Indiana Indiana Research Expense Tax Credit

Indiana Research Expense Tax Credit
Form IT-20REC
Schedule IT-20REC
State Form 49184
(R10 / 8-19)

Indiana Department of Revenue

Tax Year
Ending

Indiana Research Expense Tax Credit (#822)
(Enclose with annual income tax return)

Name(s) of Taxpayer

Federal Employer Identification Number

Part I - Federal Reporting Information
Report how the research expense credit was reflected on your federal tax return. Place a check in each box that applies (see
instructions). Maintain a complete explanation with your records if checking the box for Code 06 or 07.
Code 01

Code 02

Code 03

Code 04

Code 05

Code 06

Code 07

Part II - Qualified Research Activities in Indiana (Explain in detail; attach additional sheets if necessary)
A.	 The Indiana address(es) where the services are performed:
_____________________________________________________________________________________________________
B.	 The residence or business location of the person(s) performing the services:
_____________________________________________________________________________________________________
C.	 The place where qualified research supplies are consumed:
_____________________________________________________________________________________________________
D.	 Other factors that may be relevant for determining allowable Indiana expenses:
_____________________________________________________________________________________________________
Round all entries
Part III - Computation of Indiana Credit for Increasing Research Activities
Qualified Research Expense
Qualified Regular Credit for Research Conducted in Indiana
Within Indiana
Skip to line 14 if using the alternative incremental method.
1.	 Wage expense for qualified services......................................................................................... 	
1	
00
2.	 Cost of supplies......................................................................................................................... 	
2	
00
3.	 Rental or lease cost of computers............................................................................................. 	
3	
00
4.	 Enter the applicable portion of contract research expenses..................................................... 	
4	
00
5.	 Total qualified research expenses. Add lines 1 through 4......................................................... 	
5	
00
6.	 Enter fixed-base percentage attributable to Indiana, but not more than 16%........................... 	
6	
%
7.	 Enter average annual Indiana gross receipts for the 4 preceding tax years............................. 	
7	
00
8.	 Multiply line 7 by the percentage on line 6................................................................................ 	8	
00
9.	 Subtract line 8 from line 5. If zero or less, enter -0-.................................................................. 	9	
00
10.	 Multiply line 5 by 50% (.50)....................................................................................................... 	
10	
00
11.	 Enter the smaller of line 9 or line 10.......................................................................................... 	
11	
00
12.	 If the amount on line 11 is $1 million or less, multiply line 11 by 15% (.15)............................... 	
12	
00
13a. If the amount on line 11 is greater than $1 million, subtract one million from line 11................ 	 13a	
00
13b. Multiply line 13a by 10% (.10)................................................................................................... 	 13b	
00
13c. Add line 13b and $150,000........................................................................................................ 	 13c	
00
Qualified Alternative Incremental Credit for Research Conducted in Indiana
14.	 Enter the wage expense for qualified services........................................................................... 	
15.	 Enter the cost of supplies........................................................................................................... 	
16.	 Enter the rental or lease cost of computers............................................................................... 	
17.	 Enter the applicable portion of contract research expenses...................................................... 	
18.	 Total qualified research expenses. Add lines 14 through 17...................................................... 	
19.	 Enter the average of qualified research expenses for the 3 preceding tax years...................... 	
20.	 Multiply line 19 by 50% (.50)...................................................................................................... 	
21.	 Subtract line 20 from line 18...................................................................................................... 	
22.	 Multiply line 21 by 10% (.10)...................................................................................................... 	
23.	 If no Indiana qualified research expenses were made in any one of the 3 preceding tax years,
multiply line 18 by 5% (see instructions).................................................................................... 	
Part IV - Indiana Qualified Research Expense Credit
24.	 Enter amount from line 12 or 13c (or line 22 or 23 if using alternative incremental method) . .. 	

*24100000000*
24100000000

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Schedule IT-20REC Instructions

Code #822

Purposes of Schedule IT-20REC

Carryover of Unused Credits

Use Schedule IT-20REC to calculate your credit for increased
research activities conducted in Indiana. Effective Jan. 1, 2008,
the credit is 15% of the increase in Indiana qualified research
expenses paid or incurred in the taxable year over the taxpayer’s
base amount if it is $1 million or less. The credit is 10% if the
amount is in excess of $1 million. "Indiana qualified research
expense" means qualified research expense (as defined in Section
41(b) of the Internal Revenue Code (IRC)) incurred for research
conducted in Indiana. "Base amount," effective July 1, 2005,
means base amount (as defined in IRC Section 41(c)), modified
by considering only Indiana qualified research expenses and gross
receipts attributable to Indiana in the calculation of the taxpayer's:
(1) fixed base percentage; and
(2) average annual gross receipts.

A taxpayer is not entitled to any carryback or refund of any
unused credit. Any excess credit, or the full credit if there is no
current year tax liability (after first applying all applicable credits
under IC 6-3.1-2), may be carried over for up to 10 succeeding
taxable years. A credit earned by a taxpayer in a particular year
is applied against the taxpayer's tax liability for that year before
any credit carryover is applied. All taxpayers with a remaining
credit carryover on Jan. 1, 2006, may carry the excess credit over
not more than 10 taxable years following the year in which they
were first entitled to claim the credit. The carryover credit must
be reduced by the amount used as a credit during the immediately
preceding tax year.

The annual minimum base amount may not be less than 50% of
the Indiana qualified research expense.
For expenses incurred prior to Jan. 1, 2016, all references to the
Internal Revenue Code are to the Internal Revenue Code in effect
on Jan. 1, 2001.

Who May File
An individual, a corporation, a limited liability company, a
limited liability partnership, a trust, or a partnership that incurs
Indiana research expense and has adjusted gross income (AGI)
tax liability, imposed under Indiana Code (IC) 6-3, is entitled
to a research expense credit. Schedule IT-20REC is comparable
to federal Form 6765, used for claiming credit for increasing
research activities, and Form 8820, used for claiming orphan drug
credit. Any taxpayer claiming this credit for increasing research
activities must attach the completed schedule to their return. A
pass-through entity will allocate to each partner, shareholder, or
member any remaining annual research expense credit multiplied
by the percentage of income distribution to which the partner,
shareholder, or member is entitled.
Each partner, shareholder, or member entitled to a research
expense credit as shown by an attachment to the Schedule IN K-1
may claim their pro rata share of the credit with any carryover
research expense credit on the Indiana individual return. Unlike
the federal credit, beneficiaries of trusts and estates are not
afforded this pass-through provision for state tax purposes.
Partnerships, S corporations, and fiduciaries must enclose
IT-20REC with their annual return. Partnerships and S
corporations must also check the appropriate box on their annual
return to indicate that the IT-20REC has been included with the
return. A separate schedule showing each owner's pro rata share
of the above amount must be provided, along with Schedule IN
K-1, to each shareholder, partner, or member of an LLC.

General Instructions
Except as otherwise provided in IC 6-3.1-4, the provisions of IRC
§ Section 41 and promulgated regulations are applicable in the
interpretation and administration by the Indiana Department
of Revenue regarding this credit. This includes the allocation
and pass-through of the credit to various taxpayers and the
transitional rules for determination of the base period.

Part I - Federal Reporting Information
Check the corresponding box for each applicable code that
describes if, and if so, how the research expense credit was
reflected on your federal income tax return. Maintain a complete
explanation with your records if entering Code 06 or Code 07 as
the department may request this information.
For purposes of the codes below, “computation of a positive
federal credit” or similar language means a computation based
on federal Form 6765 and supplied with the taxpayer’s federal
tax return for the year in which the federal tax return is filed.
“Claiming the credit” or similar language means reporting the
credit on the taxpayer’s federal tax return. In the case of a
pass-through entity such as an S corporation or partnership,
“claiming the credit” means making the credit available for the
shareholders or partners to use on their returns.
For purposes of codes 01, 03, 04, and 05, use of these codes
require BOTH: (1) computation of a positive federal credit under
either IRC Sections 41(a)(1) or 41(c)(4) and (2) the federal credit
computation included all Indiana qualified research expenses
claimed on this IT-20REC.

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Schedule IT-20REC Instructions

Code #822

Code How the research expense credit was reflected on your federal income tax return
01
02

03
04
05
06

07

The taxpayer used the entire allowable federal credit for the taxable year (or, in the case of a pass-through entity,
passed through the credit). No other code should be entered.
No federal credit was claimed because both:
(A) the federal qualified research expenses for the taxable year did not exceed the federal base amount under
IRC section 41(c), and
(B) the computation under IRC section 41(c)(4) for the taxable year resulted in zero credit.
The credit was not claimed in full because there is no federal tax liability for the taxable year or the federal tax liability
was less than the credit computed for federal purposes.
The credit was not claimed in full because although there was a federal tax liability for the taxable year, the tax
liability was offset by other federal tax credits.
The credit for the taxable year was not claimed in full because of the limitation under IRC s. 41(g).
The credit was claimed for the taxable year but all or part of the Indiana expenses were not treated as federal
expenses. Note. Maintain with your records an explanation detailing the reason not all of the Indiana expenses were
treated as federal expenses.
Other, including circumstances in which federal elections relating to the federal research expense credit resulted in
zero federal credit. This can include an election under IRC Section 41(h) to use a research expense credit against
payroll taxes. Note. Maintain with your records an explanation detailing the other reason(s).

Part II - Qualified Research Activities in Indiana

x

Answer the questions on research activities. Your responses
to these questions must be sufficiently detailed to provide the
necessary data to determine that qualified research expense
activity was conducted in Indiana.

Part III - Computation of Indiana Credit for
Increasing Research Activities
Refer to federal Form 6765 for detailed line entry instructions.
For purposes of this section, qualified research expense means
qualified research expenses (as defined in IRC Section 41(b) of
the Internal Revenue Code) incurred for research conducted in
Indiana.

Qualified Regular Credit for Research Conducted
in Indiana

Start-up companies - If there are fewer than three tax years
between 1984 to 1988 in which the taxpayer had both gross
receipts and qualified research expenses, the percentage
is 3%. If the percentage computation involves de minimis
amounts of gross receipts and qualified expenses in a tax year,
or if short tax years are involved, see IRC Sections 41 (c)(3)
and 41(f)(4).

Note: The maximum percentage that can be entered on line 6 is
16%.
Line 7. Enter the average annual gross receipts attributable to
Indiana for the 4 tax years preceding the tax year for which the
credit is being determined. You may need to annualize gross
receipts for any short tax year.

Lines 1 - 13c. Complete these lines with respect to qualified
research expense activities conducted in Indiana. If you elect to
use the alternative incremental method for federal tax purposes,
skip lines 1 through 13c and continue to line 14.

Note: For the purposes of lines 6 and 7, gross receipts for any tax
year shall be reduced by returns and allowances made during the
tax year. In the case of a foreign corporation, only gross receipts
effectively connected with the trade or business within the U.S.
should be taken into account.

Line 4. Include 65% of any amount paid or incurred for qualified
research performed on your behalf. Prepaid contract research
expenses are considered paid in the year the research is actually
done. For amounts paid or incurred by the taxpayer to a qualified
research consortium, use 75% instead of 65%. For amounts paid
to certain small businesses, universities, and federal laboratories,
use 100% instead of 65%. See IRC Section 41(b)(3)(D) and (E).

Lines 10 and 11. Base period research expenses cannot be less
than 50% of current year research expenses. This applies to
existing businesses and newly organized businesses. The credit is
calculated on the lessor of the difference between current year and
base period expenses or 50% of current year expenses.

Line 6. Compute the fixed-based percentage as follows:
x Existing firms - The fixed-base percentage is the ratio that
the aggregate qualified research expenses for at least 3 tax
years from 1984 to 1988 bears to the aggregate gross receipts
for such tax years.

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Schedule IT-20REC Instructions
Alternative Incremental Credit
As an alternative to the regular credit computation, for years
beginning after Dec. 31, 2009, any taxpayer may compute the
credit per provisions outlined in IC 6-3.1-4-2(d). To do so,
complete the computation beginning on line 14. The alternative
incremental credit is 10% of the taxpayer’s Indiana qualified
research expenses for the taxable year minus 50% of the
taxpayer’s average Indiana qualified expenses for the 3 taxable
years preceding the taxable year for which the credit is being
determined.
For years beginning prior to January 1, 2010, the alternative
incremental credit can be used only by a taxpayer who is engaged
in the aerospace industry and meets the criteria specified in IC
6-3.1-4-2.5(b).
Line 23. If no Indiana qualified research expenses were made in
any one (1) of the three (3) preceding tax years, the credit is 5%
of the current year Indiana qualified research expenses. This line
only applies to those claiming the credit under the alternative
method per IC 6-3.1-4-2(d), not those in the aerospace industry
claiming the alternative method under IC 6-3.1-4-2.5.

Part IV - Indiana Qualified Research Expense Credit
Line 24. This is your current-year tentative Indiana Research
Expense Tax Credit. Carry your pro rata share of this amount
to the appropriate line on your current-year annual income tax
return.
S corporations, partnerships, limited liability companies, and
limited liability partnerships must prorate the amount on line
24 among the shareholders, partners, or members, according to
the percentage of distributive share of income and report their
respective pro rata share on each Schedule IN K-1.
Carry pro rata distributive share of amount on line 24 plus any
unused state carryover research expense credit to Form IT-20, IT20NP, IT-40, or IT-40PNR.
Enclose completed Schedule IT-20REC with the state income tax
return along with a copy of federal Form 6765 or Form 8820.

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Code #822