The Kansas research and development credit allows a taxpayer who makes expenditures in research and development activities in Kansas to claim an income tax credit.

Qualifications

Expenditures made for research and development purposes must be allowable under the provisions of the federal internal revenue code of 1986.

The Internal Revenue Code defines qualified research expenditures as those expenses for activities intended to discover information that eliminates uncertainty concerning the development or improvement of a product. Product is a process, technique, formula or invention.

Several types of expenditures are not allowed:

• acquisition of another's patent, model, or production;
• advertising;
• consumer surveys;
• efficiency surveys;
• historical or literary research;
• management studies;
• ordinary testing for quality control;
• research conducted after commercial production begins;
• research related to style taste, cosmetic, or seasonal design factors;
• research related to the adaptation of an existing business component to a particular customer's requirement;
• research conducted outside of the United States;
• any research in the social sciences, arts or humanities;
• research funded by any grant, contract or government; and
• routine data collection.

Credit Amount

The credit is 6.5% of the difference between the actual qualified research and development expenses for the year and the average of the actual expenditures made during the year and the two previous tax years.

Limitation of Credit

The credit allowed in any one tax year is limited to 25% of the credit plus any carry forward. Any remaining unused credit may be carried forward in 25% increments until the total amount of credit is used.

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