The credit may be applied toward any taxes on Gross, Adjusted Gross, and Supplemental Net Income Tax.
For passthrough entities, in the event of unused credit, the remaining credit will pass through to each partner or shareholder based on the percentage distribution of income. The big difference in the Indiana credit (compared to the federal credit) is that Indiana R&D credits may not pass through to trusts or estates. Indiana has set requirements to determine if the research was conducted in Indiana, and requires this additional information to be provided during the tax filing process:
- The place(s) in Indiana where R&D activities are performed;
- The Indiana location of the personnel performing the services;
- The Indiana location where supplies and raw materials are consumed during the R&D process; and
- Any other factors relevant to R&D activities in Indiana.
Research & Development Sales Tax Exemption
There is a 100% sales tax exemption available for the purchase of qualified R&D equipment and property. Taxpayers may file a claim for refund for sales tax paid on such a retail transaction should they not purchase it tax-exempt at the time of the actual transaction.
Research and development equipment and property is defined as tangible personal property that has not previously been used in Indiana for any purpose and is acquired by the purchaser for the purpose of conducting activities devoted to experimental or laboratory R&D for new products, new uses of existing products, or improving or testing existing products.
Learn more about Indiana's R&D Tax Credit law here and here.
R&D Tax Credit Available:
C-Corporations, S-Corporations, LLCs, Partnerships
Deadline for Tax Filing:
Due with Indiana Tax Return
Data Required to Compute Credit:
Claim Period Qualified R&D Expenses (QREs)
What Information is needed?
QREs for Prior 3 Years
Gross Receipts for Prior 4 Years
The R&D tax credit equals:
- Regular Credit Method: 15% of the increase in Indiana qualified research expenses over the base amount up to $1 million. The credit is 10% if the amount is in excess of $1 million.
- Alternative Incremental Credit Method: 10% of the difference in current-year Indiana QREs over 50% of the average of the preceding three years' QREs. Credit amount is 5% of Indiana QREs if there are no expenses in the three prior years.