Missouri Enacts R&D Credit to Start in 2023

Missouri companies that conduct research and development can look forward to a new tax credit which will be available starting in 2023. Taxpayers may be authorized to receive this credit against the Missouri corporate income tax and financial institutions tax equal to 15% of their “additional qualified research expenses”.

This is exciting news for the state, who has not had an R&D credit since the 2004 tax year. This news signals a positive trend for businesses and investment in the state. We are still waiting on guidance from the Director pertaining to the application manner.

Here is everything you need to know:

  • For tax years beginning on or after January 1, 2023, taxpayer’s may be authorized to receive a tax credit against the corporate income tax or financial institutions tax 
  • The credit will be equal to 15% of their additional qualified research expenses
  • The credit may be increased to 20% if the expenses relate to research conducted in conjunction with a public or private Missouri college or university
  • Additional qualified research expenses refers to the difference between qualified research expenses, as certified by the Director, incurred in a tax year subtracted by the average of the taxpayer’s qualified research expenses incurred in the three immediately preceding tax years
  • “Qualified research expenses” has the same meaning as provided in IRC Sec. 41
  • 12-year carryover
    • If the credit amount exceeds a taxpayer’s tax liability, the excess may be carried forward for the next 12 succeeding years
  • Transferable credits
    • Up to 100% of the credit may be transferred, sold, or assigned by filing a notarized endorsement thereof with the Department that names the transferee, the amount of tax credit transferred, and the value received for the credit, as well as any other information reasonably requested by the Department
  • Flow-through treatment
    • For a taxpayer with flow-through tax treatment to its members, partners, or shareholders, the tax credit shall be allowed to members, partners, or shareholders in proportion to their share of ownership on the last day of the taxpayer’s tax period.
  • Three-year limitation
    • A taxpayer’s credit may not exceed 200% of its average qualified research expenses incurred during the three immediately preceding tax years
  • Limits
    • The highest amount of credit a single taxpayer may claim in one year is $300,000
    • The aggregate of all tax credits shall not exceed $10 million in any year
    • $5 million of such amount is reserved first for minority-owned, women-owned, and small businesses
    • In the event that total eligible claims for credits received in a calendar year exceed the annual cap, each eligible claimant shall be issued credits based upon a pro-rata basis, given that all new businesses, defined as a business less than five years old, are issued full tax credits first
  • Sales tax exemption
    • Purchases of Missouri qualified research and development equipment are exempt from all state and local sales and use tax

Are you developing new technology for an existing application? Did you know your development work could be eligible for the R&D Tax Credit and you can receive up to 14% back on your expenses? Even if your development isn’t successful your work may still qualify for R&D credits (i.e. you don’t need to have a patent to qualify). To find out more, please contact a Swanson Reed R&D Specialist today or check out our free online eligibility test.

Who We Are:

Swanson Reed is one of the U.S.’ largest Specialist R&D tax advisory firms. We manage all facets of the R&D tax credit program, from claim preparation and audit compliance to claim disputes.

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