Indiana Research and Development Tax Credit Summary

The Indiana R&D Tax Credit provides a tax credit for increasing qualifying research activities in the state of Indiana. Indiana leverages off of the federal section 41 rules regarding the calculation and qualification of qualified research activities with some modifications.

  • Applicable Indiana code section is Ind. Code Sec. 6-3.1-4-1.
  • Research must be conducted within the state of Indiana.
  • The Indiana R&D tax credit is 15% of the increase in Indiana qualified research expenditures paid or incurred over the base amount up to $1 million. The credit is 10% of any excess of qualified research expenditures over $1 million.
  • For expenses incurred after December 31, 2009, Indiana allows an alternative method of calculating the R&D tax credit. The credit amount is 10% of the excess of the current year’s qualified research expenses that is in excess of 50% of the average of the previous three years’ qualified research expenses. Should an Indiana taxpayer not have expenses in all three prior years, the credit amount is 5%.
  • Indiana allows a 10-year carry forward period for any unused R&D tax credits.

Indiana R&D Tax Credit Case Study

An Indiana life sciences company with fewer than 100 employees had never before claimed the R&D Tax Credit. This project involved a multi-year study covering the tax years 2012 – 2014. The Company qualified for the federal R&D Tax Credit of $312,666 and an additional $81,250 in Indiana state R&D Tax Credit. Summary of credits:

FEDERAL INDIANA
Year Total QREs Credit Total QREs Credit
2014 $1,012,550 $101,255 $1,012,550 $75,941
2013 955,200 95,520 955,200 71,640
2012 905,800 90,580 905,800 67,935
2011 895,700 89,570 895,700 67,178
Total $3,769,250 $376,925 $3,769,250 $282,694

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