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Minnesota Research & Development Tax Credit: Unlock Savings Under Minn. Stat. § 290.068
The Minnesota Credit for Increasing Research Activities incentivizes innovation by providing a nonrefundable tax credit, now with partial refundability starting in 2025, against corporate franchise or income tax liabilities through the Minnesota Department of Revenue. This credit rewards qualified research expenses (QREs) performed in the state, aligning closely with federal guidelines under IRC § 41 while offering unique tiered rates and carryforward provisions. Businesses in sectors like manufacturing, biotech, and software development can offset taxes or access cash refunds to fuel growth.
Eligibility requires performing qualified research activities (QRAs) in Minnesota that meet the four-part federal test under IRC § 41: technological in nature, business component purpose, uncertainty elimination via experimentation, and process improvement. All entity types qualify if QREs are incurred in-state.
Research must occur in Minnesota; out-of-state expenses don't qualify. Startups benefit from the 50% minimum base rule.
Minnesota uses the regular incremental method, mirroring the federal approach but limited to state-sourced QREs and gross receipts. The credit equals 10% of the first $2 million of excess QREs over the base amount, plus 4% on any excess above $2 million. Unused credits carry forward for 15 years or may be partially refunded starting in 2025 (election required).
The Minnesota Credit for Increasing Research Activities (Minn. Stat. § 290.068) provides a tiered credit: 10% on the first $2 million of excess QREs over the base, and 4% above $2 million. It's nonrefundable but partially refundable at 19.2% for 2025, with 15-year carryforward.
Activities must align with federal IRC § 41: technological development or improvement of products/processes via qualified experimentation, conducted in Minnesota. Examples include software prototyping, biotech formulations, or manufacturing efficiencies. Strike Tax reviews projects for compliance.
Savings depend on QREs and base; for $3 million QREs with $1 million base (excess $2 million), expect $200,000 credit, plus potential 19.2% refund on unused portions (~$38,400 cash in 2025). Stack with federal credits for up to 20–30% total ROI. Use our calculator for personalized estimates.
Yes, partially: 19.2% of unused credits refunded in 2025 (scaling to 25% in 2026–2027), subject to statewide target managed via rate adjustments. Ideal for cash-strapped startups; elect on original Schedule RD filing. Non-electing portions carry forward 15 years.
Compute on Schedule RD and attach to your Minnesota corporate tax return (generally prepared alongside federal Form 6765). For refunds, include election details. No separate application; timely filing is key. Strike Tax handles documentation and amendments.
Yes, businesses can stack state and federal credits for the same QREs, with Minnesota layered on top of federal, subject to standard federal limitations like IRC § 280C. Strike Tax optimizes dual claims for maximum savings.
House File 9 (signed June 2025) introduces partial refundability: 19.2% rate for unused credits, scaling to 25% through 2027, and a $25M statewide target for later years. No changes to rates or base method; enhances cash flow without altering core eligibility.
Yes, with a favorable 50% minimum base if no prior gross receipts, e.g., $1M QREs yields $100,000 credit at 10%. Pair with federal payroll offsets (up to $500K/year for 5 years if under $5M receipts). Strike Tax specializes in early-stage claims.
Retain 3.5+ years of records: time logs (65/25/10 rule for wages), invoices, project narratives, and prototypes. Align with federal Form 6765 Section G (for claims >$10K). Strike Tax provides audit-proof templates.
You can still claim: base = 50% current QREs, ensuring credits for in-state research. This supports remote innovators with Minnesota ties. Consult Strike Tax for base optimization.
Use our free calculator to estimate your federal and Minnesota benefits in under 5 minutes.
Schedule a 15-minute consultation to review your QREs and 2025 refund strategy.
Connect with us to find out how R&D tax credits can boost your organization’s bottom line.
The State of Minnesota, under 290.068, offers a Credit for Increasing Research Activities, a nonrefundable tax credit for all qualifying R&D activities. The credit calculation mirrors that of the federal R&D tax credit. Taxpayers may claim a credit against the corporate income or franchise tax equal to the sum of:
The credit may be carried forward up to 15 years but never carried back. To calculate the gross receipts for Minnesota, the average annual gross receipts and aggregate gross receipts must be calculated under Minnesota sales and receipts statute 290.191. Additionally, even if a company has zero gross receipts in Minnesota, they may still claim the credit and carry it forward.
Two different bills were introduced in 2022, SF 2970 and HF 3316. Both bills would provide different methodologies for the tax credit to be calculated, basing calculations on the Alternative Simplified Credit methodology. If one of these bills is passed, taxpayers would only need to substantiate QREs for the current and previous three taxable years. These bills have been tabled in committee, but provide a hint of where Minnesota R&D tax law could go.
Strike will keep Minnesota clients updated about potential R&D tax law changes.
Learn more about Minnesota's current R&D Tax Credit law here.
R&D Tax Credit Available:
Yes
Eligible Entities:
C-Corporations, S-Corporations, LLCs, Partnerships
Deadline for Tax Filing:
Due with Minnesota Tax Return
Data Required to Compute Credit:
Claim Period Federal Qualified R&D Expenses (QREs)
What Information is needed?
Minnesota Sales & Receipts for Prior 4 Years
Federal Form 6765
Credit Carryforward:
15 Years
No Carryback provision
To get an estimate of the potential value of your unclaimed R&D Tax Credits, try out our credit calculator.
Download our R&D Tax Credit Calculator for Android to see how much you can receive from your qualified R&D tax credit expenses.
The Minnesota Credit for Increasing Research Activities (Minn. Stat. § 290.068) provides a tiered credit: 10% on the first $2 million of excess QREs over the base, and 4% above $2 million. It's nonrefundable but partially refundable at 19.2% for 2025, with 15-year carryforward.
Activities must align with federal IRC § 41: technological development or improvement of products/processes via qualified experimentation, conducted in Minnesota. Examples include software prototyping, biotech formulations, or manufacturing efficiencies. Strike Tax reviews projects for compliance.
Savings depend on QREs and base; for $3 million QREs with $1 million base (excess $2 million), expect $200,000 credit, plus potential 19.2% refund on unused portions (~$38,400 cash in 2025). Stack with federal credits for up to 20–30% total ROI. Use our calculator for personalized estimates.
Yes, partially: 19.2% of unused credits refunded in 2025 (scaling to 25% in 2026–2027), subject to statewide target managed via rate adjustments. Ideal for cash-strapped startups; elect on original Schedule RD filing. Non-electing portions carry forward 15 years.
Compute on Schedule RD and attach to your Minnesota corporate tax return (generally prepared alongside federal Form 6765). For refunds, include election details. No separate application; timely filing is key. Strike Tax handles documentation and amendments.
Yes, businesses can stack state and federal credits for the same QREs, with Minnesota layered on top of federal, subject to standard federal limitations like IRC § 280C. Strike Tax optimizes dual claims for maximum savings.
House File 9 (signed June 2025) introduces partial refundability: 19.2% rate for unused credits, scaling to 25% through 2027, and a $25M statewide target for later years. No changes to rates or base method; enhances cash flow without altering core eligibility.
Yes, with a favorable 50% minimum base if no prior gross receipts, e.g., $1M QREs yields $100,000 credit at 10%. Pair with federal payroll offsets (up to $500K/year for 5 years if under $5M receipts). Strike Tax specializes in early-stage claims.
Retain 3.5+ years of records: time logs (65/25/10 rule for wages), invoices, project narratives, and prototypes. Align with federal Form 6765 Section G (for claims >$10K). Strike Tax provides audit-proof templates.
You can still claim: base = 50% current QREs, ensuring credits for in-state research. This supports remote innovators with Minnesota ties. Consult Strike Tax for base optimization.
