Minnesota Research and Development Tax Credit Summary

The Minnesota R&D Tax Credit is very similar to the federal version, including the definition of qualifying research. Below are some of the differences between the federal and Minnesota research credits.

  • The credit is 10% of the qualifying expenditures up to $2 million and 2.5% for expenses above $2 million.
  • Only qualifying research expenses incurred in Minnesota can be captured towards the Minnesota research and development tax credit.
  • For Partnerships and S corporations, the credit was refundable from 2010 through 2012.
  • C corporations can continue to carryforward any credits prior to 2010 and after 2012.
  • For tax years beginning after 2012, C corporations may apply the credit to any member of a corporation or business that is included in the combined return.
  • Credit can be carried forward up to 15 years.

Minnesota R&D Tax Credit Case Study
A Minnesota Company develops circuit boards used by their clients. It had never before claimed the R&D credit for the development activities of its software programmers. This project involved a four-year study with a three-year look back.

The Company qualified for the federal R&D Tax Credit of $294,360 and an additional $147,139 of state R&D Tax Credit in Minnesota.

FEDERAL
MINNESOTA
Year
Total QREs
Credit
Total QREs
Credit
Year 4
$1,045,800
$104,580
$1,045,800
$52,290
Year 3
832,499
83,331
832,499
41,625
Year 2
565,925
56,593
565,925
28,296
Year 1
498,563
49,856
498,563
24,928
Total $5,503,651 $390,726 $5,503,651 $516,329