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 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 to claim credits for years 2010 through 2013. 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. Summary of credits:

FEDERAL MINNESOTA
Year Total QREs Credit Total QREs Credit
2013 $1,045,800 $104,580 $1,045,800 $52,290
2012 832,499 83,331 832,499 41,625
2011 565,925 56,593 565,925 28,296
2010 498,563 49,856 498,563 24,928
Total $5,503,651 $390,726 $5,503,651 $516,329

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