Minnesota R&D Tax Credit Filing Instructions
To claim the Research and Development (R&D) tax credit in Minnesota, businesses must first identify their qualified research expenses (QREs) that align with federal R&D credit definitions, but are specifically for research conducted within Minnesota. The credit is nonrefundable and is equal to 10% of the first $2 million of Minnesota QREs exceeding a base amount, and 4% on any such excess expenses over $2 million. The primary form that needs to be filed to make the state R&D tax credit claim is Schedule RD, Credit for Increasing Research Activities. This schedule is completed by the corporation or pass-through entity (partnership or S corporation) that incurred the qualified expenses. If the credit is passed through from a partnership or S corporation, individual partners or shareholders will receive their share of the credit on Schedule KPI (Partner’s Share of Income, Credits and Modifications) or Schedule KS (Shareholder’s Share of Income, Credits and Modifications), respectively. They then report this credit on Schedule M1C, Other Nonrefundable Credits, when filing their Minnesota individual income tax return (Form M1). The credit can be carried forward for up to 15 years if it cannot be fully utilized in the current tax year.