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Last Updated: 2/22/2017

Minnesota R&D Credit Differences to Federal Credit

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The Minnesota R&D credit is based on the federal R&D credit, however there are some significant requirement and calculation differences. Be familiar with the Minnesota provisions for the year you are claiming the research credit. See Section 41 of the Internal Revenue Code and Minnesota Statutes 290.068.

Some of the Minnesota modifications to federal law include the following:

  • To qualify for the R&D credit, “Qualified Research” must be conducted in Minnesota. This means the actual activities for the Qualified Research Expenses (QREs) must be performed in Minnesota. Qualified Research does not include ordering research from Minnesota or connected to R&D conducted in Minnesota.

  • Minnesota does not conform to the federal “Alternative Simplified Method.”

  • The credit may be carried over for a period up to 15 years, but it cannot be carried backwards.

  • The definition of “gross receipts” differs. Minnesota sales or gross receipts must be used when calculating the Minnesota “base amount.”

  • A taxpayer with Minnesota QREs and zero Minnesota gross receipts may still claim the Minnesota credit.

  • The credit was refundable in Minnesota for tax years 2010-2012.