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Lawmakers question whether Minnesota research tax credit is suitable for audit amid data gaps
Summary
Members raised concerns that the Minnesota research tax credit lacks clear goals and sufficient data for an OLA evaluation; staff and legislators discussed whether the Legislative Budget Office or Department of Revenue might be better suited to that work.
Legislators told the Legislative Audit Commission Evaluation Subcommittee on May 8 that the Minnesota research tax credit may be a poor candidate for an immediate program evaluation because prior reviews found unclear goals and limited data.
Representative Lee recalled the prior review and told the group the program’s earlier estimates suggested the credit "did not pay for itself." Deputy Legislative Auditor Munson Rodriguez said the office found similar limitations in earlier work and that arriving at a definitive answer would require a "pretty involved econometric analysis," which is outside the usual scope of a financial audit.
Staff noted the 2017 evaluation had already identified weaknesses — particularly unclear goals and limited available data — and cautioned that the Program Evaluation Division might be limited in producing actionable recommendations without additional analytic capacity or data from the Department of Revenue. Members suggested alternatives: ask the Legislative Budget Office or the Department of Revenue’s research staff to undertake or update the detailed tax-expenditure analysis and have the audit office provide an independent review of methodology if another office conducts the core work.
The subcommittee did not place the research tax credit on a final-exclusion list but several members said they would prefer not to advance it on the initial ballot because of the data and methodological challenges. Staff recommended documenting those limitations in the background packet for legislators.
