RESEARCH AND DEVELOPMENT TAX CREDIT
What is Research and Development Tax Credit?
This is credit against Louisiana income or corporation franchise taxes that are earned by a person pursuant to the provisions of the Research and Development Tax Credit Program. The program is administered by the Louisiana Department of Economic Development (DED).
What is regarded as Qualified Research?
Qualified research is defined as any research which is undertaken for the purpose of discovering information, which is technological in nature, and the application of which is intended to be useful in the development of a new or improved business component of the taxpayer. Qualified research must relate to new or improved function, performance, or reliability or quality. Research may be disqualified if its purpose relates to style, taste, and cosmetic or seasonal design factors.
What are the Qualified Research Expenses in the state?
Any wages incurred or paid to employees for qualified services performed by such employees, who are residents of Louisiana and perform their services in Louisiana. Any amount paid or incurred for supplies used in the conduct of qualified research in Louisiana. Under regulations prescribed by the Secretary, any amount paid or incurred to another person for the right to use computers located in Louisiana in the conduct of qualified research. Contract research expenses for services performed in Louisiana.Qualified services consist of:
Engaging in qualified research, or Engaging in the direct supervision or direct support of research activities which constitute qualified research.Qualified research expenses are the sum of the following amounts which are paid or incurred by the taxpayer during the taxable year in carrying on any trade or business of the taxpayer:
In-house research expenses, and Contract research expenses - any amount paid or incurred by the taxpayer to any person (other than an employee of the taxpayer) for qualified research.Process of claiming R & D credit
Prior to claiming a research and development tax credit on any tax return or selling any research and development tax credit, a person must apply for and obtain a credit certification from DED on a form provided by DED.
DED reviews the application and issues a credit certification in the amount determined to be eligible and also provides a copy to the Department of Revenue.
Research and development tax credits may be transferred only by sale approved by DED.
How much credit can a person earn against income or corporation franchise tax liability?
1. Any person who claims for the taxable year a federal income tax credit under 26 U.S.C. 搂 41 (Federal code) for increasing research activities may receive a credit in the amount of either:
Eight percent of the sate apportioned share of the taxpayer00 expenditure for increasing research activities; or Twenty five percent of the state apportioned share of the federal research credit claimed for research expenditures in the state if the taxpayer claims the alternative incremental tax credit under 26 U.S.C. 搂 41; and2. A person who receives a federal Small Business Innovation Research Grant as created by the Small Business Research Innovation Development Act of 1982 and reauthorized by the Small Business Reauthorization Act of 2000, may receive a credit in an amount equal to eight percent of the award.
The state apportioned share of expenditure is calculated as follows:
The excess of the taxpayer00
qualified expenses for the taxable year over the base amount multiplied
by the ratio of the qualified research expenses in this state for the
taxable year to the taxpayer00 total qualified research expenses for
the taxable year.
The credit may be carried forward for
up to 10 years, or under certain circumstances may be sold pursuant
to the provisions of R.S. 47:6015 and the Louisiana Administrative Code
(LAC 13:I Chapter29). The sale price cannot be less than 75% of the
value of the tax benefits. The carry forward period for the credit that
is transferred or sold begins on the date on which the credit was originally
earned.
In case of further questions please contact Susan Bigner of the Louisiana Department of Economic Development on (225) 342-5651
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