CHAPTER 4. RESEARCH EXPENSE CREDITS
IC 6-3.1-4
Chapter 4. Research Expense Credits
IC 6-3.1-4-1
Definitions
Sec. 1. As used in this chapter:
"Base amount" means base amount (as defined in Section 41(c)of the Internal Revenue Code as in effect on January 1, 2001),modified by considering only Indiana qualified research expensesand gross receipts attributable to Indiana in the calculation of thetaxpayer's:
(1) fixed base percentage; and
(2) average annual gross receipts.
"Indiana qualified research expense" means qualified researchexpense that is incurred for research conducted in Indiana.
"Qualified research expense" means qualified research expense(as defined in Section 41(b) of the Internal Revenue Code as in effecton January 1, 2001).
"Pass through entity" means:
(1) a corporation that is exempt from the adjusted gross incometax under IC 6-3-2-2.8(2);
(2) a partnership;
(3) a limited liability company; or
(4) a limited liability partnership.
"Research expense tax credit" means a credit provided under thischapter against any tax otherwise due and payable under IC 6-3.
"Taxpayer" means an individual, a corporation, a limited liabilitycompany, a limited liability partnership, a trust, or a partnership thathas any tax liability under IC 6-3 (adjusted gross income tax).
As added by P.L.51-1984, SEC.1. Amended by P.L.57-1990, SEC.1;P.L.8-1993, SEC.85; P.L.8-1996, SEC.7; P.L.192-2002(ss), SEC.86;P.L.193-2005, SEC.12.
IC 6-3.1-4-2
Amount of credit; computation
Sec. 2. (a) A taxpayer who incurs Indiana qualified researchexpense in a particular taxable year is entitled to a research expensetax credit for the taxable year.
(b) For Indiana qualified research expense incurred beforeJanuary 1, 2008, the amount of the research expense tax credit isequal to the product of ten percent (10%) multiplied by theremainder of:
(1) the taxpayer's Indiana qualified research expenses for thetaxable year; minus
(2) the taxpayer's base amount.
(c) Except as provided in subsection (d), for Indiana qualifiedresearch expense incurred after December 31, 2007, the amount ofthe research expense tax credit is determined under STEP FOUR ofthe following formula:
STEP ONE: Subtract the taxpayer's base amount from the
taxpayer's Indiana qualified research expense for the taxableyear.
STEP TWO: Multiply the lesser of:
(A) one million dollars ($1,000,000); or
(B) the STEP ONE remainder;
by fifteen percent (15%).
STEP THREE: If the STEP ONE remainder exceeds onemillion dollars ($1,000,000), multiply the amount of that excessby ten percent (10%).
STEP FOUR: Add the STEP TWO and STEP THREE products.
(d) For Indiana qualified research expense incurred afterDecember 31, 2009, a taxpayer may choose to have the amount of theresearch expense tax credit determined under this subsection ratherthan under subsection (c). At the election of the taxpayer, the amountof the taxpayer's research expense tax credit is equal to ten percent(10%) of the part of the taxpayer's Indiana qualified research expensefor the taxable year that exceeds fifty percent (50%) of the taxpayer'saverage Indiana qualified research expense for the three (3) taxableyears preceding the taxable year for which the credit is beingdetermined. However, if the taxpayer did not have Indiana qualifiedresearch expense in any one (1) of the three (3) taxable yearspreceding the taxable year for which the credit is being determined,the amount of the research expense tax credit is equal to five percent(5%) of the taxpayer's Indiana qualified research expense for thetaxable year.
As added by P.L.51-1984, SEC.1. Amended by P.L.53-1984, SEC.1;P.L.57-1990, SEC.2; P.L.192-2002(ss), SEC.87; P.L.193-2005,SEC.13; P.L.182-2009(ss), SEC.201.
IC 6-3.1-4-2.5
Amount of credit; alternative computation
Sec 2.5. (a) The general assembly makes the following findingspertaining to this section:
(1) The aerospace industry is adversely affected by thecalculation of qualified research expense credits under thischapter, based on the Internal Revenue Code's treatment offederal defense spending trends in the 1980s.
(2) This adverse impact creates a disincentive for makingqualified research expenditures in Indiana.
(3) Manufacturers of aerospace and jet propulsion equipmenthave been a major in-state employer of science and engineeringgraduates from Indiana universities.
(4) The presence of a strong aerospace manufacturing basefurthers the state's interest in maintaining the viability of aUnited States government military installation that is used forthe design, construction, maintenance, and testing of electronicdevices and ordnance.
(5) The creation of an alternative qualified research expensecredit promotes vital state interests.
(b) This section applies only to a taxpayer that: (1) is primarily engaged in the production of civil and militaryjet propulsion systems;
(2) is certified by the Indiana economic developmentcorporation as an aerospace advanced manufacturer;
(3) is a United States Department of Defense contractor; and
(4) maintains one (1) or more manufacturing facilities inIndiana employing at least three thousand (3,000) employees infull-time employment positions that pay on average more thanfour hundred percent (400%) of the hourly minimum wageunder IC 22-2-2-4 or its equivalent.
(c) A taxpayer that incurs Indiana qualified research expense ina particular taxable year may elect to calculate the research expensetax credit under this section instead of under section 2 of thischapter.
(d) An election under this section applies to the taxable year forwhich the election is made and all succeeding taxable years unlessthe election is revoked with the consent of the department. Anelection must be made in the manner and on the form prescribed bythe department.
(e) A credit may be authorized by the Indiana economicdevelopment corporation and, if authorized, shall be equal to apercentage determined by the Indiana economic developmentcorporation, not to exceed ten percent (10%), multiplied by:
(1) the taxpayer's Indiana qualified research expenses for thetaxable year; minus
(2) fifty percent (50%) of the taxpayer's average Indianaqualified research expenses for the three (3) taxable yearspreceding the taxable year for which the credit is beingdetermined.
(f) The credit amount determined in subsection (e) applies to thetaxable year for which the determination is made and all succeedingtaxable years unless the determination is changed by the Indianaeconomic development corporation. The duration of a determinationmade by the Indiana economic development corporation undersubsection (e) shall be specified by the Indiana economicdevelopment corporation at the time of the determination.
As added by P.L.197-2005, SEC.1.
IC 6-3.1-4-3
Unused credits carried forward
Sec. 3. (a) The amount of the credit provided by this chapter thata taxpayer uses during a particular taxable year may not exceed thesum of the taxes imposed by IC 6-3 for the taxable year after theapplication of all credits that under IC 6-3.1-1-2 are to be appliedbefore the credit provided by this chapter. If the credit provided bythis chapter exceeds that sum for the taxable year for which the creditis first claimed, then the excess may be carried over to succeedingtaxable years and used as a credit against the tax otherwise due andpayable by the taxpayer under IC 6-3 during those taxable years.Each time that the credit is carried over to a succeeding taxable year,
it is to be reduced by the amount which was used as a credit duringthe immediately preceding taxable year. The credit provided by thischapter may be carried forward and applied to succeeding taxableyears for ten (10) taxable years following the unused credit year.
(b) A credit earned by a taxpayer in a particular taxable year shallbe applied against the taxpayer's tax liability for that taxable yearbefore any credit carryover is applied against that liability undersubsection (a).
(c) A taxpayer is not entitled to any carryback or refund of anyunused credit.
As added by P.L.51-1984, SEC.1. Amended by P.L.57-1990, SEC.3;P.L.192-2002(ss), SEC.88; P.L.193-2005, SEC.14.
IC 6-3.1-4-4
Application of Internal Revenue Code provisions
Sec. 4. The provisions of Section 41 of the Internal Revenue Codeas in effect on January 1, 2001, and the regulations promulgated inrespect to those provisions and in effect on January 1, 2001, areapplicable to the interpretation and administration by the departmentof the credit provided by this chapter, including the allocation andpass through of the credit to various taxpayers and the transitionalrules for determination of the base period.
As added by P.L.51-1984, SEC.1. Amended by P.L.57-1990, SEC.4;P.L.192-2002(ss), SEC.89.
IC 6-3.1-4-5
Qualified research expenses; determination
Sec. 5. In prescribing standards for determining which qualifiedresearch expenses are considered Indiana qualified research expensesfor purposes of computing the credit provided by this chapter, thedepartment may consider:
(1) the place where the services are performed;
(2) the residence or business location of the person or personsperforming the services;
(3) the place where qualified research supplies are consumed;and
(4) other factors that the department determines are relevant forthe determination.
As added by P.L.51-1984, SEC.1.
IC 6-3.1-4-6
Federal credit expiration date inapplicable
Sec. 6. Notwithstanding Section 41 of the Internal Revenue Code,the termination date in Section 41(h) of the Internal Revenue Codedoes not apply to a taxpayer who is eligible for the credit under thischapter for the taxable year in which the Indiana qualified researchexpense is incurred.
As added by P.L.51-1984, SEC.1. Amended by P.L.53-1984, SEC.2;P.L.57-1990, SEC.5; P.L.43-1992, SEC.10; P.L.76-1993, SEC.1;P.L.19-1994, SEC.9; P.L.8-1996, SEC.8; P.L.4-2000, SEC.13;
P.L.192-2002(ss), SEC.90; P.L.224-2003, SEC.191; P.L.81-2004,SEC.12.
IC 6-3.1-4-7
Pass through entity; shareholder, partner, or member
Sec. 7. (a) If a pass through entity does not have state income taxliability against which the research expense tax credit may beapplied, a shareholder, partner, or member of the pass through entityis entitled to a research expense tax credit equal to:
(1) the research expense tax credit determined for the passthrough entity for the taxable year; multiplied by
(2) the percentage of the pass through entity's distributiveincome to which the shareholder, partner, or member is entitled.
(b) The credit provided under subsection (a) is in addition to aresearch expense tax credit to which a shareholder, partner, ormember of a pass through entity is otherwise entitled under thischapter. However, a pass through entity and a shareholder, partner,or member of the pass through entity may not claim a credit underthis chapter for the same qualified research expenses.
As added by P.L.57-1990, SEC.6. Amended by P.L.193-2005,SEC.15.