Wisconsin R&D Tax Credits

The state of Wisconsin offers a Research Credit, modeled after IRC § 41, that equals 5.75% of the excess qualified R&D expenditures (QREs) over the base amount (50% of the prior 3 years' QREs). Since the R&D credit is a comparative credit that uses the prior three years QREs to calculate the base, if a company does not have at least three previous years of expenditures, the credit then equals 2.875% of the excess QREs over the base amount.

• The credit is available to qualifying companies, so long as the taxpayer meets the requirements of IRC § 41;
• The credit may be claimed by individuals and shareholders, as well as by corporations, using Schedule R; and
• The credit may be carried forward up to 15 years.

Wisconsin also offers more lucrative R&D credits for activities related to internal combustion engines and certain energy efficient products. These credits equal 11.5% of the excess QREs over the base amount. The higher percentages apply to the following qualified industries:

• Designing internal combustion engines (including substitute products such as fuel cell, electric, and hybrid drives) for certain vehicles; and
• Designing and manufacturing energy efficient lighting systems, building automation and control systems, or automotive batteries for use in certain hybrid-electric vehicles.

Recent changes from Wisconsin's Department of Revenue increased the refundable portion of the credit from 10% to 15% for taxable years starting on or after January 1, 2021.

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Learn more about Wisconsin's R&D Tax Credit here.

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R&D Tax Credit Available:

Yes

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Eligible Entities:

C-Corporations, S-Corporations, LLCs, Partnerships

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Deadline for Tax Filing:

Due with Wisconsin Tax Return

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Data Required to Compute Credit:

Claim Period Wisconsin Qualified R&D Expenses (QREs)

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What Information is Needed?

Wisconsin QREs for Prior Three Years

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Credit Carryforward:

15 Years

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The R&D tax credit equals:

• 5.75% of the taxpayer's Wisconsin Qualified Research Expenses (QREs) for the taxable year that exceed 50% of the average Wisconsin QREs for the three preceding taxable years.
• If the taxpayer had no Wisconsin Qualified Research Expenses (QREs) in any of the three preceding tax years, the credit amount is 2.875% of the taxable years' Wisconsin QREs.

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Specific Items to Note:

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• For taxable years beginning prior to January 1, 2018, the credits were 100% nonrefundable and any unused portion of the credit could be carried forward to offset future tax liabilities for up to 15 years. Pursuant to 2017 Act 59, for taxable years beginning on or after January 1, 2018, the amount of the credit is calculated in the same manner; however, up to 10% of the amount may be claimed as a refundable credit. For tax years on or after January 1, 2021, the refundable credit amount increased to 15%.

• The refundable portion of the research tax credit is equal to the lesser of A) 10% of the tax credit claimed in the current year, or B) the credit remaining after subtracting the amount of credit used in the current year to offset the tax owed. For tax years on or after January 1, 2021, this amount increased to 15%.
• Any unused portion of the nonrefundable tax credit may be carried forward for up to 15 years. Unused credits that were carried forward from taxable years beginning prior to January 1, 2018, remain nonrefundable.