Short answer. Minnesota's research credit is 10 percent of the first $2 million of in-state research spending over a base, and 4 percent above $2 million. Since H.F. 9 in 2025 it is partly refundable: you can elect to cash out 19.2 percent of unused credit for tax year 2025 and 25 percent for 2026 and 2027. Unused credit carries forward 15 years.
Key facts
| Rate (first $2M over base) | 10% of Minnesota QRE |
|---|---|
| Rate (above $2M) | 4% |
| Refundable | Partial: elect 19.2% (2025), 25% (2026-2027) |
| Carryforward | 15 years |
| Statute | Minn. Stat. 290.068 |
10 percent, then 4 percent
Minnesota's rate steps down once your research spending passes $2 million.
The credit is 10 percent of the first $2,000,000 of Minnesota qualified research expenses over the base amount, and 4 percent on anything above $2,000,000. This two-tier structure has applied for tax years beginning after December 31, 2016. It is incremental, like the federal credit: only spending above the base earns credit, and the base is the federal Section 41(c) base recomputed using Minnesota gross receipts.
The credit offsets the corporate franchise tax, or the individual income tax for owners of pass-through entities such as LLCs and S corporations.
Part of it is now cash
For most of its history the credit was useless to a company with no Minnesota tax. That changed in 2025.
H.F. 9, signed June 14, 2025, lets you elect a refund of part of the credit that exceeds your tax liability, for tax years beginning after December 31, 2024. The refundable 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, 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. For an unprofitable software company with no Minnesota tax to offset, the election turns part of the credit into cash for the first time.
What happens to the rest
Whatever you do not refund keeps its old treatment.
Any unused credit you do not elect to refund carries forward up to 15 years. There is no carryback. So even before the refund election, a credit you cannot use this year is not lost; it banks against future Minnesota tax.
More on Minnesota's R&D credit
The full state overview, the federal Section 41 work it builds on, and related state guides:
Sources
Every claim on this page traces to a primary authority. Each source below is independent and verifiable.
- Minnesota Statutes 290.068 (credit for increasing research activities) - Minnesota Office of the Revisor of Statutes
- Minnesota Department of Revenue, Credit for Increasing Research Activities - Minnesota Department of Revenue
- 26 U.S.C. ยง 41 (credit for increasing research activities) - Cornell Law School, Legal Information Institute
Get documentation built to survive an exam
R&D Binder produces the federal Section 41 binder and the Minnesota state workpaper from one engagement, both built to survive an exam.