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Are You Leveraging Refundable Wisconsin Research Credits?

Dec 19, 2018

There’s a large tax credit opportunity for taxpayers in Wisconsin that you may not know about. Enacted in September of last year, the 2017 Wisconsin Act 59 allows up to 10% of current-year research credits to be refunded for certain taxpayers for tax years beginning on or after January 1, 2018. Taxpayers who haven’t traditionally benefited from research credits due to excess credits or tax liability limitations may now benefit, especially manufacturers and companies with net operating loss (NOL) carryovers.

The combination of Wisconsin’s manufacturing and research credits has resulted in credit carryovers for many businesses and their owners. Due to carryover ordering rules, these carryovers make it likely that current-year credits are not being leveraged after all tax liability has been offset. Starting in 2018, up to 10% of the current-year credit may be refunded. Even companies with NOL carryovers, and therefore no tax liability, may be able to monetize a portion of the research credit.

Here’s how it applies: The refundable portion is the lesser of 1) the current-year research credit remaining after subtracting the amount of current-year credit used to offset tax or 2) 10% of the current-year research credit. The nonrefundable portion of the research credit may be carried forward for up to 15 years. Please note that credit carryforwards are not eligible to be refunded and are not considered in the computation for the 10% refundable credit.

Wipfli works with our clients to maximize research credit monetization at both the federal and state levels. These changes in Wisconsin have created an opportunity to monetize a portion of research credits in situations where they previously would have been carried forward to future tax years. To learn more about the update and help ensure you are monetizing your Wisconsin research credits, contact your Wipfli representative.

Author(s)

Jared J. Heimerl, CPA
Senior Manager, Tax
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