Minnesota Senate Bill SF1762

Minnesota 2023-2024 Regular Session

• Introduced: 2/16/23
• Refer: 2/16/23

Caption

State income and corporate franchise tax subtraction for certain research and experimental expenditures disallowed federally authorization

Impact

The passing of SF1762 is expected to have a significant impact on state laws regarding taxation. By permitting deductions for research and experimental expenditures at the state level that are not recognized federally, the bill aims to reduce the financial burden on corporations and promote further investment in research within Minnesota. The effective date of these changes, applicable to taxable years beginning after December 31, 2022, will allow businesses to benefit from immediate tax relief associated with their R&D investments.

Summary

SF1762 introduces amendments to Minnesota tax statutes concerning the treatment of certain research and experimental expenditures. Specifically, the bill allows for a subtraction in state income and corporate franchise tax calculations for expenses that are normally disallowed under federal regulations. This legislation seeks to align state tax policy with federal provisions, thereby providing incentives for businesses engaging in innovative research and development activities.

Contention

During discussions surrounding SF1762, there were notable points of contention regarding its implications for state revenue and the equitable distribution of tax benefits. Proponents argue that the bill will bolster Minnesota's economy by attracting businesses and encouraging local innovation. However, critics express concern that allowing such deductions could lead to a decrease in state tax revenues, potentially impacting funding for public services. Additionally, there are worries about the fairness of the legislation in that it primarily benefits larger corporations that can afford to invest substantial resources into research and development.