Kansas has long offered a state R&D tax credit for C corporations. Now, recent changes will see this credit opened up to individuals, partnerships, S corporations, limited liability companies, and other pass-through entities.

The original credit came into effect for all taxable years beginning after Dec. 31 1987. This new, expansive credit will be available to all income taxpayers beginning in tax year 2023.

Summary of Recent Changes

The first big change includes opening the credit to all income taxpayers, rather than simply C corporations.

The second change is the inclusion of an application prior to claiming the credit using form K-204. This form must be submitted along with a copy of the federal Form 6765 and any substantiating data.

In the third change, for tax year 2023 and on, new R&D tax credits can be transferred by a taxpayer without any tax liability to any person. The credit must be transferred in full and only one time. The recipient may then carry the credit forward as needed.

The credit will increase from 6.5% to 10%.

The Credit

The Kansas state credit follows in line with the federal regulations in the Internal Revenue Code of 1986. This means qualified research expenditures are those expenses for activities intended to discover information that eliminates technical uncertainty when developing or improving a product, process, technique, formula, or invention.

Of course, there are some limitations. The research must be conducted in the state and the expenses made in the state of Kansas. In addition, qualified research expenditures must fall within the following categories:

• Staff time spent designing or conducting technical experimentation or development
• Domestic contractors in the state performing development work on behalf of the company
• Consumable materials and supplies (e.g. for prototypes)
• Cloud-based software licensing fees or technical hosting costs associated with development

The credit is 6.5% of the difference between the actual qualified R&D expenses for the year and the average of the actual expenditures made in a prior year baseline period. For all taxable years commencing after December 21, 2022, the credit will be 10% of the difference.

The Preapproval Application Form K-204

The new K-204 (Research and Development Credit Application) is designed as a means to obtain approval and certification. The taxpayer must specify any shareholders, partners, or members whom the credit will flow through to. In addition, the form requests information for each type of expenditure and the computation for the credit.

Once submitted, the state will review the application and, if approved, provide a tax credit certificate number, which can be entered on the new K-53.

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.

Swanson Reed regularly hosts free webinars and provides free IRS CE and CPE credits for CPAs. For more information please visit us at www.swansonreed.com/webinars or contact your usual Swanson Reed representative.

StartUp Hutch and K-State 105 have joined hands in a strategic alliance aimed at catalyzing economic development in Hutchinson and beyond. This partnership signals a concerted effort to invigorate Reno County’s economy by nurturing local start-ups and entrepreneurs.

Through this collaboration, both entities pledge to provide comprehensive support to emerging businesses, ranging from funding assistance to mentorship programs. The goal is to create a thriving ecosystem where entrepreneurs can flourish and contribute to job creation and economic prosperity.

Central to this initiative is the introduction of an Entrepreneur Navigator (E-Navigator) who will serve as a guide for local entrepreneurs, facilitating cooperative efforts and building crucial relationships. Jessica Gnad, Director of K-State 105, envisions this initiative as a catalyst for innovation across all 105 counties, fostering a vibrant entrepreneurial spirit.

K-State 105 is committed to offering resources and tools to empower small businesses and entrepreneurs. Workshops and mentoring sessions are planned to aid business development and expansion, further fueling local economic growth.

To ensure the success of this partnership, solid relationships with local leaders and stakeholders are paramount. Executive Director of StartUp Hutch, Jackson Swearer, believes that fostering entrepreneurship will not only bolster the local economy but also promote community development and improve living standards.

In addition to StartUp Hutch and K-State 105, other organizations like NetWork Kansas, Hutchinson Community College, and K-State Research and Extension will play integral roles in fostering an environment conducive to entrepreneurial success. Together, they aim to replicate successful models statewide, stimulating economic development across Kansas.

This collaboration represents a concerted effort to fortify Reno County’s economy, fostering a culture of innovation and adaptability essential for sustainable economic resilience and prosperity in the region.

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.

Swanson Reed regularly hosts free webinars and provides free IRS CE and CPE credits for CPAs. For more information please visit us at www.swansonreed.com/webinars or contact your usual Swanson Reed representative.

Scorpion Biological Services, a contract development and manufacturing organization (CDMO) focused on cell- and gene-based therapies, has announced their plan to build a $60 million biodefense-focused plant in Kansas. This plan includes the use of a planned development partnership with a private developer, the state of Kansas, and university affiliates.

The new plant will be 500, 000 sq ft and intended to service around 144, 000 L of biomanufacturing capacity across 48 bioreactors for the production of large molecule biologics.

One specific goal of the Kansas plant will be to support scale production of Anthim (obiltoxaximab), an antitoxin against anthrax, which could be used in defense against a potential anthrax attack when alternative therapies are not available or are not appropriate.

The firm intends to use a US-based supply chain and to develop trains focused on products for the Strategic National Stockpile (SNS). Scorpion says this is partly because 70% of the drug products in the SNS will be gone over the next four years. 

Scorpion anticipates that the facility will be complete, fully operational and staffed by April 2027. Once complete, the firm anticipates employing over 500 individuals, largely from the local talent pool.

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.

Swanson Reed regularly hosts free webinars and provides free IRS CE and CPE credits for CPAs. For more information please visit us at www.swansonreed.com/webinars or contact your usual Swanson Reed representative.