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S.F. No. 1008 - Fixed base percentage allowed for R & D credit
Author: Senator Carla J. Nelson
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.

Under federal law, the maximum fixed base percentage is 16% and for businesses starting up after 1988, the base amount is 3%.

This bill would allow businesses to use the 16% fixed base percentage if there are inadequate records or records are unavailable to calculate or verify the fixed base percentage.

Effective beginning in tax year 2019.

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