Indiana R&D Tax Credit Summary

INDIANA R&D TAX CREDIT SUMMARY

Indiana State R&D Tax Credits

Indiana allows two alternative credits for research expenses: a research expense credit and an alternative qualified research expense credit for aerospace contractors.

Indiana State Research Expense Credit

A taxpayer, including an individual, corporation, limited liability company, trust or partnership that has any liability under the adjusted gross income tax, and that incurred an Indiana qualified research expense in a taxable year is entitled to a tax credit for that year.

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    For Indiana, qualified research expense incurred after December 31, 2009, a taxpayer may choose to have the amount of the research expense tax credit determined as follows rather than under Ind. Code §6-3.1-4-2(c). At the election of the taxpayer, the amount of the taxpayer’s research expense tax credit is equal to 10% of the part of the taxpayer’s Indiana qualified research expense for the taxable year that exceeds 50% of the taxpayer’s average Indiana qualified research expense for the three taxable years preceding the taxable year for which the credit is being determined. However, if the taxpayer did not have Indiana qualified research expense in any one of the three taxable years preceding the taxable year for which the credit is being determined, the amount of the research expense tax credit is equal to 5% of the taxpayer’s Indiana qualified research expense for the taxable year.

    Research Expense Tax Credit

    For Indiana qualified research expense incurred after December 31, 2007, the amount of the research expense tax credit is determined under the following formula:

    1. Subtract the taxpayer’s base amount from the taxpayer’s Indiana qualified research expense for the taxable year.
    2. Multiply the lesser of $1 million or the remainder from (1) above by 15%
    3. If the remainder from (1) above exceeds $1 million, multiply the amount of that excess by 10%
    4. Add the products from (2) and (3) above

    For Indiana, qualified research expense incurred before January 1, 2008, the amount of the research expense tax credit is equal to 10% of the remainder of the taxpayer’s Indiana qualified research expenses for the taxable year minus the taxpayer’s base amount.

    The amount of the research expense credit that a taxpayer uses during a particular taxable year may not exceed the sum of the adjusted gross income tax for the taxable year after the application of all credits under Ind. Code §6-3.1-1-2 are to be applied before the research expense credit.

    How to obtain the credit?

    Qualified taxpayers must submit Form IT-20 and enclose it with their annual income tax return.

    Refundable/Transferable Tax Credit – No

    Carryforward

    Applicable to taxable years beginning after December 31, 2005, credits may be carried forward for 10 years.

    Indiana State Alternative Qualified Research Expense Credit

    Applicable to taxable years beginning after December 31, 2005, an aerospace contractor can elect to calculate the research expense credit under an alternative method instead of the method provided in Ind. Code §6-3.1-4-2. An election to use the alternative method applies to the taxable year for which the election is made and all succeeding taxable years unless the election is revoked with the consent of the Department.

    The alternative credit is available only to a taxpayer that:

    • is primarily engaged in the production of civil and military jet propulsion systems
    • is certified by the Indiana economic development corporation (IEDC) as an aerospace advanced manufacturer
    • is a United States Department of Defense contractor; and
    • maintains one or more manufacturing facilities in Indiana employing at least 3,000 employees in full-time employment positions that pay on average more than 400% of the hourly minimum wage under Ind. Code §22-2-2-4 or its equivalent

    A credit authorized by the IEDC is equal to a percentage determined by the IEDC, not to exceed 10%, multiplied by:

    • the taxpayer’s Indiana qualified research expenses for the taxable year; minus
    • 50% of the taxpayer’s average Indiana qualified research expenses for the three taxable years preceding the taxable year for which the credit is being determined

    How to obtain the credit?

    Qualified taxpayers must submit  Form IT-20 and enclose it with their annual income tax return.

    Refundable/Transferable Tax Credit – No

    Carryforward

    Applicable to taxable years beginning after December 31, 2005, credits may be carried forward for 10 years.

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