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S.F. No. 38 - Extending research & development credit to sole proprietors and requiring DEED certification (as proposed to be amended by the A-1)
Author: Senator Ann H. Rest
Prepared By: Nora Pollock, Senate Counsel (651/297-8066)
Date: February 2, 2015


This bill extends the research and development (R & D) credit to sole proprietors and requires that sole proprietors apply to the Department of Employment and Economic Development (DEED) for certification that the expenses for which the credit is claimed are qualified research expenses.  This change to the R & D credit would be effective beginning in tax year 2015.




Extends the R & D credit to sole proprietors.  Under current law, the credit is available for corporate franchise taxpayers and for individual taxpayers filing as S-corporations and partnerships.


Adds the requirement that sole proprietors who wish to claim the credit apply to DEED for certification that expenses are qualified research expenses.  The application must be submitted by September 15 of the year following the year in which qualifying expenses were incurred.  The commissioner of DEED must notify the applicant within 90 days of receipt of the application, and must then issue a credit certificate to the applicant.  The commissioner of DEED must notify the commissioner of revenue of the issuance of the credit certificate, the amount of the credit, and the taxable year to which the credit applies.  To claim the credit, the taxpayer must file an amended return containing the credit certificate for the year to which the credit applies.  The credit must not be issued unless the commissioner of revenue has received the certification from DEED.     


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