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