Are R&D Tax Credits Available in Louisiana?

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.
• Unused Louisiana research tax credit can be carried forward for a period not to exceed five years. However, the credit is fully refundable and no carry forward is necessary if the credit is claimed on an amended return filed on or after July 1, 2015, if the credit was properly claimed on an original return filed prior to July 1, 2015.
• 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.
• 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, or
  • 50% of the average prior three years of Qualified Research Expenditures if the entity employs less than fifty persons.
• The credit amount calculated by taking a percentage of the difference of Louisiana qualified research expenses over the base amount. The percentages are as follows:
  •  30% for companies that employ less than 50 persons.
  • 10% for companies that employ 50-99 persons.
  • 5% for companies that employ 100 or more persons.
• • The aggregate amount of R&D tax credit allowed in each fiscal year is limited to $12 million each fiscal year beginning July 1, 2025. R&D tax credit claims are allowed on a first-come, first-served basis. Taxpayers whose R&D credit claims are disallowed due to the cap may use the credits on an original return filed in the next fiscal year; their claim will receive priority over others filed after the original claim was filed.
• Taxpayers who receive a federal SBIR or SBTT grant are allowed a credit equal to 30% of the award received during the tax year.
• 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 of the year in which the expenditures were incurred. For example, a business has a fiscal filing period of July 1, 2024, to June 30, 2025, 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, 2025.
• 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, which is equal to 0.5% of the tax credit applied for (minimum application fee of $500 and a maximum application fee of $15,000).
• 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.
• • The Louisiana research credit will sunset on December 31, 2029.