The Indiana research expense credit (REC) provides an incentive for increasing qualifying research activities that are done in Indiana. This credit is similar to the federal credit for research and experimental expenses paid in carrying on your trade or business in Indiana. S corporations and partnerships may pass through the credit to their shareholders and partners.
This year, Indiana passed HEA 1001, Section 121 making changes to IC 6-3.1-4-8. These changes go into effect January 1, 2019. Below is a list of the major changes to this section:
- Adds a new section whereby a taxpayer who claims a credit for Indiana qualified research expenses under this chapter for a taxable year must report to DOR whether it has determined a credit for those Indiana qualified research expenses under either IRC Sec. 41(a)(1) or (c)(4) and claimed the credit for those Indiana qualified research expenses under either of the aforementioned IRC sections.
- If a taxpayer claims an Indiana credit for those qualified research expenses under this chapter, and does not claim an Indiana credit for those qualified research expense for federal tax purposes, the taxpayer must disclose to DOR any reasons for not claiming the credit for those Indiana qualified research expenses for federal purposes for the taxable year. The disclosure under this subsection shall be made in the manner specified by DOR.
- For purposes of IC 6-3-4-6 and IC 6-8.1-5-2, a change to the federal credit under the above mentioned IRC sections shall be considered a modification.
- In addition, DOR may adopt rules including emergency rules.