Minnesota: R&D Credit Under Attack!

I just recently became aware that Minnesota is aggressively auditing companies who have filed research and development (R&D) credit claims on their Minnesota return.

Minnesota is hiring additional auditors to pursue invalid R&D credit claims. Despite the fact that Minnesota follows the IRS' rules in regards to the R&D credit, it is not going to approve an R&D credit simply because the IRS signs-off on it.

SO WHAT?

Therefore, if you have taken an R&D credit on your Minnesota return over the past 3 or 4 years, or will be taking one this year, please make sure your documentation is in order in preparation for an audit. In other words, an R&D credit on your Minnesota return may have turned into a "red flag" for Minnesota audit purposes.

With that said, if you do have adequate documentation to support your R&D credit, you can win under audit.

We have defended several clients recently in this position, and expect the number to rise. As always, winning or losing depends on your facts and how your position is presented.

ACTION?

If your company has taken a Minnesota R&D credit or will be taking one on this year's return, please contact me at brian.strahle@bakertilly.com to discuss if a review of your files or documentation may be helpful.

Also, if you are contacted by Minnesota for an audit, please contact me at brian.strahle@bakertilly.com for representation or assistance.