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S.F. No. 996 - R & D alternative simplified credit allowed
 
Author: Senator David H. Senjem
 
Prepared By: Nora Pollock, Senate Counsel (651/297-8066)
 
Date: February 19, 2019



 

The research and development credit represents the increase in Minnesota qualified research expenses (QREs) in a tax year over a “base amount.” The base amount is the larger of the following two calculations:

  • 50% of QREs; or
  • Average Minnesota sales for the four preceding tax years multiplied by the “fixed base percentage.” The fixed base percentage equals the total Minnesota QREs from 1984 to 1988 divided by its total Minnesota gross receipts for that period.

The base amount is then subtracted from the current year QREs to determine the credit eligible QREs. The credit-eligible QREs are then applied to the two-tiered credit calculation.

Section 1 authorizes a third method (the “alternative simplified credit” or “ASC”) for calculating the credit. The credit equals 6% multiplied by QREs for the taxable year over the base amount.  

Section 2 defines the base amount for purposes of the ASC election. The ASC equals 50% of average Minnesota QREs over the three years immediately preceding the tax year in which the credit is claimed.

Section 3 authorizes taxpayers electing the ASC calculation to revoke the election without the commissioner’s approval. Those taxpayers would be disallowed from electing the ASC method for the next five taxable years.

Effective beginning in tax year 2019. 

 
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