Recent Changes to Kansas R&D Rules

Previously, the Research and Development Credit was only available to corporations that were subject to the Kansas corporate income tax, i.e. C corporations. An R&D credit was not available to individuals, partnerships, S corporations, limited liability companies (LLCs), and other pass-through entities.

Kansas legislation signed into law on April 14, 2022 has reversed this limitation. After December 31, 2022, when the law goes into effect, any individual or entity, regardless of classification, is eligible for the state tax credit. Kansas taxpayers should review and prepare documentation to claim the credit in 2023.

Additionally, the recent R&D legislation also increases the credit rate from 6.5% to 10%. And, as an added bonus, taxpayers without a tax liability can transfer their R&D tax credit to another taxpayer. This transfer can only occur once and for the full amount of the credit.

Other Kansas Tax Requirements Stay the Same

The Kansas R&D credit allows a taxpayer who incurs qualified R&D expenditures associated with activities conducted in Kansas to claim a credit against their corporate income tax liability. Qualified Research Activities (QRAs) are defined as having the intent to discover information that eliminates technical uncertainty concerning the development or improvement of a product, process, technique, formula, or invention.

Utilization of the Kansas R&D credit is limited to 25% of the credit plus any carryforward.  Any remaining unused credit may be carried forward in 25% increments until the total amount of credit is used. In other words, a C-Corp with sufficient tax liability must spread the credit utilization out over four tax periods.

The credit is claimed using Kansas Schedule K-53.

Learn more about the Kansas R&D Tax Credit here.

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R&D Tax Credit Available:

Yes

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Eligible Entities:

C-Corporations only

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Deadline for Tax Filing:

Due with Kansas Tax Return

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Data Required to Compute Credit:

Claim Period Kansas Qualified R&D Expenses (QREs)

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Credit Carryforward:

Indefinite (until credit is used up)

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The R&D tax credit equals:

• 6.5% of the difference between Kansas QREs in claim period and the average Kansas QREs from the prior two tax periods.
• After December 31, 2022, the credit amount will increase to 10%.

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Specific Items to Note:

• The Kansas credit utilization is limited to 25% of the credit in a tax year.
• Any remaining credit can be carry forwarded in 25% increments until the entire credit is used.
• Taxpayers without a tax liability can transfer their credits to another taxpayer once, and for the entire amount.