Research and Development Tax Incentives
Brittany Mann
Business Development
(317) 995-0847
bmann@iedc.in.gov
Purpose of Initiative
The state of Indiana offers two tax incentives designed to encourage investments in research and development. The Indiana Department of Revenue oversees these incentive programs—the Research Expense Credit and the R&D Sales Tax Exemption.
Research Expense Credits
Taxpayers may be eligible for a credit on qualified research expenses. The value of the credit is equal to the taxpayer’s qualified research expense for the taxable year, minus the base period amount up to $1 million, multiplied by 15%. A credit percentage of up to 10% is applied to any excess of qualified research expense over a base period amount greater than $1 million. In addition—for Indiana qualified research expenses that were incurred after December 31, 2009—an alternative method of calculating the credit is available. At the taxpayer’s election, the amount of the taxpayer’s Research Expense Tax Credit is equal to 10% of the part of the taxpayer’s Indiana qualified research expense for the taxable year that exceeds 50% of the taxpayer’s average Indiana qualified research expense for the three taxable years preceding the taxable year for which the credit is being determined. However, if the taxpayer did not have Indiana qualified research expenses in any one of the three taxable years preceding the taxable year for which the credit is being determined, the amount of the research expense tax credit is equal to 5% of the taxpayer’s Indiana qualified research expense for the taxable year. Credits awarded pursuant to the relevant statutory provisions may be carried forward for up to ten taxable years. For more details on the calculation of the credit, please reference IC 6-3.1-4.
Qualifying for the Research Expense Credit
An Indiana qualified research expense is defined as the sum of the following amounts, incurred by the taxpayer during the taxable year: employee wages, supplies, services for qualified research or the supervision of research activities. Qualified research expense is defined by Section 41(b) of the Internal Revenue Code (in effect, as of January 1, 2001). In prescribing what qualifies as a research expense, the Department of Revenue make take into consideration the place where the services are performed, the residence or business location of the person(s) performing the services, the place where qualified research supplies are consumed, and any other factors that the department deems relevant.
Research & Development Sales Tax Exemption
There is a 100% sales tax exemption for qualified research and development equipment and property purchased. Taxpayers may file a claim for refund for sales tax paid on these types of purchases, assuming that they did not purchase it exempt from sales tax at the time of the original transaction.
Qualifying for the Research & Development Sales Tax Exemption
Research and development equipment and property is defined as tangible personal property that has not previously been used in Indiana for any purpose and is acquired by the purchaser for the purpose of research and development activities devoted to experimental or laboratory research and development for new products, new uses of existing products, or improving or testing existing products.
Application Process
The value of the incentive amount varies based on the amount of the qualifying transaction. A taxpayer who qualifies for the exemption must claim the exemption in accordance with the guidelines prescribed by the Indiana Department of Revenue. The form used to claim the exemptions is available at www.in.gov/dor
Elevate Ventures Purdue Foundry Fund
Purpose of Initiative
Elevate Ventures is one of the largest venture capital firms in the state of Indiana and they are a leading provider of funding to entrepreneurs launching and building businesses within the state. Their goal is to make capital more accessible to high-growth startups and entrepreneurs. The organization manages funds that provide venture capital-type investments and other funds to Indiana-based companies during their early stages of growth. They also support emerging businesses by offering introductions to other venture capital firms and angel investors. Elevate Ventures supports a number of funding initiatives—one of which is the Elevate Ventures Purdue Foundry Fund. This Fund is an established partnership between Elevate Ventures, Purdue Foundry, and the Indiana Economic Development Corporation that provides funding to companies at two levels: Black Awards are valued up to $20,000 per award and Gold Awards are valued up to $80,000 per award.
Eligibility
Businesses that fit the Elevate Ventures model tend to be a startup company based in (or interested in relocating to) Indiana. They are generally involved in the agriculture, life science, information technology, advanced manufacturing, or medical device segments. Finally, companies tend to be in the ideation, early, or growth stage of development. The Elevate Ventures Purdue Foundry Fund is used to provide funding for companies in the ideation stage. At this stage, companies are still formulating their product or idea. They are pre-revenue, conducting research and design to prove the product.
Award Details
Black Awards are valued up to $20,000 per award and Gold Awards are valued up to $80,000 per award.
Apply for Funding
https://www.elevateventures.com/apply/
Elevate Ventures – High Potential Startup Grant
Purpose of Initiative
Elevate Ventures is one of the largest venture capital firms in the state of Indiana and they are a leading provider of funding to entrepreneurs launching and building businesses within the state. Their goal is to make capital more accessible to high-growth startups and entrepreneurs. The organization manages funds that provide venture capital-type investments and other funds to Indiana-based companies during their early stages of growth. They also support emerging businesses by offering introductions to other venture capital firms and angel investors. Elevate Ventures manages the High Potential Startup Grant program. This pre-seed program encourages entrepreneurship and business development in specific communities by awarding between $5,000 and $25,000 to high-potential startups in regions where communities have invested in entrepreneurism.
Eligibility
Businesses that fit the Elevate Ventures model tend to be a startup company based in or interested in relocating to Indiana. They are generally involved in the agriculture, life science, information technology, advanced manufacturing, or medical device segments. Finally, companies tend to be in the ideation, early, or growth stage of development. High Potential Startup Grants provide funding for companies in the ideation stage. At this stage, companies are still formulating their product or idea. They are pre-revenue, conducting research and design to prove the product.
Award Details
Awards range from $5,000 to $25,000. Funding goes to high-potential startup companies in regions where the communities have invested in entrepreneurship.
Apply for Funding
https://www.elevateventures.com/apply/
Elevate Ventures – SBIR/STTR Grant Matching
Purpose of Initiative
Elevate Ventures is one of the largest venture capital firms in the state of Indiana and they are a leading provider of funding to entrepreneurs launching and building businesses within the state. Their goal is to make capital more accessible to high-growth startups and entrepreneurs. The organization manages funds that provide venture capital-type investments and other funds to Indiana-based companies during their early stages of growth. They also support emerging businesses by offering introductions to other venture capital firms and angel investors. Elevate Ventures manages the SBIR/STTR Grant Matching program. The SBIR and STTR programs are the largest source of early-stage technology funding in the United States. For awardees in the state of Indiana, Elevate Ventures matches 50% of up to three SBIR/STTR Phase I grants ($150,000 maximum match) per recipient.
Eligibility
Businesses that fit the Elevate Ventures model tend to be a startup company based in or interested in relocating to Indiana. They are generally involved in the agriculture, life science, information technology, advanced manufacturing, or medical device segments. Finally, companies tend to be in the ideation, early, or growth stage of development. The SBIR/STTR Grant Matching program is typically for companies in the ideation stage. At this stage, companies are still formulating their product or idea. They are pre-revenue, conducting research and design to prove the product.
Award Details
Elevate Ventures matches 50% of up to three SBIR or STTR Phase I grants, with $150,000 as the maximum match per recipient.
Apply for Funding
https://www.elevateventures.com/apply/
Elevate Ventures – Indiana Seed Fund
Purpose of Initiative
Elevate Ventures is one of the largest venture capital firms in the state of Indiana and they are a leading provider of funding to entrepreneurs launching and building businesses within the state. Their goal is to make capital more accessible to high-growth startups and entrepreneurs. The organization manages funds that provide venture capital-type investments and other funds to Indiana-based companies during their early stages of growth. They also support emerging businesses by offering introductions to other venture capital firms and angel investors. Elevate Ventures collaborates with multiple fund managers throughout the Midwest to support seed-stage and early-stage companies through the Indiana Seed Fund. The Indiana Seed Fund provides these seed- and early-stage companies with capital needed to help them grow their business and generate revenue.
Eligibility
Businesses that fit the Elevate Ventures model tend to be a startup company based in or interested in relocating to Indiana. They are generally involved in the agriculture, life science, information technology, advanced manufacturing, or medical device segments. Finally, companies tend to be in the ideation, early, or growth stage of development. The Indiana Seed Fund is typically for early-stage companies. At this stage, companies have well-articulated market opportunities with some level of customer validation and a strong founding team. Often, founders are interested in completing product development and identifying its initial product/market fit, but they may not be ready for a typical first investment from a venture capital firm.
Apply for Funding
https://www.elevateventures.com/apply/
Elevate Ventures – 21 Fund
Purpose of Initiative
Elevate Ventures is one of the largest venture capital firms in the state of Indiana and they are a leading provider of funding to entrepreneurs launching and building businesses within the state. Their goal is to make capital more accessible to high-growth startups and entrepreneurs. The organization manages funds that provide venture capital-type investments and other funds to Indiana-based companies during their early stages of growth. They also support emerging businesses by offering introductions to other venture capital firms and angel investors. Elevate Ventures manages the 21 Fund. The 21 Fund is an investment fund with a maximum investment size of $2 million per company.
Eligibility
Businesses that fit the Elevate Ventures model tend to be a startup company based in or interested in relocating to Indiana. They are generally involved in the agriculture, life science, information technology, advanced manufacturing, or medical device segments. Finally, companies tend to be in the ideation, early, or growth stage of development. The companies within the 21 Fund portfolio have a market size over $1 billion and demonstrate clear, sustainable competitive advantages (such as technical superiority). Other criteria include the existence of a disruptive business model and a coachable and committed management team. Companies funded through the 21 Fund are often in the growth stage. Growth stage companies are primarily businesses with products or solutions already on the market, with meaningful customer traction. They have demonstrated some mastery of operational infrastructure, expertise, and planning needed to pursue initial scale-up and are seeking capital from institutional investors.
Award Details
The 21 Fund is a dedicated investment fund with a maximum investment size of $2 million per company. Companies that qualify for the 21 Fund must fulfill a co-investment requirement.
Apply for Funding
https://www.elevateventures.com/apply/
Updated April 2018 by Kristen Johnson
