How long does Minnesota's R&D credit carry forward?

Minnesota's credit is 10 percent of the first $2 million of Minnesota research spending over a base and 4 percent above that. When the credit for a year is larger than your tax, the unused amount carries forward for up to 15 years and can be applied against Minnesota tax in later years. For a software company that expects to stay unprofitable for a while, 15 years is a long runway.

The credit is claimed on Schedule RD each year. A company that earns credit in several years ends up holding several layers of carryforward, each with its own 15-year clock, so it pays to keep a running schedule of how much was earned in which year and how much has been used.

You may elect to have part of the current-year credit that remains after your tax liability reaches zero refunded. The share is 19.2 percent for tax year 2025 and 25 percent for 2026 and 2027. From 2028 it is the lesser of 25 percent or a rate the commissioner sets each year to keep statewide refunds near $25 million, so the future percentage is not fixed.

Two limits matter for planning. First, the refund reaches only current-year credit, measured before prior-year carryforwards are applied, so credit already sitting in your carryforward cannot be cashed out this way. Second, the election has to be made on a timely filed return, extensions included, and it cannot be undone for that year. For a partnership or S corporation, the partners or shareholders make the election, not the entity.

Say a Minnesota software company earns a $40,000 research credit for tax year 2026 and owes no Minnesota tax that year. If it makes the refund election, 25 percent of the $40,000, or $10,000, comes back as a refund. The other $30,000 carries forward.

If it skips the election, the full $40,000 carries forward instead. Either way the carried amount stays available for up to 15 years. The choice is between $10,000 now and keeping that $10,000 for a later year when the company expects to owe tax. Because the election is irrevocable for the year, it is worth settling before the return is filed.

A credit earned in 2026 might not be applied until the 2030s. When it finally reduces tax, the research and the expenses behind it still have to be supported, long after the engineers who did the work may have moved on. Documentation written close to the work holds up far better than a reconstruction years later.

Minnesota's credit rests on federal Section 41 qualified research. R&D Binder produces the federal Section 41 documentation from your commit history and payroll, which the Minnesota claim builds on. Your CPA files the return, and whether your facts qualify is your CPA's call.

• Minnesota's R&D credit (full overview)
• Minnesota R&D credit rate
• Minnesota vs the federal credit
• Minnesota R&D credit refund
• 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

• Minnesota Statutes 290.068 (credit for increasing research activities) - Minnesota Office of the Revisor of Statutes
• Minnesota 2025 Schedule RD instructions - Minnesota Department of Revenue
• Minnesota Department of Revenue, Credit for Increasing Research Activities - Minnesota Department of Revenue
• Eide Bailly, Minnesota introduces refundability for R&D tax credits (updated August 2026) - Eide Bailly LLP
• Winthrop & Weinstine, Minnesota R&D tax credit now partially refundable (August 2025) - Winthrop & Weinstine