Indiana Agriculture R&D Tax Credit

Indiana Agriculture R&D Tax Credit for Farms and Agribusinesses

Indiana farms and agribusinesses regularly test crops, improve livestock production, modify equipment, develop processing methods and adopt agricultural technology. When that work involves qualifying technical research, some of the related expenses may be eligible for the federal R&D Tax Credit and Indiana Research Expense Credit.


Indiana also provides a separate sales tax exemption for certain qualifying research and development property, creating another potential consideration for agricultural businesses investing in research equipment.


RCG Tax Partners helps agricultural businesses evaluate potential R&D Tax Credit and Cost Segregation opportunities based on their activities, expenses and property..

Can Indiana Farms Qualify for the R&D Tax Credit?

Potentially. Indiana's Research Expense Credit applies to qualified research activities conducted in Indiana.



Agricultural activities that may warrant review include:

Indiana Farming Activity Potential R&D Area
Corn and soybean trials Testing varieties, inputs or production methods
Livestock and swine Feed, nutrition or production experimentation
Irrigation Developing or testing systems and controls
Agricultural equipment Designing or modifying machinery
Pest and disease management Testing alternative treatments or processes
Precision agriculture Developing sensors, software or monitoring systems
Greenhouses Testing environmental controls and growing methods
Food processing Improving products or production processes

Routine farming activity does not automatically qualify. The underlying work and expenses must satisfy the applicable research requirements.

How Does the Indiana Research Expense Credit Work?

Indiana's Research Expense Credit provides an income tax credit for increasing qualifying research activity conducted within Indiana.


Indiana generally uses the federal definition of qualified research expenses under IRC §41, with the research activities required to take place in Indiana for purposes of the state credit.


The credit may apply to qualifying corporations and pass-through entities, subject to the applicable Indiana requirements.

Indiana R&D Credit Calculation 



Indiana's regular credit calculation generally applies different rates based on the amount of qualified research expenses above the applicable base amount.

Qualified Research Expense Increase Indiana Credit Rate
First $1 million above the applicable base amount 15%
Amount above $1 million Up to 10%

The actual credit depends on the business's qualified Indiana research expenses and the applicable base-period calculation.

Federal vs. Indiana R&D Tax Credit

Area Federal R&D Credit Indiana Research Expense Credit
Research framework IRC §41 Based on qualifying research under IRC §41
Geographic requirement Qualified U.S. research Research must be conducted in Indiana
Agriculture eligible? Potentially Potentially
Separate calculation Yes Yes
Pass-through treatment Subject to federal rules May apply through qualifying entities

Indiana farms and agribusinesses should therefore evaluate federal and state eligibility separately.

Indiana R&D Equipment Sales Tax Exemption

Indiana also provides a sales and use tax exemption for certain qualifying research and development property.


The exemption may apply to qualifying tangible personal property used for experimental or laboratory research and development involving new products, new uses of existing products, or improvements and testing of existing products.


This exemption is separate from the Indiana Research Expense Credit.



An agricultural business should not assume that property qualifies for the sales tax exemption simply because research expenses qualify for an R&D income tax credit. Each provision has separate requirements.

Indiana Farming and Agricultural R&D Opportunities

Indiana has a large agricultural economy with significant activity in row crops, livestock, poultry and food production.



According to the USDA's 2022 Census of Agriculture, Indiana had:

Indiana Agriculture 2022
Farms 53,599
Land in farms About 14.6 million acres
Average farm size 272 acres

Agricultural products sold About $18 billion

Major Indiana agricultural products include:

Corn

Soybeans

Hogs and pigs

Corn

Poultry and eggs

Milk

Vegetables and specialty crops

These industries can involve technical research related to crop performance, animal nutrition, disease management, equipment, processing, automation and precision agriculture.



Purdue University's agricultural research and Extension network also supports farming and agricultural education across Indiana, including crops, livestock, horticulture and farm management.

Cost Segregation for Indiana Farms

The R&D Tax Credit addresses research activities. Cost Segregation addresses depreciation of buildings and property.



Indiana agricultural businesses may consider a Cost Segregation review after purchasing, constructing or improving agricultural facilities.

Agricultural Property Potential Review Area
Grain facilities Grain bins and handling systems
Livestock facilities Specialized structures and systems
Greenhouses Specialized structures and equipment
Processing buildings Production-related components
Farm sites Drainage and site improvements

Federal depreciation treatment depends on the specific asset and how it is used.



For example, grain bins and agricultural fences generally have shorter recovery periods than general farm buildings, while qualifying single-purpose agricultural or horticultural structures may receive different treatment from ordinary farm buildings.

Can Indiana Farms Use Both R&D Credits and Cost Segregation?

Potentially.


An Indiana farming business might test crop varieties, improve feed formulations or modify equipment while also constructing a grain facility, livestock building or processing operation.


The technical research may warrant an R&D Tax Credit review, while the property investment may separately warrant a Cost Segregation study.



Each strategy has different qualification and documentation requirements.

Frequently Asked Questions

  • Does Indiana have an R&D Tax Credit?

    Yes. Indiana provides a Research Expense Credit for qualifying research activities conducted in Indiana. Eligibility and the credit calculation depend on the business's qualified research expenses and applicable state requirements.

  • Can an Indiana farm qualify for the R&D Tax Credit?

    Potentially. Crop trials, livestock research, irrigation testing, agricultural equipment development and precision agriculture projects may warrant review when the underlying activities and expenses meet applicable requirements.

  • Does the research have to take place in Indiana?

    For the Indiana Research Expense Credit, qualifying research activities must be conducted within Indiana.

  • Does Indiana provide a sales tax exemption for R&D equipment?

    Indiana provides a sales and use tax exemption for certain qualifying research and development property. The exemption has separate requirements from the Indiana Research Expense Credit.

  • Can Indiana farms use Cost Segregation?

    Potentially. Farms and agribusinesses that own qualifying depreciable buildings and improvements may benefit from reviewing property classifications and recovery periods.

Explore More Agriculture Resources

Indiana agricultural businesses can also review RCG's main Agriculture R&D Tax Credit and Cost Segregation resource for federal qualification rules and broader farm-property considerations.


Businesses can also learn more through RCG's dedicated R&D Tax Credit and Cost Segregation service pages..

Discuss Indiana Agricultural R&D With RCG

RCG Tax Partners helps businesses evaluate potential R&D Tax Credit and Cost Segregation opportunities based on their activities, expenses and property.


Contact RCG Tax Partners to discuss potential R&D Tax Credit or Cost Segregation opportunities for your Indiana farming or agricultural business.