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Indiana R&D Tax Credit

Indiana business owners might be glad to learn that the state provides two alternate research expense credits — a research expense credit and an alternative qualifying research expense credit for aerospace contractors. If you want to take advantage of these benefits, you need to look into both Indiana R&D tax credit offers. That way, you’ll know whether your company qualifies and how to calculate the potential gain.

Indiana State Research Expense Credit

A taxpayer who incurred an Indiana-eligible research cost in a taxable year and has any liability under the adjusted gross income tax can get an Indiana research tax credit for that year. You can calculate it using criteria similar to IRC 41. The value of the Indiana research and development tax credit is 15% of the eligible expenses over a base of $1 million.

Indiana permits taxpayers to calculate the credit using either a regular or an alternate method as of 2009. The credit can offset gross, adjusted gross, and supplemental net income tax.

In the case of pass-through businesses, any unused credit will be distributed to each partner or shareholder according to the income distribution percentage. It is important to note that this Indiana R&D tax credit cannot be transferred to trusts or estates like federal credits may.

Requirements

Indiana requires evidence that the study was carried out in Indiana at the time of filing. For this reason, you must specify all Indiana locations where you conducted R&D activities and all other relevant factors. For instance, indicate the place(s) or area(s) where your employees performed services or where they used raw materials and supplies for research and development.

Sales Tax Exemption for Research and Development in Indiana

Sales tax is entirely excluded from the acquisition of approved R&D property and equipment. Taxpayers could submit a claim for a refund of the sales tax they paid on a retail transaction if they did not initially buy it as tax-exempt.

R&D equipment and property is a tangible personal property purchased to perform activities reserved for experimental or laboratory R&D for discovering new products, new uses for existing products, or enhancing or testing existing products. In addition, this tangible personal property must not have been used in Indiana previously for any purpose.

Indiana Research Tax Credit for the Aerospace Industry

This type of credit is available to:

  • Companies focused on manufacturing jet propulsion systems for both civil and military use.

  • Firms acknowledged as advanced aerospace manufacturing by the Indiana Economic Development Corporation (IEDC).

  • Contractors for the US Department of Defense.

  • Companies maintaining at least three manufacturing plants in Indiana with at least 3,000 full-time workers earning, on average, more than 400% of the minimum wage set out in Code 22-2-2-4 or its equivalent.

How to Calculate the Georgia Research Tax Credit

Regular Method

15% of the increase in Indiana eligible research costs over the basic amount if the sum is up to $1 million. If the sum exceeds $1 million, the credit is 10%.

Alternative Simplified Method

14% of QRE for the current year over a base amount. The base amount is 50% of the QRE average for the previous three years. If there were no costs in the three years prior, the credit amount is equal to 6% of Indiana QREs.

Indiana Research and Development Tax Credit: Takeaway

Taxpayers can get a credit equal to a portion of their eligible research costs against their Indiana state income tax due (QREs). Taxpayers can also receive a refund for any sales tax on eligible R&D equipment purchases. The Indiana Department of Revenue manages these incentive programs.

 

FAQs

What kind of companies can apply in Indiana?

Partnerships, LLCs, S-Corporations, C-Corporation

What is the deadline for applying in Indiana?

You must submit your application at the same time as the Indiana Tax Return.

What data do I need to calculate credit in Indiana?

Claim period QREs (Qualified R&D Expenses)

What information do I need to provide?

Gross Receipts for the past four years as well as QREs for the past three years.

Is credit carryforward an option in Indiana?

Yes, up to ten years.

R&D Tax Credits by State: