Minnesota R&D Tax Credits

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:

1. 10% of the first $2 million of the excess (if any) of the "qualified research expenses" for the taxable year over the base amount; and
2. 4% on all of such excess expenses over $2 million.
   
   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.

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Learn more about Minnesota's R&D Tax Credit law here.

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R&D Tax Credit Available:‍

Yes

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Eligible Entities:‍

C-Corporations, S-Corporations, LLCs, Partnerships

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Deadline for Tax Filing:‍

Due with Minnesota Tax Return

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Data Required to Compute Credit:‍

Claim Period Federal Qualified R&D Expenses (QREs)

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What Information is needed?‍

Minnesota Sales & Receipts for Prior 4 Years

Federal Form 6765

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Credit Carryforward:‍

15 Years

No Carryback provision

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The R&D tax credit equals:

• 10% of the first $2 million of qualifying expenses over the base amount, and 4% of expenses over $2 million.
• Minnesota does not conform to the federal “Alternative Simplified Method".

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Specific Items to Note:

• The credit is non-refundable and cannot exceed the tax liability.
• QREs can include contributions to qualified nonprofit organizations that make grants to small, technologically innovative businesses in Minnesota during their early development stages.