United States

Wisconsin changes allow 10 percent refund on R&D credit carryforward

TAX ALERT  | 

The 2017 WI Act 59 brought substantial change to the way Wisconsin taxpayers calculate and recognize their Wisconsin Research Credit. For tax years beginning on or after Jan. 1, 2018, Wisconsin will now allow taxpayers the ability to receive a refund of up to 10% of their Wisconsin Research Credit (R&D Credit) carryforward. This refund can be claimed by an individual, partner of a partnership, shareholder of an S-corp, member of an LLC, or corporation with qualified research activities occurring in Wisconsin.

The maximum refund available will be 10 percent of the current year’s R&D credit. The refundable portion is calculated by looking to the lesser of:

  • The current year research credit remaining after subtracting the amount of current year credit used to offset tax; or
  • 10 percent of the current year research credit.

These changes are reflected in the new Wisconsin Schedule R (the form used for claiming the Wisconsin R&D credit) in an additional calculation at the end of the form. The refundable portion of the R&D credit carryforward will now also be reported as a refundable credit on Wisconsin Schedule CR.

Here is a link to the Wisconsin Department of Revenue’s website that contains FAQs and more information regarding the credit.

Key takeaways

Significantly, the calculation on Wisconsin Schedule R does not appear to contain a limitation on the refund related to taxable income. This means that taxpayers with R&D operations in Wisconsin that may have chosen to not pursue the R&D credit in prior years may now have an incentive to do so.

More guidance surrounding this new R&D credit refund will likely be released as it is implemented. With the above in mind, taxpayers should work closer with their tax adviser when claiming the Wisconsin R&D credit and the potential R&D credit refund.

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