A recent change in Wisconsin tax legislation will increase the refundable portion of the Wisconsin Research and Development (R&D) Tax Credit, providing a significant and positive adjustment in the tax year beginning on or after January 1, 2024.
In Wisconsin, taxpayers may claim a credit for increasing research, activities related to internal combustion engines, and activities related to certain energy-efficient products. Through the Wisconsin R&D Tax Credit, taxpayers are eligible to receive a credit equal to 5.75% of the amount in excess of 50% of the allocated base period. Like the federal R&D tax credit, the base period consists of an average of qualified research expenses from the three preceding tax periods. For activities involving or relating to internal combustion engines or certain energy-efficient products, taxpayers may file a claim to receive an R&D credit equal to 11.5% of the amount in excess of 50% of the allocated base period expenses.
For tax years beginning on or after January 1, 2021, 15% of the total Wisconsin R&D credit is eligible to be refunded. The recent change in tax legislation will increase this percentage from 15% to a 25% refundable credit portion set to be available for the tax year beginning on or after January 1, 2024. The refundable portion of the credit will be calculated as the lesser of 1) 25% of the current-year R&D credit or 2) the unused amount after subtracting the current-year R&D credit used to offset any tax liability. Wisconsin Schedule R is used to compute the refundable and nonrefundable portions of the credit, and any unused nonrefundable amounts may be carried forward for up to 15 years. The refundable portion of the credit may be claimed by individuals, partners of a partnership, S corporations, members of a limited liability company, or corporations.
Further information regarding this change can be found in Wisconsin Act 19, Senate Bill 70, which was approved on July 5, 2023. If you have any questions or need assistance, please reach out to a professional at Forvis Mazars or use the Contact Us form below.