Indiana is a pro-business state with a
diversified economic base that is committed to business
development and improvement. Major innovating business
sectors in the State include: manufacturing (including additive
manufacturing), life sciences and medical technology, and food
processing.

Indiana State Map
The Research & Development Tax Credit
Enacted in 1981, the now permanent Federal
Research and Development (R&D) Tax Credit allows a credit
that typically ranges from 4%-7% of eligible spending for new
and improved products and processes. Qualified research must
meet the following four criteria:
- Must be technological in nature
- Must be a component of the taxpayers business
- Must represent R&D in the experimental sense and
generally includes all such costs related to the development
or improvement of a product or process
- Must eliminate uncertainty through a process of
experimentation that considers one or more alternatives
Eligible costs include U.S. employee wages, cost of supplies
consumed in the R&D process, cost of pre-production testing,
U.S. contract research expenses, and certain costs associated
with developing a patent.
On December 18, 2015, President Obama signed the PATH Act,
making the R&D Tax Credit permanent. Since 2016, the R&D
credit has been used to offset Alternative Minimum Tax (AMT) for
companies with revenue below $50MM and for the first time,
pre-profitable and pre-revenue startup businesses can obtain up
to $250,000 per year in cash rebates applied to payroll taxes.
Indiana Research Expense Credit
Qualifying criteria for the Indiana R&D
tax credit are considered the following:
- The place where the services are performed
- The residence or business location of the person or
persons performing the services
- The place where qualified research supplies are consumed
- Other factors that the department deems relevant
Qualified research expense (QRE) for Indiana is as defined by
Section 41(b) of the Internal Revenue Code as in effect on
January 1, 2001.
For Indiana QREs incurred after December 31, 2009, an
alternative method of calculating the credit is available at the
taxpayer’s election.
Additionally, unlike the Federal R&D tax credit, Indiana
offers taxpayers an R&D Sales Tax Exemption for tangible
personal property purchased for purposes of R&D eligible
activities.
Manufacturing
Manufacturing is a strong industry in
Indiana. In fact, the state of Indiana’s economic
development agency will launch a new smart manufacturing hub to
support the long-term growth of its manufacturing industry,
which is considered a key driver of the local
economy. The new facility will be referred to as the
Emerging Manufacturing Collaboration Center (EMC2), and will be
home to GE Additive’s state-of-the-art binder jet
technology. This will propel innovators, start-ups, and
manufacturers to advance research and development and 21st
century skills training in smart manufacturing.
Auto manufacturing has been the leading industrial sector for
several years now. A close second is life sciences.
Both are also the largest employers in the State.
Manufacturers in Indiana comprise 27.84% of the total output in
the State and employ 17.24% of the workforce. In 2018,
manufacturing output amounted to $102 billion.

Source: National Association of Manufacturers
Life Sciences and Medical Technology
The future of Indiana manufacturing lies in
med-tech. It is a fact that pharmaceutical and medical
manufacturing was the leading sector for both economic output
and job growth in 2018.
BioCrossroads
BioCrossroads strives to advance Indiana to the next generation
of growth and development. They serve as a vehicle for the
continued expansion of Indiana's life sciences industry by
creating an environment that provides more economic opportunity.
BioCrossroads helps provide funding, launch new business
products, and partner with Indiana's state research
institutions, global companies, philanthropic organizations and
government. BioCrossorads is a catalyst for the continued
development and diversification of the life sciences industry in
Indiana. They promote science education and build
awareness through marketing for Indiana's life sciences
industry. BioCrossroads provides money and support to life
sciences businesses and expands partnerships among Indiana's
life sciences institutions. They also produce improved
healthcare for Indiana communities. All these efforts create a
flourishing industrial network for Indiana's growth and
innovation.
Medical Devices
Indiana is currently the national leader in medical device
manufacturing. Its medical device industry generates more
than $10 billion in revenue annually. Indiana lawmakers are
examining the ways that the state can assist and partner in the
continued growth and success of Indiana's medical device
industry. State policies, laws, and regulations can positively
affect the continued growth and innovation of an industry that
saves lives and produces quality jobs. In fact, Northeast
Indiana has 11 times more employment in medical equipment and
supplies manufacturing than the rest of the country.
Warsaw, Indiana has earned the title “Orthopedic Capital of the
World” because of its prominence in the medical device and
technology industry. Medical device companies in Northeast
Indiana control 39.5% of the worldwide orthopedic market,
accounting for approximately $19 billion in revenue. When
combined, the medical device companies in Fort Wayne,
Indiana comprise 46% of the $7.2 billion worldwide hip market,
49% of the $8.7 billion worldwide knee market, and 48% of the $9
billion worldwide spine market.
Indiana Medical Device Manufacturers Council (IMDMC)
The Indiana Medical Device Manufacturers Council (IMDMC) is an
association for medical device manufacturers. Combined with
other companies, it promotes the education and interests of
medical manufacturers in Indiana and Washington D.C. Their focus
is on delivering innovative, life-changing technologies to their
patients. IMDMC brings together large and small medical device
manufacturers to strengthen communication and express the
interests of these innovative companies before state and federal
legislatures and regulatory agencies.
Food Processing
Indiana farmers and food producers are
developing new and innovative techniques and processes to boost
productivity and save money.
In the agriculture industry, agrobots are automating the process
of picking small produce products like strawberries. Such tasks
have long required the backbreaking efforts of tens of thousands
of low-paid workers. However, recent labor shortages in
the industry have forced farmers to start rethinking the way
they pick the berries. “It’s no longer a problem of how
much does a strawberry harvester cost,” said Juan Bravo,
inventor of Agrobot, the picking machine. “Now it’s about how
much does it cost to leave a field unpicked, and that’s a lot
more expensive.” Even though the machine costs about
$100,000 it would still be profitable for farmers because it
saves them the expense of leaving their patches unpicked when
they cannot find workers.

The Agrobot E-Series
Agrobots are not the only developments in farming
technology. Crop protection, irrigation, nitrogen use
efficiency, no-till farming, water harvesting and precision
agriculture all involve substantial research and development.
Consumer demand is also driving innovation on the production
side of the food industry. Meaningful changes in core
ingredients for food products require laboratory activity
because consumers are demanding healthier products that still
taste the same as their less healthy counterparts. Large food
manufacturers have huge contingents of chemists, scientists, and
nutritionists constantly seeking solutions to concerns created
by emerging health awareness.
The major challenge for food producers is creating a product
that tastes good but is healthy at the same time. Food
companies do particularly well in establishing the R&D tax
credit. Indiana has a significant amount of food
manufacturing, production and distribution companies due to the
State’s vast amount of available resources.
Food manufacturers can qualify for an R&D Tax Credit in
multiple ways – both for product development, but also for
process improvement. Today’s food shoppers are far more
discerning than the previous generation. Today’s consumer
demands organic, whole-grain foods, with reduced trans-fats,
sugar and salt, that is preservative-free. In response,
food companies are substituting processed ingredients with
healthy alternatives, all while adhering to regulatory health
and safety guidelines.
Food companies also face technical hurdles in the area of
packaging and distribution developments and improvements as
well. Sample activities that food companies engage in that
qualify for the R&D tax credit include test kitchen
activities, experimenting with new ingredients, shelf-life
testing and maximization, initiatives to increase nutritional
value, and incorporating new or lean manufacturing
procedures. The delicious food Indiana is home to is often
the silent result of systematic testing and experimentation.
Developing a food product that meets these standards involves a
deep process of experimentation, which can be costly and
time-consuming, as well.
Indiana's food and agricultural sector is a $16 billion
industry. Food and agricultural innovation
today is very diverse. It includes biotechnology, plant science,
bioinformatics, information technologies, food science and food
safety systems, animal health and nutrition, cropping systems,
and satellite technologies, among many others.
Purdue Research Park Economic Development
New industries and new departments from
existing industries grew out of Purdue research. The
nearly $1 billion Purdue Research Foundation manages and
licenses Purdue's intellectual property, accepts gifts,
administers trusts, acquires property and performs other
services helpful to the University . The park network has four
locations. It has 236 companies with more than 4,200 jobs. With
more than half a million square feet dedicated to incubation, it
is the largest university-affiliated incubation park complex in
the country.
The priority of the Innovators program is for the development of
new products with commercial potential. The Purdue Research
Foundation engaged Thomas P. Miller and Associates to conduct an
independent study of the economic impact of the Park across the
State of Indiana. In their findings, they concluded, that
combined, the Park is a top 20 employer in the State. There was
a $256 million investment in the Park facilities and
infrastructure from 1999-2000. They found that the economic
impact for the State of Indiana was $1.3 billion. Also, $48
million was contributed to State and local taxes. Since 1987,
$49 million was brought to Indiana in federal research and
development grants for small businesses. They stated that
high-tech, high quality jobs pay an average annual salary of
$63,000, which is 65 percent higher than the Indiana average.
Therefore, as a result of the Park, Purdue is viewed as a major
player in commercialization and economic development in Indiana.
Indiana University Partners with Eli Lilly and
Company
The School of Science at Indiana
University-Purdue University Indianapolis and the Indiana
University School of Medicine had announced their collaboration
with Eli Lilly and Company for the Lilly Graduate Research
Advanced Degrees program (LGRAD). The program was designed for
Lilly Research Labs employees based in Indianapolis. The goal of
the program is to help Lilly employees obtain advanced degrees
in a graduate program from the School of Medicine or School of
Science. In July 2020, the IU School of Medicine announced
a multi-million dollar strategic research agreement with
Lilly. The $5 million deal will span multiple projects and
teams. The objective is to gain insight into the molecular
and cellular changes that occur in patients after administration
of some of Lilly’s currently marketed autoimmune
therapies. These are also being developed for the
potential of new autoimmune diseases, including inflammatory
bowel disease and psoriasis.
“It makes sense for us to collaborate with IU School of Medicine
and the Indiana Clinical and Translational Sciences Institute
(ICTSI), located in our own backyard,” said Patrik Jonsson,
senior vice president and president of Lilly Bio-Medicines in
July of this year. “IU has a positive reputation for analytics
and informatics that we hope will benefit our autoimmune
pipeline for the patients it serves.”
Conclusion
Indiana is a powerhouse of research and
innovation. R&D is a key factor in doing business in
Indiana and pivotal to its continuing economic success.
Businesses should be aware of both federal and state tax
incentives which are available to help reduce their tax
liabilities while helping them grow and thrive in this economy.