State R&D Tax Credits

While most of the literature you read on the R&D tax credit focuses on the federal credit, there are tax incentives given by most states for R&D activities. Many of these state credits are not as lucrative as the federal credit but they lack tax nuances such as AMT limitations, NOL carry forwards, ... Therefore, some companies that cannot use a federal credit may still have tax to offset on the state level. ANd these credits can be substantial. My home state of Indiana, for example, has a credit that is more lucrative than the federal credit.

The question becomes, how do you know if the states you conduct R&D in have state R&D tax credits? State tax websites are hard to navigate and some college tax departments have summaries of credits but they do not provide the whole picture (forget knowing if the information is reliable). Well, hopefully you use Hull & Knarr to get this information. We have been collecting information from the states and we are posting it on our website, www.hullandknarr.com, within the next week. You will be able to get information on how the credit is calculated, carry forward and back years, credit expiration dates, and any special instructions for pre-filing applications. With the sourcing links you should be able to get yourself in the right direction for filing a state credit to either further supplement your federal R&D claims or benefit from a credit that is previously been unavailable.

I will keep you posted for when the interactive map with the information goes live. If you have questions now feel free to send them my way. Cheers.

Patrick