Schedule IN-PAT

This article explains the process of claiming the qualified patents income exemption in Indiana, providing detailed, step-by-step instructions for completing Schedule IN-PAT, ensuring clarity for those filing the form.

Schedule IN-PAT is a form used by individuals, corporations, and nonprofit organizations in Indiana to claim an exemption for income derived from qualified patents. These patents, which must be utility or plant patents issued after December 31, 2007, are eligible for exemption if the invention originated from a development process conducted within Indiana. This exemption is particularly relevant for those involved in licensing, royalty income, or patent sales. The purpose of this form is to reduce the amount of taxable income by exempting certain income from the adjusted gross income tax, making it advantageous for businesses and individuals with qualifying patents.

How to File Schedule I N-P A T?

To file Schedule IN-PAT, individuals or entities must complete the form and attach it to their Indiana tax return, which could be either Form IT-20, IT-20NP, IT-40, or IT-40PNR. The exemption is claimed by reporting the income received from qualified patents, as well as the relevant tax year and percentage of exemption allowed for that year. The total exemption claimed in a year cannot exceed $5 million.

How to Complete Schedule IN-PAT Line-by-Line Instructions

How to Complete Schedule IN-PAT: Line-by-Line Instructions

Part 1: Information About the Claimant

  1. Name of Corporation, Nonprofit Organization, or Individual: Enter the full legal name of the entity or individual applying for the exemption.
  2. Check one: SSN, FEIN, PTIN: Choose the appropriate option to identify your taxpayer status (SSN for individuals, FEIN for corporations, or PTIN for tax professionals).
  3. Enter ID Number: Fill in the applicable identification number—either your SSN, FEIN, or PTIN.

Part 2: Patent Details

  1. Name of Patent: Enter the official name of the patent.
  2. Description of Patent: Provide a brief description of the patent, including its nature and functionality.
  3. Patent Filing Date: Specify the date the patent was filed.
  4. Number of Employees on Patent Filing Date: Enter the number of employees your organization had on the date the patent was filed. The exemption is only applicable if the entity had fewer than 500 employees at that time.

Part 3: Claiming Exemption for Patent Income

  1. Column 1 – Claiming Exemption for (List Tax Period Ending): Indicate the tax years for which you’re claiming the exemption. The exemption can be claimed for up to 10 years.
  2. Column 2 – Amount of Income from a Qualified Patent: Enter the total income you earned from the qualified patent during the listed tax year.
  3. Column 3 – Multiply by Percentage Allowed: For each tax year, use the corresponding percentage allowed. For the first five years, the percentage is 50% of the income received from the patent. After that, it declines by 10% annually.
  4. Column 4 – Amount of Exemption Claimed: Multiply the income (Column 2) by the percentage (Column 3) to determine the exemption claimed. Report this amount on your Indiana tax return form (e.g., IT-20, IT-40).

Carryforward Years

The exemption can be claimed for a maximum of 10 years. The percentage of income eligible for exemption begins at 50% for the first five years, and then decreases by 10% each year starting from the sixth year. Ensure that the total amount of exemptions claimed does not exceed $5 million in a taxable year.

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