Wisconsin Research and Development Tax Credit

Who qualifies

• Corporations subject to Wisconsin franchise or income tax — C-corporations claim directly; pass-through entities (S-corporations, partnerships, LLCs) compute the credit and allocate to partners/members/shareholders who then claim on their individual Wisconsin returns
• Qualified research must be conducted in Wisconsin and meet the federal §41 four-part test: technological in nature, aimed at developing or improving a business component, involving genuine technical uncertainty, conducted through experimentation
• Wisconsin QRE uses federal §41 definitions applied to Wisconsin-located activities: wages, supplies, and 65% of contract research payments
• Incremental structure: credit applies only to the amount by which current-year Wisconsin QRE exceeds 50% of the average of the three prior taxable years' Wisconsin QRE
• New claimants: companies with fewer than three years of Wisconsin QRE use the new-filer rate (2.875% standard or 5.75% specialized) applied to current-year QRE rather than an incremental amount
• Specialized 11.5% rate applies to research specifically on: internal combustion engine design and development, energy efficiency improvements in engines or mechanical systems, or battery technology (as defined under Wisconsin law)
• Partial refundability: for tax years beginning after December 31, 2023, up to 25% of the credit amount not used to offset Wisconsin tax liability may be claimed as a refund — the remaining 75% carries forward up to 15 years
• Cannot double-count compensation used in computing other Wisconsin tax credits
• Partners and shareholders of pass-through entities cannot claim more credit than their proportional ownership interest in the entity

What it covers

How to apply

1. 1

   Calculate Wisconsin qualified research expenses

   Start from your federal §41 QRE computation. Carve out expenses attributable to Wisconsin-located activities: wages for employees performing research in Wisconsin, supplies purchased and consumed at Wisconsin locations, and 65% of Wisconsin-based contractor research payments. For multi-state companies, build an apportionment by employee work location and supply delivery/consumption location.

   ~8 hrs

2. 2

   Determine the base-period average and incremental amount

   Compute the three-year rolling average of Wisconsin QRE from the three immediately preceding taxable years. The base amount is 50% of this average. The incremental credit applies to current-year Wisconsin QRE minus this base amount. If you have fewer than three prior years of Wisconsin QRE, use the simplified new-filer rate (2.875% standard / 5.75% specialized) applied to all current-year Wisconsin QRE without a base deduction.

   ~3 hrs

3. 3

   Determine the applicable credit rate

   Apply the 5.75% standard rate unless the research qualifies for the 11.5% specialized rate (internal combustion engine design, energy efficiency research, or battery technology). Document which activities fall into the specialized category if claiming the higher rate — Wisconsin DOR auditors will examine the qualification basis for the 11.5% claim specifically.

   ~2 hrs

4. 4

   Compute the credit and plan refund vs. carryforward

   Multiply the incremental QRE by the applicable rate to get the gross credit. Subtract any Wisconsin franchise/income tax liability to determine the unused credit balance. For 2024+ tax years: 25% of the unused balance can be taken as a refund; 75% carries forward (up to 15 years). Model whether refunding 25% now vs. carrying forward is preferable based on projected Wisconsin tax liability over the next 2–3 years. High-growth companies building a credit bank may prefer maximum carryforward.

   ~3 hrs

5. 5

   Complete Schedule R and file with Wisconsin franchise/income return

   For C-corporations: complete Wisconsin Schedule R (Research Credits) and attach to the Wisconsin franchise tax return (Form 4). For pass-through entities: complete the entity-level credit computation on Schedule 3K and report each partner's/member's/shareholder's allocated share. Individual partners claim the allocated credit on Wisconsin Form 1 or Form 1NPR. The refundable portion is claimed directly on the return; the carryforward is tracked on Schedule R.

   ~4 hrs

6. 6

   Maintain Wisconsin-specific documentation

   Keep records demonstrating that qualifying activities occurred in Wisconsin: employee project timesheets with work location, Wisconsin lab and facility records, supply delivery invoices, and contractor agreements specifying Wisconsin research locations. Retain records for 4 years from the return due date. For the specialized 11.5% rate, maintain technical documentation showing research activities specifically address internal combustion engines, energy efficiency, or battery technology.

   ~4 hrs

Industry & certifications

NAICS codes: 336111, 336120, 336310, 325412, 541714, 541715, 336411, 334413

Deadline & timing

No separate application — credit is claimed directly on the Wisconsin franchise or income tax return using Schedule R (Research Credits) for C-corporations, or Schedule 3K for pass-through entities that allocate the credit to partners/shareholders. Calendar-year C-corporations file by March 15 with extension to September 15. Pass-through entities file by March 15 (extended September 15). The base-period computation (three-year rolling average) requires prior-year Wisconsin QRE records. New claimants without three prior years of Wisconsin QRE use the simplified new-filer rate.

Programs that stack well

• Research & Development Tax Credit (Section 41)

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