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2023 Schedule RD Instructions
If your business paid qualified research and development expenses in Minnesota, and those expenses exceed base a
amount, you may be entitled to this credit.
The credit equals 10 percent of the first $2,000,000 of qualifying expenses over the base amount, and 4 percent of expenses over $2,000,000.
Partnerships and S corporations are allowed to pass the credit through to their partners and shareholders.
Qualified Expenses
Round amounts to the nearest whole dollar.
Lines 1–6
Qualified research expenses are the same kinds of expenses and payments that qualify for the federal credit for increasing research activities
except that they must be for research done in Minnesota. Include your qualified Minnesota research expenses paid or incurred in the taxable
year on lines 1 through 5.
Qualified research expenses also include contributions to qualified nonprofit organizations that are operated to make grants to small, techno-
logically innovative enterprises in Minnesota during their early development stages. Include these contributions on line 6.
If you received an Innovation Grant from the Minnesota Department of Employment and Economic Development (DEED), then any expendi-
tures funded by the Innovation Grant are not eligible qualified expenses. Do not include these funded expenditures on lines 1 through 6.
Base Amount
Lines 8–12 and 15–18
The base amount is calculated in the same way as it is under federal law, except that expenses must be for research done in Minnesota. Also,
your Minnesota sales or receipts that you used to apportion income are used instead of your gross receipts to calculate the base amount.
Enter your Minnesota sales and receipts and qualified research expenses for the indicated tax years in the appropriate columns.
Lines 13 and 14
Fixed-Base Percentage
Follow the instructions on lines 13 and 14 to determine the amount of your fixed-base percentage. (Note: Only tax years beginning in 1984
through 1988 are used to calculate the percentage.)
Start-up companies. If you had Minnesota sales or receipts and Minnesota qualified research expenses in fewer than three tax years begin-
ning after Dec. 31, 1983, and before Jan. 1, 1989, or if the first taxable year you had both gross receipts and qualified research expenses began
after Dec. 31, 1983, your fixed-base percentage for the first five tax years beginning after 1993 is 3 percent (line 14).
See IRC section 41(c)(3)(B)(ii) to figure the fixed-base percentage for any tax year after the fifth tax year beginning after 1993 for which you
have qualified research expenses. Use Minnesota qualified research expenses and sales or receipts in applying the provisions of IRC section
41(c)(3)(B)(ii).
Line 30
Any Credit from a Partnership
Include any credit amounts you received as a partner of a partnership (from line 27 of Schedule KPC). Credits from a partnership are limited
to the amount of tax attributable to your share of the partnership’s taxable income.
Attach a statement explaining amounts included on line 30.
Line 31
Tentative Credit
C corporations: Complete lines 31 through 44.
Partnerships: For your individual, estate and trust partners, pass the amount, pro rata, on Schedule KPI, line 24. For your partnership and
corporate partners, pass the amount, pro rata, on Schedule KPC, line 27. However, partners electing to file composite returns are not entitled
to this credit.
Attach Schedule RD when you file your Form M3.
S corporations: Pass the amount through, pro rata, to shareholders on Schedule KS, line 24. However, shareholders electing to file composite
returns are not entitled to this credit.
Attach Schedule RD when you file your Form M8.
Line 32
Limitation
Your credit is limited to the regular franchise tax or the liability for tax, whichever is less. Enter the lesser of Form M4T, line 10, or the differ-
ence of Form M4T, line 17 minus the sum of lines 22 through 25. If the result is zero or less, leave blank.
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