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Committee hears bill to simplify R&D tax credit (HF173); supporters cite competitiveness, bill laid over for possible inclusion
Summary
Representative Robbins presented House File 173 offering an optional simplified calculation for Minnesota's R&D tax credit; business groups testified in favor and the committee laid the bill over for possible inclusion in later tax legislation.
Representative Robbins on Feb. 25 presented House File 173, which would give businesses an optional simplified method to calculate Minnesota's research-and-development (R&D) tax credit consistent with a federal alternative calculation. Proponents from statewide business groups told the House Tax Committee the option would make the credit more usable and competitive with other states; the committee laid the bill over for possible inclusion in later tax legislation.
Robbins said Minnesota's current R&D credit calculation relies on a 1984–1988 base period that often requires companies to retrieve decades‑old records. "If a 40 year old company with R and D activities and sales tax revenue from that period wants to claim R and D tax credits in 2025, the company would have to look back to records from 37 years ago to properly calculate and claim the R and D tax credit," Brian Cook testified for the Minnesota Chamber of Commerce, summarizing a common business complaint.
Gavin Hansen, fiscal and economic policy director for the Minnesota Business Partnership, said Minnesota has a strong innovation ecosystem and that simplifying the credit could retain and grow R&D activity. "Minnesota is uniquely positioned to be a national leader in research and development," Hansen said, noting Minnesota's strengths in medical devices, food and health patents.
Representative Gomez raised longstanding evaluation concerns from the Office of Legislative Auditor. Gomez summarized the OLA's conclusions that the credit "does not pay for itself," noted limited clarity about the program's purpose, and said large corporations receive the bulk of claimed credits under the existing structure. Gomez also warned about the fiscal cost of expanding the credit and the need to articulate a clear purpose and measurable goals before adding new tax expenditure authority.
Representative Robbins said she would support adding a purpose statement to the bill and argued the simplified option would make the credit usable and therefore better positioned to drive economic activity in Minnesota. After testimony and brief questions, the committee laid HF173 over for possible inclusion in a future omnibus tax bill; no committee vote to advance the bill was taken at this hearing.
