Minnesota’s R&D Tax Credit: It’s Not Just for White Lab Coats Anymore

It used to be that to qualify for an R&D tax credit you practically needed a microscope and lab coat. Not any more. The new Minnesota R&D tax credit is much more small business-friendly.

Minnesota’s new-and-improved research and development tax credit doubles the size of the credit and also expands the credit to include more business entities. The tax credit for R&D expenditures is 10 percent, up to the first $2 million in eligible expenses. The credit is 2.5 percent for eligible expenses above $2 million.

Individuals involved in partnerships, S-corporations and limited liability companies are allowed to claim the credit against their individual income taxes. This opens up the tax credit to more small and medium-sized businesses.

To claim the credit, the partner or shareholder must complete Schedule M1B, Business and Investment Credits, and include Schedule M1B and Schedule KPI or KS when filing his or her Minnesota income tax return.

Source: Minnesota Department of Employment and Economic Development

In the past these tax credits were taken mostly by large corporations, but now I will be investigating these for our small business clients. 

For More Information

Contact the Minnesota Department of Revenue at 651-556-3075 or email businessincome.tax@state.mn.us.


2012 a successful year for Minnesota small businesses

Source: Brainerd Dispatch August 8, 2013

Minnesota’s Small Business Development Center (SBDC) network is shaping the future of small business in Minnesota.

The SBDC annual report for 2012 highlights that success: over 3,000 businesses served, 8,000 jobs created and access to $125 million in new capital to help Minnesota small businesses grow.

The SBDC network, positioned within the Minnesota Department of Employment and Economic Development (DEED), provides professional expertise and guidance to small businesses in Minnesota.

“Small businesses, which account for half of our private sector jobs in Minnesota, help drive the state’s economy,” said DEED Commissioner Katie Clark Sieben in a news release. “For entrepreneurs hoping to start and grow a small business, the SBDCs are a great resource in today’s competitive and ever-changing business world.”

Nine SBDCs, located throughout the state, provide localized business services that include business consulting, training and access to capital. The centers are funded in part through a cooperative agreement with the U.S. Small Business Administration. SBDC funding also comes from state sources, institutions of higher education, nonprofit agencies and private investors.

“The SBDCs are a perfect example of a successful public-private partnership,” said SBDC State Director Bruce Strong. “Partner involvement and support is crucial to our new focus areas and the creation or retention of more than 8,000 jobs. We also had our third-highest year in business capital raised, making 2012 an exciting, successful year.”

The SBDC focused on serving veterans, youth and struggling businesses in 2012, according to the report.

Working with several partners, the SBDC provided outreach to thousands of veterans and family members through job fairs, panel discussions and training opportunities. They provided more than 40 scholarships to veterans interested in entrepreneurship for high-level financial literacy training.

In the area of youth entrepreneurship, the SBDC offered business startup training programs to more than 500 students throughout the state. Training and discussion on credit, financial literacy and the importance of planning were included in all youth entrepreneurship programs.

The Turn-Around Program for struggling businesses helped those businesses to refinance debt or obtain more than $28.5 million in new credit to stabilize their company, stay in business and retain more than 700 jobs. More than 100 businesses are participating in the Turn-Around Program.

The SBDC helped businesses increase Minnesota exports to other countries; 2012 was a record-setting year with 200 new businesses exporting globally, helping to set the pace at $20.6 billion in exports around the world.


Benefits of Peer Advisory Groups for Business Owners

It is my experience that a business owner gets the best, most practical advice from someone who has walked a mile in his shoes, which is why I suggest to my clients that that join a peer advisory group.

The old saying is true – It’s lonely at the top. And it is important to overcome the isolation that comes with being the boss. Peer groups offer an opportunity to discuss important issues with those who can empathize and offer unbiased advice. Bankers, accountants and investors that you mentioned can come to the table with biases and agendas that are not necessarily aligned with those of the business owner. I am not implying any evil-doing, but they just come with a different perspective.

The opportunity to network is another benefit of joining a peer group. Professional networking is becoming more important for growing one’s business, and often members of these groups end up doing business with fellow members and referrals.

Finally, leading an organization comes with tremendous pressure and responsibility, and can be a roller-coaster ride of emotions that you probably don’t want to share with your employees. Having a group of trusted peers allows you to be comfortable sharing hidden feelings and blow off a little steam, too.


Business Plan Anxiety

A business plan should be a tool to guide your business, not a source of anxiety. Successful businesses balance financial and personal goals. If you’re miserable, financial success isn’t very rewarding. Set personal goals first, and plan the rest of your businesses accordingly. How much time, energy and anxiety are you willing to invest in your business?

Also, don’t let the process of planning suck energy from your main goal of acquiring customers. Full business plans are only absolutely required when raising outside capital; investors and lenders need to know where their money is going and when they will get it back.


Express Insurance – Credit Insurance for Foreign Receivables from EX-IM Bank

This short-term insurance policy helps small businesses expand into new foreign markets, add new buyers, and transfer all foreign buyer credit decision making to Ex-Im Bank at an economical cost. It is a “named buyer” policy that simplifies small business access to export credit risk insurance on their foreign accounts receivable. In addition to providing payment risk protection and allowing the extension of competitive credit terms to foreign buyers, the insurance also enables small businesses to obtain lender financing of those receivables through the assignment of policy proceeds.

A streamlined online application provides a policy quote and credit decisions up to $300,000 on foreign buyers within five workdays (buyer credit requests exceeding $300,000 will require additional processing time). Insurance premiums are payable only upon an exporter’s shipment, or invoice for services, to a buyer pre-approved by Ex-Im Bank. Premium rates are determined by a rate schedule based on the credit term with no differentiation based on country.

Credit reports on all buyers the exporter elects to insure are complimentary (though they remain with Ex-Im Bank). Insuring pre-existing foreign buyers is optional. There are no application fees. A $500 advance deposit is required at quotation acceptance to issue the policy. This deposit is refundable if the exporter decides to cancel the policy.