The Minnesota Department of Revenue (Department) on June 18 provided guidance on its website that the R&D carryover credit must be applied to other members of a combined group, similar to the way the credit is applied to the earning member in the year of generation.
This represents a change from what is provided in Schedule RD, which states the credit carryover may only be used by the earning member. Accordingly, the R&D credit carryover is allowed to be shared among other combined members.
The new guidance is a needed change as there was an increase in audit activity related to the Department challenging utilization of R&D credit carryovers. C corporations filing a combined return should revisit returns or review prior audit assessments to determine if it would be advisable to file a refund claim. Note that the Department reiterates that credit sharing became effective for tax years beginning after December 31, 2012; it remains uncertain whether R&D carryovers generated in ‘presharing’ years, i.e., 2012, can be shared.