Navigate Up
Sign In
Last Updated: 10/26/2017

Frequently Asked Questions

Contact Us

Corporate Franchise Tax

651-556-3075
8:00 a.m.- 4:30 p.m. Mon.- Fri.

more

Related Information

Corporation Franchise Tax > Tax Information > Research Credit

  • Who may qualify for the credit?Back to top

    ​If your business paid certain research and development (R&D) expenses in Minnesota, you may qualify for the Credit for Increasing Research Activities, or “R&D credit”.

  • Which taxpayers may qualify for the credit?Back to top

    • C corporations
    • Individual shareholders or partners of S corporations and partnerships with qualifying credits claimed

  • How do C corporations claim the credit?Back to top

    Determine the credit amount by completing Form RD. Include any amount of the credit reported to the corporation on Schedule KPC by a partnership in which the corporation is a partner.

  • How do S corporations and partnerships claim the credit?Back to top

    For tax years beginning after 2009, if an S corporation or partnership paid qualified expenses in Minnesota, the business entity must:

    • Determine the credit amount by completing Form RD.
    • Distribute the credit to partners or shareholders. For more information:

  • How do individual shareholders or partners claim the credit?Back to top

  • How is the credit calculated?Back to top

    You receive 10 percent of the excess of current year research expenditures over a computed base amount for the first $2 million of qualified research expenses. In addition, for the qualified research expenses over $2 million, you receive 2.5 percent of the excess of current year research expenditures over a computed base amount.

  • May unused credits be carried forward?Back to top

    For tax years beginning after December 31, 2012, if the earning member of the combined reporting group is unable to claim the credit in a tax year, they must assign the credit to another member of the combined group. For more information, see M.S. 290.068, subdivision 3(a).

    If no combined group member is able to use the credit earned in that tax year, you may carry over any unused amount up to 15 future years until none remains.

  • What research activities, supplies and contracts do not qualify for the Minnesota R&D credit?Back to top

    Some non-qualifying activities include:

    • Research activities performed outside of Minnesota.
    • Research conducted in the social sciences, arts, or humanities.
    • Ordinary testing or inspection of materials or products for quality control.
    • Market and consumer research.
    • Research relating to style, taste, cosmetic, or seasonal design.
    • Advertising and promotional expenses.
    • Management studies and efficiency studies.
    • Acquisition and improvement of land.
    • Certain property used in research which can be depreciated or depleted.
    • Research conducted after the beginning of commercial production.
    • Research related to the adaptation of an existing business component.
    • Research related to the duplication of an existing business component from physical inspection, plans, blueprints, etc.
    • Funded Research.

  • Will the Minnesota Department of Revenue provide educational speakers on the R&D credit to the public?Back to top

    The department will work with associations to provide an R&D informational session if requested.

    To request a session, contact us :
    651-556-3075
    businessincome.tax@state.mn.us

  • What do the terms listed below mean from the Informational Box on the bottom of Page 2 on Form RD?Back to top

    • Assist in the calculation or preparation of the tax credit: A taxpayer may consult with or asked questions of a CPA, attorney, consultant, or other person who is not an employee of the taxpayer to determine the amount of qualified research expenses eligible for inclusion in the calculation of the credits. See Section 41 of the Internal Revenue Code or Minnesota Statutes 290.068.
    • R&D tax credit study: Any analysis of taxpayer data, whether performed on-site or remotely, to determine the amount of qualified research expenses eligible for inclusion in the calculation of the credits  - allowed under Section 41 of the Internal Revenue Code or M.S. 290.068.

    Taxpayer data includes, but is not limited to:

    • employee time records
    • invoices
    • any documentation of expenses
    • surveys
    • iterviews
    • other information relevant to the calculation of the credit

    Note: An R&D tax credit study may or may not result in a written report.

    • Conduct a R&D tax credit study: when the CPA, attorney, consultant, or other person who is not an employee of the taxpayer engages in, assists with, or leads a R&D tax credit study as defined above.