Credit for Increasing Research Activities (R&D Credit)

You may qualify if both of these 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)

Qualifying expenses include either of these:

• 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

The credit is equal to 10% of qualifying expenses up to $2 million, and 4% for expenses above that level.

This credit is nonrefundable. You may carry forward up to 15 years any credit amount you are not able to claim in the current year.

For details, see Minnesota Statute 290.068 and the Minnesota Corporate Franchise Tax webpage on the credit.

The partnership or S corporation who paid qualified R&D expenses in Minnesota completes Schedule RD, Credit for Increasing Research Activities. You’ll receive your share of the credit on Schedule KPI, Partner’s Share of Income, Credits and Modifications (for partnerships), or Schedule KS, Shareholder’s Share of Income, Credits and Modifications (for S corporations).

To claim the credit on your Minnesota tax return:

1. Complete Schedule M1C, Other Nonrefundable Credits.
2. Report the amount of your credit on Form M1, Individual Income Tax.
3. When filing Form M1, include the schedule you completed in step 1 and a copy of Schedule KPI or Schedule KS.