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Last Updated: 2/9/2017

Credit for Increasing Research Activities ("R&D Credit")

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

Beginning with tax year 2010, you may claim the R&D credit on your Minnesota income tax return if both of the following are true:

  • You’re a partner in a partnership or shareholder in an S corporation.
  • The partnership or business had qualifying R&D expenses in Minnesota that exceeded its “base amount” (as calculated for the federal R&D credit, but based on Minnesota gross receipts).

The amount of the credit is equal to 10 percent of qualifying expenses up to $2 million, and 2.5 percent for expenses above that level. Qualifying expenses include:

  • R&D expenses that qualify for the federal R&D credit and are for research done in Minnesota.
  • Contributions to qualified nonprofit organizations that make grants to small, technologically innovative businesses in Minnesota during their early development stages.

Beginning with tax year 2013, the credit is nonrefundable.  Any amount of the credit that you are not able to claim in the current year may be carried forward for up to 15 years.

For tax years before 2013, the credit is refundable. You may claim it even if your business didn’t make a profit for the year (C corporations may continue to claim any carryover credits from prior years).

View the statute, M.S. 290.068.

Note: View the Corporate Franchise Tax information on Credit for Increasing Research Activities ("R&D credit") for more information.

Claiming the Credit

If your partnership or S corporation paid qualified R&D expenses in Minnesota, it the entity completes Schedule RD, Credit for Increasing Research Activities. You’ll receive your share of the credit on Schedule KPI (for partnerships) or Schedule KS (for S corporations).
To claim the credit on your Minnesota tax return: