Mississippi R&D Tax Credit

Research and development activities are expensive. But the risk of investing in innovation is almost always worth taking, especially when tax credits are available to help offset your costs.

In general, a tax credit is a reduction in taxes you owe instead of a direct reduction in your tax bill. Several public policies give businesses incentives to conduct research and development activities. For example, companies in Mississippi can take advantage of the Mississippi research tax credit. With these incentives, companies can reduce the cost of investing in R&D projects.

Mississippi Research and Development Tax Credit Explained

The state doesn’t offer credit for research and development comparable to IRC 41. However, there is an option the SMART Business Act provides. This incentive provides reimbursement of certain costs, like hiring costs for R&D workers or expenses incurred by investors for qualifying research. As a result, there are two ways to use this credit.

The Academic Research Investor Rebate

For investors, the Mississippi R&D tax credit is 25% of an investor’s QREs. However, the maximum rebate is $1 million per investor for every fiscal year and a total refund of $5 million for all investors each year. To qualify for this reimbursement, investors must submit their applications to the Mississippi Institutions of Higher Learning board (IHL).

When applying, you must also provide:

• The SMART Business Incentive Form

• Evidence of payment made to the college or research company

• A copy of the SMART Business certificate

• A copy of the research agreement

• Any other paperwork the Mississippi Department of Revenue requires

Furthermore, keep in mind that the same investor can’t get more than one credit per year. Also, any research conducted before the IHL certification is not considered a qualified research expense. Likewise, any R&D activity conducted outside Mississippi doesn’t qualify. In the same manner, any research supported by another individual or governmental body, whether through a grant, contract, or otherwise, will not be deemed qualifying research.

The Research and Development Skills Tax Credit

The R&D skills tax credit is a $1,000 yearly credit for every new full-time worker hired for any new position that requires research skills (like an engineer or chemist). This hiring incentive is valid for the first five employment years.

Before claiming any credit, you need to send a letter with your request to the Department of Revenue. In the letter, you must include sufficient information to establish if a list of your workers qualifies for the incentive (for instance, a copy of the employer’s bachelor’s degree).

It’s important to note that you should not use the credit until you get a letter of approval. That said, once you receive it, provide a copy of the letter and a computation schedule with the tax return.

Credit is available to most businesses regardless of industry. That said, no commercial venture engaged in storing, handling, transporting, processing, or disposing of hazardous waste can qualify.

Moreover, the R&D skills credit is restricted to 50% of the annual income tax liability. You can carry forward any unused credit for up to five years, with the option to first utilize the unexpired credits from the oldest year.

How to Calculate Mississippi Research Tax Credit

The Academic Research Investor Rebate

The rebate is equivalent to 25% of the investors’ QREs, with a maximum of $1 million a year.

Research and Development Skills Tax Credit

The credit is $1,000 per employee annually for five years, which you can use to lower a qualifying income tax burden.

Mississippi Research and Development Tax Credit: Takeaway

Mississippi R&D tax credit covers new positions and jobs requiring research and development skills. Furthermore, the state reimburses eligible research expenditures incurred by investors.

FAQs

What kind of companies can apply for an R&D tax credit in Mississippi?

Partnerships, LLCs, S-Corporations, C-Corporations

What data do I need to calculate credit an R&D tax credit in Mississippi?

If you want to apply for the R&D skills credit, you must submit the following information for every position and employee:

• Job title

• Job purpose

• Job-related education requirements

• Job-related experience requirements

• Weekly hours worked

• Compensation or salary

• Date of hiring

Is credit carryforward an option in Mississippi?

Yes, up to five years.