Minnesota Credit for Increasing Research Activities

Program overview

Minnesota provides a credit on the increase in qualified research expenses for research conducted in Minnesota, with a higher rate applied to the first tranche of qualifying spending. The credit is non-refundable for C corporations but a portion is refundable for individual partners and shareholders of pass-through entities, an unusual structure that benefits closely held engineering and manufacturing firms. Minnesota follows federal Section 41 definitions.

Eligibility

Corporations, partnerships and S corporations with qualified research expenses for research conducted in Minnesota.

Benefits

Non-refundable for corporations; partially refundable for individual owners of pass-through entities.

Minnesota IDR questions

What an examiner is likely to ask about this credit. S1–S7 apply to every state claim; the rest come from this program's own rules.

1. S1Confirm the research was physically performed within Minnesota.
2. S2Provide the Minnesota qualified research expense calculation and base amount.
3. S3Reconcile Minnesota expenses to the federal Form 6765.
4. S4Show how wages and supplies were apportioned between Minnesota and other locations.
5. S5Provide the Minnesota return and credit schedule for each year claimed.
6. S6Show the carryforward schedule for unused Minnesota credits.
7. S7Confirm the entity claiming the credit is the entity subject to Minnesota tax.
8. MN-1Show the Minnesota refund eligibility tests (such as small business status) were met in each year refunded.

Draft questions for illustration, reviewed by a specialist before any engagement.