Wisconsin expands R&D credit

Gov. Scott Walker signed legislation expanding the tax credit for qualified research and development (R&D) activities in Wisconsin to individuals, partnerships, S corporations, and limited liability companies treated as partnerships. This expansion—part of 2013 Act 20—is effective for taxable years beginning on or after Jan. 1, 2013. Prior to this amendment, the Wisconsin research credit was only available to C corporations.

The research credit methods available to taxpayers will remain the same. Specifically, Wisconsin taxpayers may elect to claim the credit using either the regular credit method or the alternative incremental credit (AIC) method.

  • Under the regular credit method, the credit is equal to 5 percent of Wisconsin qualified research expenses (QREs) that exceed a base amount, which is generally the product of the taxpayer’s fixed base percentage and the average gross receipts of the taxpayer for the four years preceding the credit year.
  • Taxpayers electing the AIC method are subject to a three-tiered rate structure, with credit rates ranging from 2.65 percent to 3.75 percent. The credit rate rises as the amount of QREs increase.

The credit is nonrefundable, but any unused credits may be carried forward and credited against Wisconsin income or franchise taxes for up to 15 years.

Contact your Baker Tilly tax advisor or send an e-mail to tax@bakertilly.com to discuss research credit opportunities for 2013.