Minnesota made the R&D credit partially refundable.

Rate	10% (first $2M over base), 4% above
Refundable	Partial (H.F. 9 cash-out election)
Carryforward	15 years

Minnesota's R&D credit was nonrefundable for its whole history. If you could not use it against tax this year, you banked it and carried it forward. H.F. 9, signed by the governor on June 14, 2025, changed that for tax years beginning after December 31, 2024.

You may now elect to receive a refund of part of the credit that exceeds your tax liability. The refundable share is set by statute and steps up over time:

• 19.2 percent for tax year 2025.
• 25 percent for tax years 2026 and 2027.
• From 2028 on, the lesser of 25 percent or a rate the commissioner publishes each year, with total statewide refunds capped at $25 million a year.

The election is made on a timely filed return, extensions included, and it is irrevocable for that year. The rest of the credit keeps its old treatment: any unused amount you do not refund carries forward up to 15 years.

Why this matters for a startup: a nonrefundable credit is worth nothing to a company with no Minnesota tax to offset. The refund election turns part of the credit into cash for the first time, which is exactly the case for an unprofitable software company that is still spending more on engineering than it earns in Minnesota.

The credit is the federal research credit, narrowed to Minnesota. The mechanics:

• Rate. 10 percent of the first $2,000,000 of Minnesota qualified research expenses over the base amount, and 4 percent on the excess above $2,000,000. This two-tier structure applies for tax years beginning after December 31, 2016.
• It is incremental. Like the federal credit, Minnesota counts only research spending above a base amount. The base is the federal Section 41(c) base, recomputed using Minnesota gross receipts. The fixed-base percentage is 3 percent for companies that started after 1988, capped at 16 percent.
• Minnesota-only. The research has to be performed in Minnesota. Expenses for research done outside the state do not count, even where the federal definition would include them.
• Same expense definition as federal. Qualified research expenses follow IRC Section 41: wages for qualified services, supplies, and contract research. The work that supports your federal claim supports the Minnesota claim, limited to the Minnesota-performed portion.
• Who claims it. The credit offsets the corporate franchise tax, or the individual income tax for owners of pass-through entities such as LLCs and S corporations.
• A 50 percent ceiling. The credit cannot exceed 50 percent of the business's research expenditures for the year.
• Carryforward. Unused credit carries forward up to 15 years. There is no carryback.

The credit is claimed on Schedule RD, Credit for Increasing Research Activities, filed with the Minnesota return.

R&D Binder produces federal Section 41 documentation from your GitHub commit history. The binder is what supports your federal Form 6765 and, starting tax year 2026, the mandatory Form 6765 Section G appendix. Because Minnesota uses the same Section 41 expense definition, that same evidence supports the Minnesota credit for the portion of the work performed in Minnesota.

The Minnesota state credit workpaper is a $995 add-on to the standard binder engagement. It produces:

• A Minnesota-attributable QRE breakdown: wages, supplies, and contractor expenses tied to research performed in Minnesota, using the same business-component partition as the federal binder.
• Schedule RD input values: Minnesota qualified research expenses, the base amount, and the credit computed at the 10 and 4 percent tiers.
• A refund-election note: whether electing the partial refund or carrying the credit forward fits your tax position, with the refundable percentage for the year.
• Filing notes for your CPA: that the credit goes on Schedule RD, which return it attaches to, and the election deadline.

We do not file Schedule RD or sign the Minnesota return. That stays with your CPA, the same way federal Form 6765 does. R&D Binder produces the workpaper; your CPA files.

If you operate in more than one state, additional state workpapers are $995 each. Most states with an R&D credit track the federal QRE definition closely, so the marginal cost per state is low once the federal binder is complete.

A worked example. A Minneapolis SaaS company with 12 engineers, $2.4M in qualifying wages (the federal QRE pool), and 9 engineers performing their research in Minnesota.

• Federal Section 41 credit. Computed on the full $2.4M federal QRE pool through Form 6765, claimed by the CPA. R&D Binder produces the binder, QRE workpaper, and Form 6765 Section G appendix.
• Minnesota credit. Computed on the Minnesota-performed portion of QREs. Allocate roughly $1.8M to Minnesota ($2.4M times the 9/14 engineer ratio, refined by each employee's actual research location). Assume a base amount of $300,000 for illustration. The excess over the base is $1.5M, all inside the first $2M tier, so the credit is 10 percent of $1.5M, or $150,000.
• The refund election. If the company is pre-profit with no Minnesota tax to offset, the full $150,000 is unused. For tax year 2025 it can elect to refund 19.2 percent of that, which is $28,800 in cash, and carry the remaining $121,200 forward for up to 15 years.
• Total engagement cost. SaaS Standard tier ($4,995, 6 to 25 FTE) plus the Minnesota state workpaper add-on ($995). Total $5,990.

The base amount and the engineer allocation are specific to each company; the numbers above are illustrative. The CPA files both returns. R&D Binder never appears on the federal or Minnesota return.

If the Minnesota Department of Revenue examines a return on which the research credit was claimed, the substantiation expected is the same kind the IRS expects under federal Section 41: business-component identification, four-part-test rationale, contemporaneous evidence, and QRE allocation by employee, contractor, and supplies, plus support that the research was performed in Minnesota. The binder R&D Binder produces is built to that standard from the federal side, and the Minnesota workpaper inherits the same business-component structure and adds the in-state allocation.

Our standard scope ends at delivering the binder and the state workpaper. Audit-defense engagement for a Minnesota Department of Revenue examination is a separate scope at $250 per hour, scoped per incident. We do not represent before the Department; that remains your CPA's responsibility or your tax controversy attorney's.

• Minnesota Statutes section 290.068 (Credit for Increasing Research Activities), including the rate structure, the Minnesota-only limitation, the 15-year carryforward, and the refund election at subdivisions 3a and 3b. Minnesota Office of the Revisor of Statutes.
• H.F. 9, 2025 regular session, signed June 14, 2025, which added the partial refund election effective for tax years beginning after December 31, 2024 (19.2 percent for 2025, 25 percent for 2026 and 2027, then the lesser of 25 percent or an annually published rate, capped at $25 million in aggregate refunds per year).
• Minnesota Department of Revenue, Credit for Increasing Research Activities, and Schedule RD.
• Minnesota House Research Department, Minnesota Research and Development Tax Credit (December 2024), for the rate structure, the incremental base amount, the 50 percent ceiling, and the carryforward (this nonpartisan summary predates H.F. 9, so the refund election is sourced to the statute and Department of Revenue above).
• IRS Form 6765 (federal Credit for Increasing Research Activities) and Internal Revenue Code Section 41, the federal definition Minnesota incorporates.

This page is general informational content, not tax advice for any specific taxpayer. The Minnesota credit is administered by the Minnesota Department of Revenue. Rates, the refund percentages, and procedural requirements reflect Minnesota Statutes section 290.068 and Department of Revenue guidance as of June 2026. Confirm current figures and deadlines with your CPA or the Department before filing.

• The Section 41 four-part test
• What is a qualified research expense (QRE)?
• Form 6765 and Section G
• Wisconsin R&D credit
• Arizona R&D credit
• California R&D credit
• Connecticut R&D credit