Business Taxes

Research and Development Tax Credit

Three bills heard in the Tax Reform Division would make improvements to the existing research and development tax credit, a lucrative tax benefit that encourages entrepreneurs and start-up businesses in Minnesota. Testifiers praised the set of bills as policies that will continue to make Minnesota more competitive and encourage innovation.

When Minnesota’s R&D credit was first enacted in 1982, it was available to be applied to the corporate franchise tax and individual income tax, including sole proprietors. In 1987, the state narrowed the application to only be applied against the corporate franchise tax. Two of the bills heard this year would expand it again to include sole proprietors and make it accessible to all groups that originally were allowed to utilize the credit when it was first enacted. Another bill proposes to increase the credit available and make it refundable.

STATUS: The bills were laid over for possible inclusion in the omnibus bill. (S.F. 38/S.F. 305/S.F. 351)

Corporate Franchise Tax Transfers

A bill aimed at encouraging entrepreneurs would provide Minnesota start-ups with cash to help offset their initial costs. Under this proposal, corporations could purchase unused Minnesota Net Operating Loss carryovers from emerging technology and biotech start-up businesses. Purchasing companies would receive tax credits equal to the amount of the tax benefits being transferred, and smaller companies would receive cash to help offset initial start-up costs.

This bill would allow small start-ups to have some cash flow during their early stages, while providing tax benefits to larger corporations also settled in Minnesota.

STATUS: The bill was laid over for possible inclusion in the omnibus bill. (S.F. 1253)

Vendor Sales Tax Collection Credit

Three proposals were heard to create a vendor allowance for retailers who collect and remit Minnesota sales taxes. It’s a model used by 28 other states to provide retailers a reimbursement of a portion of the costs associated with collecting and remitting the state’s sales taxes. The allowance would be available as long as the vendor filed and paid in a timely fashion, and it could not exceed the total amount of taxes reported in one reporting period.

STATUS: The bills were laid over for possible inclusion in the omnibus bill. (S.F. 324/S.F. 160/S.F. 1702)

Angel Investment Tax Credit

The Small Business Investment Tax Credit – commonly known as the Angel Investment Tax Credit – was enacted in 2010 and is another mechanism to help start-up businesses in Minnesota. The current credit is set to sunset after 2016. The Tax Reform Division heard three bills that would extend that deadline as well as adjust the annual appropriation, timeline, and business targets.

STATUS: The bills were laid over for possible inclusion in the omnibus bill. (S.F. 119/S.F. 185/S.F. 186)

Accelerated Sales Tax Payments

Businesses with annual sales tax liabilities over $250,000 must currently submit most of their June sales tax liabilities before the close of the Fiscal Year on June 30. This is a budget shift mechanism that has been used several times since the 1980s to artificially balance the state’s budget. The Tax Committee heard a proposal to undo this shift and eliminate any obligation for retailers to remit a portion of their June sales tax liabilities early. The Department of Revenue estimated this bill would affect about 2,300 retailers throughout Minnesota.

STATUS: The bill was laid over for possible inclusion in the omnibus bill. (S.F. 8)

NEXT IN TAXES: Property Tax Relief


Senate DFL Media