Are R&D Tax Credits Available in Wisconsin?

Are R&D Tax Credits Available in Wisconsin?

Yes. The state of Wisconsin provides the Research and Development (R&D) Tax Credit leverages the Federal Section 41 rules regarding the calculation and qualification of qualified research activities with some modifications:

Research credit for increasing research:

• For tax years beginning after 2014, the Wisconsin research credit is calculated as follows:
  • 5.75% of the amount by which Wisconsin qualified research expenses (QREs) for the taxable year exceed 50% of the average QREs for the 3 taxable years immediately preceding the taxable year for which the credit is being claimed.
  • If the taxpayer had no QREs in any of the 3 prior taxable years, the credit will be calculated by taking 2.875% of QREs for that taxable year.

Research credit for activities related to internal combustion engines:

• For internal combustion engines, the credit is calculated by taking 11.5% of the amount by which QREs exceed 50% of the average QREs for the 3 prior taxable years.
  • If the taxpayer had no QREs in any of the 3 prior taxable years, the credit will be calculated by taking 5.75% of QREs for that taxable year.

Research credit for activities related to certain energy efficient products:

• The same rules for calculating the research credit for internal combustion engines applies.

• The definition of qualified research is the same as the federal definition with the exception that the expenditures must be incurred in Wisconsin, and does not include compensation used in computing the development zones credit.
• For tax years beginning on or after January 1, 2013, the credit may be claimed by corporations as well as by an individual, a partner of a partnership, a shareholder of a tax-option corporation, or a member of a limited liability company.
• The credit must be claimed on the taxpayer's tax return within four years of the un-extended due date of the return.
• For tax years beginning after December 31, 2017, 10% of the credit is refundable. For tax years beginning on or after January 1, 2021, 15% of the credit is refundable. For tax years beginning after December 31, 2023, 25% of the credit is refundable.
• Unused credit that is not refundable may be carried forward for up to 15 years.