Are R&D Tax Credits Available in Minnesota?
Yes. The state of Minnesota provides the Research Development (R&D) Tax Credit very similar to the federal version, including the definition of qualifying research. Below are some of the differences between the federal and Minnesota research and development tax 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 carry forward 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 for 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
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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 | ||
You can read more about this Minnesota tax credit case study here.
Four-Part Test
Qualified research activities are defined by the four-part test outlined below
Technological in Nature
Activities must fundamentally rely on the principles of physical or biological science, engineering, or computer science.