On September 11, 2017, the IRS issued new guidance on the R&D credit. View the full text of the guidance on the IRS website
The directive lays out the examination process the IRS will use for the Research and Development Credit claimed by Large Business & International (LB&I) taxpayers who meet both of the following requirements:
- Have assets equal to or greater than $10,000,000.
- Follow U.S. GAAP to prepare their Certified Audited Financial Statements who show a separate line item or separately state the amount of currently expensed ASC 730 Financial Statement R&D.
The directive also requires specific documentation be made available upon request during an audit if the taxpayer chooses to follow the IRS Directive along with a completed and signed Certification Statement.
For LB&I taxpayers that file a Minnesota business return and meet the above requirements, the Minnesota Department of Revenue will follow the IRS guidelines and allow the use of GAAP expenditures for calculation of the Minnesota Research and Development Credit. During an audit, taxpayers making this election must provide the following information when requested by the department, for each tax period the taxpayer chooses to follow the IRS Directive for Minnesota purposes:
- A copy of the completed and signed Certificate Statement filed with the IRS
- All U.S. ASC 730 Financial Statement R&D In-house Research performed outside of Minnesota.
We may also request other relevant documentation during an audit.
Taxpayers that choose to follow the IRS Directive must make the following changes to their federal calculations when computing the credit for Minnesota purpose (See Minnesota Statute 290.068, subdivision 2(b).):
- From the Computation of Adjusted ASC 730 Financial Statement R&D under the IRS Directive Appendix C, Line 9, subtract “All U.S. ASC 730 Financial Statement R&D In-house Research performed outside Minnesota.”
- For the Adjusted ASC 730 Financial Statement R&D Wage Detail under the IRS Directive Appendix D, include only wages attributed to qualified research conducted within Minnesota.