Kansas R&D Tax Credit Case Study

The R&D tax credit is one of the most valuable credits leveraged by companies. The R&D credit yields billions of dollars in federal and state benefits to companies engaged in qualifying research. The R&D tax credit can provide a significant reduction to current and future tax liabilities and a source of cash.

Benefits

  • Dollar -for-dollar reduction in your state income tax liability
  • Kansas credit can be carried forward in 25 percent increments until fully utilized
  • In 2022, Kansas will allow all taxpayers to claim the R&D tax credit and the credit will be increased from 6.5% to 10% of the incremental amount of R&D expenses

Qualifications

More companies in Kansas can now qualify for the R&D tax credit. Companies can qualify R&D activities beginning with the development of concepts and extend to the point where a product, process, formula, or other business component is ready to be commercially released. If you are engaged in any research activities, looking into a potential R&D tax credit may be a great benefit. In addition, look back studies can recognize unclaimed credits for the last 3 or 4 open tax years.

Case Study

A Kansas City Company designed and manufactured robotics equipment. 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 2020 – 2023. In 2018, the Company generated $400,000 in qualified research expenses and in 2019 they generated $425,000 in qualified research expenses. The Company qualified for the federal R&D Tax Credits of $314,000 and an additional $61,000 in Kansas state R&D Tax Credits.

FEDERAL
KANSAS
Year
Total QREs
Credit
Total QREs
Credit
2023
$1,300,000
$135,333
$1,300,000
$35,000
2022
$900,000
$90,417
$900,000
$15,167
2021
$650,000
$61,250
$650,000
$9,208
2020
$450,000
$27,000
$450,000
$1,650
Total $3,300,000 $314,000 $3,300,000 $61,000