Section 6-3-2-29 - Specified research or experimental expenditures; deduction; computation(a) As used in this section, "specified research or experimental expenditures" means specified research or experimental expenditures (as defined in Section 174(b) of the Internal Revenue Code) that the taxpayer is required to charge to capital account under Section 174(a)(2) of the Internal Revenue Code. The term does not include expenditures for which a deduction is disallowed as a result of Section 280C(c) of the Internal Revenue Code.(b) Except as otherwise provided in this section, for taxable years beginning after December 31, 2021, a taxpayer, in determining the taxpayer's adjusted gross income for a particular taxable year, shall:(1) deduct from the taxpayer's adjusted gross income an amount equal to the specified research or experimental expenditures charged to capital account under Section 174(a)(2)(A) of the Internal Revenue Code for the taxable year; and(2) add to the taxpayer's adjusted gross income the amount deducted under Section 174(a)(2)(B) of the Internal Revenue Code for the taxable year.(c) In the case of a taxpayer that owns an interest in a partnership or corporation described in section 2.8(2) of this chapter, the amount that must be deducted under subsection (b)(1) for a particular taxable year may not exceed the sum of: (1) the taxpayer's adjusted basis in the partnership or corporation for federal tax purposes, as determined at the end of the taxpayer's taxable year and after application of any expenses, deductions, or losses; plus(2) the amount of any specified research or experimental expenditures claimed as a deduction under Section 174 of the Internal Revenue Code in determining the taxpayer's federal adjusted gross income for the taxable year.(d) A deduction or part of a deduction that is disallowed under subsection (c) must be: (1) carried forward to the subsequent taxable year;(2) treated as a specified research or experimental expenditure that is paid or incurred in the subsequent taxable year; and(3) applied under subsection (c) against the adjusted basis of the partnership or corporation for the subsequent taxable year.(e) If a taxpayer is eligible for a deduction under subsection (b)(1), but the deduction would be treated as a passive deduction under Section 469 of the Internal Revenue Code, the amount that may be deducted under subsection (b)(1) for a particular taxable year may not exceed the sum of: (1) the amount of the taxpayer's passive income, as determined for federal tax purposes, after application of any passive losses or deductions for the taxable year and after application of any passive loss carryovers for the taxable year, but not less than zero (0); plus(2) the amount of any specified research or experimental expenditures claimed as a deduction under Section 174 of the Internal Revenue Code in determining the taxpayer's federal adjusted gross income for the taxable year. The requirements under this subsection must be applied after application of subsections (c) and (d). Any deduction or part of a deduction that is disallowed under this subsection must be carried forward to the subsequent taxable year and treated as a specified research or experimental expenditure that is paid or incurred in the subsequent taxable year from a trade or business that is a passive activity for the taxpayer.
(f) If, before the effective date of this section, a taxpayer:(1) is a pass through entity; and(2) filed a return either:(A) for a taxable year beginning before January 1, 2023, that reported tax under IC 6-3-2.1 as an electing entity; or(B) for a taxable year beginning before January 1, 2023, passing through the tax paid under IC 6-3-2.1 by another entity on the taxpayer's behalf as pass through entity to its owners; the taxpayer shall report the adjusted gross income subject to pass through entity tax for purposes of IC 6-3-2.1 as if the modification under this section was not in effect for taxable years beginning before January 1, 2023. The taxpayer shall report the modifications otherwise required under this section to its partners, shareholders, or beneficiaries for the taxable year in the manner prescribed under this article.
(g) The modifications required under this section are not applicable if a taxpayer is not required under federal law to charge specified research or experimental expenditures to capital account in determining federal adjusted gross income, regardless of whether the taxpayer elects to charge research or experimental expenditures to capital account.Added by P.L. 194-2023,SEC. 18, eff. 5/4/2023.