Kentucky 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

  • Up to 13.5 cents of R&D tax credit for every qualified dollar
  • Dollar-for-dollar reduction in your federal and state income tax liability
  • Credit carried forward up to 20 years

Qualifications

More companies in Kentucky can now qualify for the R&D tax credit. Companies are able to 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 company in Louisville, Kentucky designs and manufactures components for the aerospace industry. In addition to the federal R&D Tax Credit it has traditionally claimed, the company claimed state R&D Tax Credits for the construction of a new research facility in 2014. 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 $210,000 in Kentucky state R&D Tax Credit.

  
FEDERAL
 
KENTUCKY
Year
Total QREs
Credit
Total QREs
Credit
2014
$1,300,000
$135,333
$4,200,000
$210,000
2013
900,000
91,100
NA
NA
2012
650,000
63,000
NA
NA
2011
450,000
38,500
NA
NA
     
Total $3,300,000$327,833 $4,200,000$210,000