Tax credit seen as essential to growing state’s high tech industry

Minnesota provides a package of incentives that has made it attractive to startup science and technology companies looking for a home.

To retain a competitive edge, research and development tax credits need to be expanded to ensure that companies start, grow and stay in the state, Rep. Sarah Anderson (R-Plymouth) told the House Taxes Committee Tuesday.

She sponsors three bills that look to:

• Extend the highly sought R and D credit, currently only available to S-corporations and partnerships, to sole proprietors (HF254);
• change the method of computation to one similar to that used in federal law (HF90); and
• increase the second-tier credit rate and provide that the first $250,000 of the credit is refundable (HF253).

Minnesota was the first state to initiate a non-refundable research and development credit in 1981. Over the years, it has been modified and, as the state’s economic conditions changed, the scope of the credit was lessened.

Anderson’s bills would bring back some of the original provisions.

Rep. Sarah Anderson

“I see this as kind of an overall package of goods, if you will, to make sure that Minnesota remains an innovator and a place that people will come to,” she said.

Combined with the state’s angel investment credit for those willing to risk their funds on new business, she said her proposals would keep Minnesota competitive with other states that now offer research and development tax credits.

Minnesota’s technology industries account for $13.3 billion in payroll and employ 142,000 people with an average wage of $93,500, said John Dukich, director of government relations for the Minnesota High Tech Association. He said credit enhancements would ensure that when startups grow here to mid-size companies and larger, they will continue to help make Minnesota more competitive and attract the high-paying jobs.

WATCH Full video of Tuesday's meeting of the House Taxes Committee

While HF254 received an informational-only hearing, HF 90 and HF253 were held over for inclusion in a possible committee omnibus bill. The companion to HF253 is SF417, sponsored by Sen. Carla Nelson (R-Rochester) and has been referred to the Senate Taxes Committee. HF254 and HF90 do not have Senate companions.