The Legislature is proceeding with plans to increase one of the state’s biggest business tax breaks, despite last month’s report from the Legislative Auditor criticizing the break as rudderless and too expensive given the small number of jobs created.

Both the House and Senate have rolled out omnibus tax bills with provisions to expand Minnesota’s decades-old research and development (R&D) tax credit.

The House version would increase the size of the credit for qualifying research expenses above a certain threshold, the so-called second tier. The Senate version would create a new, optional method for determining the base amount of a company’s qualified research, which would mean a larger credit for most taxpayers, lawmakers said.

Popular in the tech and medical device industries, the R&D tax credit reduces a company’s state corporate income tax bill based on qualifying research conducted in Minnesota. Companies can claim the break for the first 10 percent of qualifying research expenses, up to $2 million, and claim it for 2.5 percent of expenses beyond that. The House bill would raise that second-tier credit to 4 percent.

The existing credit is expected to cost Minnesota taxpayers $72.8 million in forgone taxes in fiscal 2018.

Supporters say it leads businesses to invest in good-paying jobs in Minnesota, but the state has never set explicit objectives, last month’s audit of the program noted. The report showed the economic benefits from the tax credit equal just 5 to 22 percent of the forgone tax revenues each year. In other words, the credit doesn’t come close to paying for itself, the audit found.

Business groups have pushed this year’s changes, saying Minnesota is falling behind states offering more generous breaks.

The Senate omnibus tax bill rolled out on Wednesday contains a new way for companies to calculate qualifying research expenses based on an average of expenses over the previous three years. But gone is language to make the tax break “refundable,” meaning start-ups could claim it and receive a payment from the state even if they aren’t profitable and aren’t paying corporate income tax.

Sen. Roger Chamberlain, R-Lino Lakes, chairman of the Senate Tax Committee, said refundability was amended out because it was too expensive.

The refundability feature did survive in the House tax bill rolled out last week, although it caps any such payment to a company at $100,000. Language to allow sole proprietors to claim the tax break was scuttled.

Genevieve Plumadore, vice president of government relations at the Medical Alley Association, said she was very excited that refundability was “still in the mix.”