Kansas Research and Development Tax Credit Summary

The Kansas R&D Tax Credit allows a taxpayer who makes expenditures in R&D activities in Kansas to claim an income tax credit. Here is a summary of the R&D Tax Credit for the state of Kansas:

  • The credit is 6.5 percent of the difference between the actual qualified research and development expenses for the year and the average of the actual expenditures made during the year and the two previous tax years.
  • Beginning in tax year 2013, this credit is only available to corporations that are subject to the Kansas corporate income tax (i.e., C corporations). It is not currently available to individuals, partnerships, S corporations, limited liability companies, and other pass-through entities.
  • Expenditures made for research and development purposes must be allowable under the provisions of Internal Revenue Code Section 41.
  • IRC Section 41 defines qualified research expenditures as those expenses for activities intended to discover information that eliminates uncertainty concerning the development or improvement of a product, process, technique, formula or invention.
  • The credit allowed in any one tax year is limited to 25 percent of the credit plus any carry forward.
  • Any remaining unused credit may be carried forward in 25 percent increments until the total amount of credit is used.
  • To claim the Kansas R&D Tax Credit, Schedule K-53 must be completed and submitted with the income tax return.

Kansas R&D Tax Credit Case Study

A Wichita company designs and manufactures components for the aerospace industry. The company claims R&D credits each year for the development activities of its engineers. This project involved a multi-year study covering the tax years 2011 – 2014. The company qualified for the federal R&D Tax Credits of $327,833 and an additional $50,917 in Kansas state R&D Tax Credits. Summary of credits:

FEDERAL KANSAS
Year Total QREs Credit Total QREs Credit
2014 $1,300,000 $135,333 $1,300,000 $22,750
2013 900,000 91,000 900,000 15,167
2012 650,000 63,000 650,000 9,750
2011 450,000 38,500 450,000 3,250
Total $3,300,000 $327,833 $3,300,000 $50,917

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