Minnesota R&D Tax Credit

The R&D tax credit is a tax incentive intended to spur innovation, accelerate the adoption of new technology, and support businesses that invest in research and development. Numerous states have implemented such benefits to support companies in their area, and Minnesota is no different. Here’s an overview of the Minnesota R&D tax credit and common answers regarding eligibility and claiming the credit.

Minnesota Research and Development Tax Credit Explained

Under Minnesota Statute 290.068, the state provides a nonrefundable tax credit for all eligible R&D activities called the Credit for Increasing Research Activities. The same method you use to calculate the federal R&D credit can be applied to this incentive.

You can claim the Minnesota research tax credit against franchise or corporate income tax by completing Schedule RD. The sum equals 10% of the first $2 million QREs that exceed the base amount and 4% of all such surplus costs exceeding $2 million. Contributions to qualifying nonprofit organizations that award grants to start-up small, technologically innovative firms are also eligible as QREs.

Although you can never carry the Minnesota research and development tax credit back, you can carry it forward for up to fifteen years. According to Minnesota sales and receipts statute 290.191, to determine Minnesota gross receipts, you must calculate the average yearly gross receipts and aggregate gross receipts. However, a business may still apply for the credit and carry it forward even if it has no gross receipts in Minnesota.

How to Calculate Minnesota Research Tax Credit

The credit equals 10% of the first $2 million of QREs over the base amount and 4% of expenses over $2 million. However, you can’t use the Alternative Simplified Method to calculate Minnesota R&D tax credit.

Minnesota Research and Development Tax Credit: Takeaway

You might be eligible to benefit from Michigan’s R&D tax credit if you run a company in the area. However, the credit cannot exceed the tax liability and is not refundable.

FAQs

What kind of companies can apply for an R&D tax credit in Minnesota?

Partnerships, LLCs, S-Corporations, C-Corporations

What is the deadline for applying for an R&D tax credit in Minnesota?

You must submit your application together with the Minnesota Tax Return.

What data do I need to calculate credit an R&D tax credit in Minnesota?

Claim period Federal QREs (Qualified R&D Expenses)

What information do I need to provide when filing an R&D tax credit in Minnesota?

Federal Form 6765 and Minnesota sales and receipts from the past four years.

Is credit carryforward an option in Minnesota?

Yes, up to fifteen years, but without the carryback provision.