In the past 5 weeks, I have twice testified to the Minnesota House and Senate Finance Tax Committees on improving the Minnesota State R&D Tax Credit and restoring its status as one of the best state R&D Tax Credits in the country.
Starting January 1st of 2010, Minnesota made the state R&D Tax Credit refundable. The intent of making the credit refundable was to allow for immediate monetization of the credits when not able to otherwise be used, and thus freeing up money that’s able to be reinvested to grow the business and do more R&D. However, at the end of 2012, as a result of state budget issues, the refundability feature was eliminated.
Another enhancement to the credit in 2010 was to make all types of business entities (i.e. C corps, S corps, LLC’s, LLP’s, etc.) eligible for the MN credit. However, one group that somehow got overlooked were sole proprietors.
Thanks to the support of Representative Sarah Anderson (R) and Senator Terri E. Bonoff (DFL), bills were introduced to both the House and Senate Finance Tax Committees to again make the Minnesota State R&D Tax Credit refundable, and to add sole proprietors to the list of entities that can claim the MN credit.
As an R&D Tax Credit firm that helps companies all across the country, and thus having exposure to and knowledge of the many other state R&D Tax Credits, the purpose of my testimony was to give perspective of how the Minnesota State R&D Tax Credit stacks up against the other state credits. My message was “as a refundable credit, it’s one of the best in the country. Without the refundability feature, it’s very average.”
In addition to myself, Mark Gross, CEO of Formacoat® LLC in Savage, MN testified on behalf of sole proprietors that do R&D, and Genevieve Plumadore, Director of Government Relations at LifeScience Alley, testified on behalf of Minnesota LifeScience companies that would benefit from being able to immediately monetize the tax credits they could generate from doing R&D, but not use due to not having a tax liability to apply the credits against.