Research and Development Credit
INCOME TAXPAYER-Effective for all taxable years beginning after Dec. 31, 1987.
Beginning in tax year 2013, this credit shall only be available to corporations that are subject to the Kansas corporate income tax, i.e. C corporations. This credit shall not be available to individuals, partnerships, S corporations, limited liability companies, and other pass-through entities.
Beginning in tax year 2023, new credits shall be available to all income taxpayers.
The Kansas research and development credit allows a taxpayer who makes expenditures in research and development activities in Kansas to claim an income tax credit.
Expenditures made for research and development purposes must be allowable under the provisions of the federal internal revenue code of 1986.
The Internal Revenue Code defines qualified research expenditures as those expenses for activities intended to discover information that eliminates uncertainty concerning the development or improvement of a product. Product is a process, technique, formula or invention.
Several types of expenditures are not allowed:
- acquisition of another's patent, model, or production;
- consumer surveys;
- efficiency surveys;
- historical or literary research;
- management studies;
- ordinary testing for quality control;
- research conducted after commercial production begins;
- research related to style taste, cosmetic, or seasonal design factors;
- research related to the adaptation of an existing business component to a particular customer's requirement;
- research conducted outside of the United States;
- any research in the social sciences, arts or humanities;
- research funded by any grant, contract or government; and
- routine data collection.
The credit is 6.5 percent of the difference between the actual qualified research and development expenses for the year and the average of the actual expenditures made during the year and the two previous tax years.
For all taxable years commencing after December 31, 2022, the credit is 10% of the difference between the actual qualified research and development expenses for the year and the average of the actual expenditures made during the year and the two previous tax years.
Beginning tax year 2023, a taxpayer must submit the revised Form K-204 to apply for this credit.
Transfer of Credit
For tax year 2023 and all tax years thereafter, new research and development tax credits can be transferred by a taxpayer without a current tax liability to any person and be claimed by the transferee in the tax year it was transferred. Only the full credit may be transferred, and the credit may only be transferred one time. The credit claimed by the transferee may be carried forward by the transferee, however, the carry forward shall not be subject to limitations and requirements in place at the time the credit was earned.
Limitation of Credit
The credit allowed in any one tax year is limited to 25 percent of the credit plus any carry forward. Any remaining unused credit may be carried forward in 25 percent increments until the total amount of credit is used.
Procedures to Claim the Credit
You may download Schedule K-53 (tax year 2022 and prior) or Schedule K-53 (tax year 2023 and after) to claim the research and development credit. This schedule must be completed and submitted with the income tax return. You may also call the Department of Revenue voice mail system at 785-296-4937 to request Schedule K-53. You will be asked to give your name, address, phone number and form(s) you desire. Please allow two weeks for delivery of your forms.