HOUSE BILL No. 1318
DIGEST OF INTRODUCED BILL
Citations Affected: IC 6-3.1-4.
Synopsis: Research expense tax credit. Provides that the alternative
research expense tax credit for jet propulsion systems also applies to
taxpayers engaged in the production of or research and development
related to military defense systems. Provides that a taxpayer must
employ at least 1,000 employees in the United States, including at least
50 employees in Indiana (rather than 3,000 employees) to be eligible
to claim the tax credit. Extends the tax credit to taxpayers that are
primarily engaged in research and development (rather than only those
taxpayers that are primarily engaged in production).
Effective: January 1, 2007.
January 10, 2006, read first time and referred to Committee on Commerce, Economic
Development and Small Business.
Second Regular Session 114th General Assembly (2006)
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between statutes enacted by the 2005 Regular Session of the General Assembly.
HOUSE BILL No. 1318
A BILL FOR AN ACT to amend the Indiana Code concerning
Be it enacted by the General Assembly of the State of Indiana:
SOURCE: IC 6-3.1-4-1; (06)IN1318.1.1. -->
SECTION 1. IC 6-3.1-4-1, AS AMENDED BY P.L.193-2005,
SECTION 12, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JANUARY 1, 2007]: Sec. 1. (a)
As used in The definitions in this
section apply throughout
"Base amount" means base amount (as defined in Section 41(c)
of the Internal Revenue Code as in effect on January 1, 2001), modified
by considering only Indiana qualified research expenses and gross
receipts attributable to Indiana in the calculation of the taxpayer's:
(1) fixed base percentage; and
(2) average annual gross receipts.
"Indiana qualified research expense" means qualified research
expense that is incurred for research conducted in Indiana.
(d) "Military defense system" means a product or equipment
that is used in whole or in part:
(1) for the purpose of military defense; or
(2) in the production, manufacture, fabrication, or assembly
of other products or equipment that will be used for the
purpose of military defense;
including aerospace, ground transportation, communication, or
research and development products or equipment used for
purposes described in subdivision (1) or (2).
(e) "Qualified research expense" means qualified research expense
(as defined in Section 41(b) of the Internal Revenue Code as in effect
on January 1, 2001).
(f) "Pass through entity" means:
(1) a corporation that is exempt from the adjusted gross income
tax under IC 6-3-2-2.8(2);
(2) a partnership;
(3) a limited liability company; or
(4) a limited liability partnership.
(g) "Research expense tax credit" means a credit provided under this
chapter against any tax otherwise due and payable under IC 6-3.
(h) "Taxpayer" means an individual, a corporation, a limited liability
company, a limited liability partnership, a trust, or a partnership that
has any tax liability under IC 6-3 (adjusted gross income tax).
SOURCE: IC 6-3.1-4-2.5; (06)IN1318.1.2. -->
SECTION 2. IC 6-3.1-4-2.5, AS ADDED BY P.L.197-2005,
SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JANUARY 1, 2007]: Sec 2.5. (a) The general assembly makes the
following findings pertaining to this section:
(1) The aerospace industry
is and the military defense system
industry are adversely affected by the calculation of qualified
research expense credits under this chapter, based on the Internal
Revenue Code's treatment of federal defense spending trends in
(2) This adverse impact creates a disincentive for making
qualified research expenditures in Indiana.
(3) Manufacturers of aerospace and jet propulsion equipment and
military defense systems have been a major in-state employer of
science and engineering graduates from Indiana universities.
(4) The presence of a strong aerospace manufacturing base and
military defense system manufacturing base furthers the state's
interest in maintaining the viability of a United States government
military installation that is used for the design, construction,
maintenance, and testing of electronic devices and ordnance.
(5) The creation of an alternative qualified research expense
credit promotes vital state interests.
(b) This section applies only to a taxpayer that:
(1) is primarily engaged in:
(A) the production of; or
(B) research and development related to;
civil and military jet propulsion systems or military defense
(2) is certified by the Indiana economic development corporation
as an aerospace advanced manufacturer or as a military defense
system manufacturer or researcher;
(3) is a United States Department of Defense contractor; and
(4) employs at least one thousand (1,000) employees in the
United States and maintains one (1) or more manufacturing
facilities in Indiana employing at least
three thousand (3,000)
fifty (50) employees in full-time employment positions that pay
on average more than four hundred percent (400%) of the hourly
minimum wage under IC 22-2-2-4 or its equivalent.
(c) A taxpayer that incurs Indiana qualified research expense in a
particular taxable year may elect to calculate the research expense tax
credit under this section instead of under section 2 of this chapter.
(d) An election under this section applies to the taxable year for
which the election is made and all succeeding taxable years unless the
election is revoked with the consent of the department. An election
must be made in the manner and on the form prescribed by the
(e) A credit may be authorized by the Indiana economic
development corporation and, if authorized, shall be equal to a
percentage determined by the Indiana economic development
corporation, not to exceed ten percent (10%), multiplied by:
(1) the taxpayer's Indiana qualified research expenses for the
taxable year; minus
(2) fifty percent (50%) of the taxpayer's average Indiana qualified
research expenses for the three (3) taxable years preceding the
taxable year for which the credit is being determined.
(f) The credit amount determined in subsection (e) applies to the
taxable year for which the determination is made and all succeeding
taxable years unless the determination is changed by the Indiana
economic development corporation. The duration of a determination
made by the Indiana economic development corporation under
subsection (e) shall be specified by the Indiana economic development
corporation at the time of the determination.
SOURCE: ; (06)IN1318.1.3. -->
SECTION 3. [EFFECTIVE JANUARY 1, 2007] IC 6-3.1-4-1 and
IC 6-3.1-4-2.5, both as amended by this act, apply to taxable years
beginning after December 31, 2006.