How much of Minnesota's R&D credit comes back as cash?

The partial refund was added to Minn. Stat. 290.068 by H.F. 9, signed June 14, 2025. It is available to a taxpayer whose current-year credit is larger than its Minnesota tax. For a partnership or S corporation, the entity does not make the choice. The partners or shareholders make the election.

The credit itself is 10 percent of the first $2 million of Minnesota QRE over the base and 4 percent above that, claimed on Schedule RD. The refund is a share of that credit.

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 to keep statewide refunds near $25 million, so the 2028 figure cannot be known in advance. The refund is computed on current-year credit, before prior-year carryforwards are applied, so an older balance cannot be turned into cash.

Illustrative example. A pre-profit SaaS company has $600,000 of Minnesota QRE over its base in 2026, all within the first $2 million, so its credit is $60,000. It owes no Minnesota tax. With the election, 25 percent of $60,000, or $15,000, is refunded, and $45,000 carries forward. The same credit in tax year 2025 would have produced $11,520 at 19.2 percent. If the company also holds $20,000 of carryforward from earlier years, that $20,000 stays in the carryforward either way.

The election is made on a timely filed return, and extensions count. A late return loses the option for that year. Once made, the election is irrevocable for that year, so the decision should be settled before filing, with a view of whether the company expects to owe Minnesota tax soon.

Whatever is not refunded carries forward for 15 years, whether the company elected or not. A company that skips the election keeps the full amount as a carryforward. The trade is simple: cash now at 25 cents on the dollar, or the whole credit later against tax the company may or may not owe within 15 years.

The refund is a share of the credit on Schedule RD, so it is only as solid as the QRE and base behind that credit. Minnesota's credit rests on federal Section 41 qualified research, and the four-part test analysis and wage detail that support the federal credit support the Minnesota claim too.

R&D Binder produces the federal Section 41 documentation from your commit history and payroll. Your CPA files the return and makes the election with you, 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 carryforward
• 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
• 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