Are R&D Tax Credits Available in Missouri?

For tax years beginning on or after January 1, 2023, the Department of Economic Development (DED) allows taxpayers to claim a credit for qualified research expenses (QREs) related to research activities performed in Missouri. The qualified expenses for this credit must relate to the activities meeting the requirements of IRC §41 (To be eligible for R&D Tax Credits, research activities must meet the criteria in the IRS Four-Part Test). The tax credits are available for expenditures including:

  • Wages paid to an employee performing research activities conducted at a facility in Missouri.
  • Wages paid to any employees directly supporting or directly supervising an employee performing research activities conducted at a facility in Missouri.
  • Supplies used or consumed while performing research activities at a facility in Missouri.
  • A portion of 3rd party research was conducted in Missouri.

The credit is calculated by taking the greater of the following:

  • 15% of the difference between the QREs and the average of QREs for the three prior years, or
  • 20% of the difference between the QREs and the average of QREs for the three prior years, if QREs are related to research performed in conjunction with a public or private Missouri college or university.
  • The credit cannot exceed 200% of the taxpayer’s average QREs incurred in the three prior years.
  • The credit is capped at $300,000 per taxpayer per year. If the total eligible claims exceed the annual cap, the credit will be allocated to taxpayers on a pro rata basis once all new businesses less than five years old are first issued their credits in full.
  • Any unutilized credits may be carried forward for 12 years.
  • The annual cap for the credit for all taxpayers in a year is $10 million.
  • $5 million of the cap is reserved for minority businesses, women’s business enterprises, and small businesses.
  • The purchase of Missouri-qualified research and development equipment is specifically exempt from state and local sales and use tax.
  • The credit provisions will expire on December 31, 2028.

You can read more about this in our article on Reviving Missouri’s Tax Credit in 2023.

Get More Information About the R&D Tax Credit

The R&D Tax Credit, first enacted in 1981, has been one of the most valuable credits leveraged by companies. Every year, the R&D credit yields billions of dollars in federal and state benefits to companies engaged in qualifying research. This credit provides much-needed cash to hire additional employees, increase R&D, expand facilities, and more. Thousands of companies take advantage of the credit across several industries. » Learn More

Four-Part Test

Qualified research activities are defined by the four-part test outlined below

Technological in Nature
Activities must fundamentally rely on the principles of physical or biological science, engineering, or computer science.

Permitted Purpose
Activities must be performed in an attempt to improve the functionality, performance, reliability, or quality of a new or existing business component.

Eliminate Uncertainty
Activities intended to discover information that could eliminate technical uncertainty concerning the development or improvement of a product.

Experimentation
All activities must include a process of experimentation including testing, modeling, simulating, and systematic trial and error.