Are R&D Tax Credits Available in Louisiana?
Yes. The state of Louisiana provides the Research Development (R&D) Tax Credit defined as Qualified Research Expenditures, the same as the federal version, but does have some differences. Below are some of the differences between the federal and Louisiana R&D Tax Credit:
- Qualified research expenses must be incurred in Louisiana.
- The tax credit was fully refundable from 2009 through June 30, 2015.
- Credits in excess of the tax liability are refundable when claimed on an original return filed after June 30, 2015, and have a carryforward of five (5) years.
- The primary credits are not transferable. However, beginning with the 2018 tax year, the additional credits for SBIR and SBTT grants may be transferred or sold to another Louisiana taxpayer.
- Credits claimed prior to 2009 that cannot be utilized may be carried forward, transferred, or sold.
- Louisiana defines its base amount as 80% of the average prior three years of Qualified Research Expenditures if the entity employs fifty or more persons.
- Louisiana defines its base amount as 50% of the average prior three years of Qualified Research Expenditures if the entity employs less than fifty persons.
- The credit amount is 30% for companies that employ less than 50 persons.
- The credit amount is 10% for companies that employ 50-99 persons.
- The credit amount is 5% for companies that employ 100 or more persons.
- Taxpayers who receive a federal SBIR or SBTT grant are allowed a credit equal to 30% of the award received during the tax year (40% prior to 2017).
- An expenditure verification report shall be required only for applicants with less than 50 employees that have not filed for the federal R&D tax credit on IRS Form 6765-Credit for Increasing Research Activities, or that are not applicants for either the Small Business Technology Transfer Program or the Small Business Innovation Research Program.
- In order for the R&D Tax Credits to be awarded, a taxpayer must claim the expenditures within one year after December 31 in which the expenditures were incurred. For example, a business has a fiscal filing period of July 1, 2021, to June 30, 2022, and the business incurred qualifying research expenses in that time period. Then, the Research and Development application will be due no later than December 31, 2022.
- Prior to claiming the R&D Tax Credits, a company must apply for and obtain a credit certification from the Department of Economic Development. The application requires a fee.
- The following types of businesses are ineligible to apply for the credit:
- Professional services firms that do not have a pending or issued United States patent related to the qualified research expenditures claimed; and
- Businesses primarily engaged in custom manufacturing and custom fabricating that do not have a pending or issued United States patent related to the qualified research expenditures claimed.
Louisiana R&D Tax Credit Case Study
A company with less than 50 employees incurred $210,000 of R&D expenditures in the tax year 2019 and had no prior year R&D expenditures. In this case. there would be no base year. The calculation would be 30% of the current year's expenditures. $210,000 x 30% = $63,000 in 2019 LA R&D credit