The Research and Development Tax Credit encourages existing businesses with operating facilities in Louisiana to establish or continue research and development activities within the state by providing up to a 30% tax credit on qualified research expenditures incurred in Louisiana — with no cap and no minimum requirement.
The Tax Credit Incentive is open to companies who have incurred research and development expenditures in Louisiana and who meet certain requirements (where listed). Only research and development conducted in Louisiana will qualify for the Tax Credit Incentive.
In order for credits to be awarded, a taxpayer must claim the expenditures within one year after December 31 of the year in which the expenditure was incurred.
The following businesses will be ineligible to participate in the Research and Development tax credit program, unless specifically invited by the Secretary of LED to:
All incentive program rules are in the Louisiana Administrative Code maintained by the Office of the State Register.
My Company, XYZ, conducted research and development with a team of four spending 100% of their time on research and development — two were scientists, one was a lab supervisor and the other was the VP of Operations. Will the wages for these individuals qualify for the Research and Development Tax Credit Program?
Not all will qualify. According to Section 41 (b)(2)(B) wages of individuals who are engaging in qualified research, directly supervising qualified research or directly supporting qualified research will be eligible. The term “direct supervision” means the immediate supervision (first-line management) of qualified research. “Direct supervision” does not include supervision by a higher-level manager to whom first-line managers report, even if that manager is a “qualified research scientist.”
Complete the application online and submit the fee and additional required documentation for type of business either online or by mail.
LED staff reviews application.
Business notified of approval or denial and Louisiana Department of Revenue is notified.
If approved, business files or amends state income tax return and claims the tax credits.
Complete the application online and submit the fee and additional required documentation for type of business either online or by mail.
LED staff reviews application.
Business notified of approval or denial and Louisiana Department of Revenue is notified.
If approved, business files or amends state income tax return and claims the tax credits.
A company must submit the completed Research and Development application and fee. Based on your application type additional information must be provided:
• Filed Federal Form 6765 for the current tax year and the three previous tax years
• Please attach the Louisiana only qualified research expenses for the three previous years (if applicable)
• Listing of disbursements received (date, amount, grant)
• Bank statements indicating distribution of funds
• Filed Federal Form 6765 for the current tax year and the three previous tax years
• Please attach the Louisiana only qualified research expenses for the three previous years (if applicable)
This can typically take 3-6 months. Total application time will be dependent upon application type, application and supporting documents being submitted timely, and if the application is selected for a detailed review (statutorily required for at least 10% of applications).
In the event an R&D application is selected for a detailed examination, the following items will be requested:
Application is presented to the Louisiana Economic Development review panel.
Notification of the decision is sent via email.
Louisiana Department of Revenue is notified of the credits certified.
Application is presented to the Louisiana Economic Development review panel.
Notification of the decision is sent via email.
Louisiana Department of Revenue is notified of the credits certified.
The Louisiana R&D Credit is claimed on your Louisiana income tax return for the year you paid or incurred qualified research and development expenses or carry forward up to 5 years. Credits cannot be claimed on a return until they have been certified by Louisiana Economic Development.
Louisiana law generally conforms to the federal research credit as enacted under the Small Business Job Protection Act of 1996. However, Louisiana does make some modifications. “Basic research” and “qualified research” must be conducted in Louisiana to qualify.
Research activity is considered “qualified research” if it meets all of the following four requirements of Internal Revenue Code (IRC) §41(d)(1):
A qualified research activity must meet all four tests to be considered for the Louisiana R&D Credit. Apply the tests separately to each business component of the taxpayer.
Qualified research expenses generally include wages, supplies and contract research costs.
Wages — Qualified wages are for qualified services that directly relate to the research activities and are paid or incurred by the taxpayer. Qualified services include direct supervision, direct support or direct performance of qualified research. General or administrative wages generally do not qualify. For example, an allocated portion of the purchasing or receiving department’s wages would not qualify because these are indirect costs and are incidental to research activity.
Supplies — Supplies include tangible property that is consumed directly by the research activity or that is utilized in the development of a prototype. The supplies must be used in the conduct of qualified research. Supplies do not include land, improvements to land or property subject to the allowance for depreciation. Utilities (phone and electricity), small tools and allocations of total shipping cost do not qualify as supply expenses.
Contract research — Contract research expenses are amounts paid to non-employees (outside consultants) to perform qualified research. The taxpayer must enter into written agreement prior to performance of the research and must bear the costs even if the research is unsuccessful. The consultant must perform the research within Louisiana. If the research is conducted within and outside of Louisiana, only the expenditures incurred within Louisiana qualify. Only 65% of the Louisiana expense qualifies for the credit.