Minnesota Tax Filings and Section 174: What You Need to Know

By Published On: September 25, 2025Categories: Businesses, Tax News, Tax Tips

If your business invests in research and development (R&D), recent tax law changes could affect how you file in Minnesota. Managing these changes is important for financial planning, accounting, and compliance. Read below to see some of what changed and why it matters.

What Changed

  • Under the Tax Cuts and Jobs Act (TCJA) passed in 2017, research expenses (Internal Revenue Code (IRC) Section 174) that used to be fully deductible were required to be capitalized and amortized over several years.
  • Minnesota conforms to these federal rules, meaning the same treatment applies on your state tax return.
  • The 2025 tax bill signed into law this summer added IRC Section 174A, which restores immediate expensing for domestic research expenditures for certain taxpayers starting in 2025.
  • Minnesota hasn’t conformed to IRC 174A, so the requirement to capitalize and amortize research expenditures still exists for state tax purposes.

Why It Matters

The requirement to capitalize and amortize research expenses can:

  • Increase taxable income in early years, affecting cash flow.
  • Require detailed tracking of research expenses.
  • Lead to differences between federal and state filings if Minnesota doesn’t fully conform to future federal changes.

What To Do Next

Every business’s situation is different. Whether you’re wondering how these rules apply to your company, if you should amend prior returns, or how to plan going forward, SDK can help. Reach out to your SDK advisor with questions and we’ll walk you through how Section 174 impacts your filings and what steps you can take to minimize surprises.