The Louisiana R&D tax credit, explained

How the Louisiana credit works

The rate depends on company size. Businesses with fewer than 50 employees can claim 30% of the increase in qualified research expenses over a base amount. Companies with 50 to 99 employees claim 10%, and companies with 100 or more employees claim 5%. A separate 30% credit applies to Small Business Innovation Research and Small Business Technology Transfer award amounts.

The credit is nonrefundable and requires an application through Louisiana Economic Development before it can be claimed on a tax return. It is not a simple self-calculated credit like the federal one. The statewide program is capped at $12 million a year and awards on a first come, first served basis, so early filing matters.

How it stacks with the federal credit

Louisiana's state credit stacks on top of the federal R&D credit, which is worth roughly 6% to 10% of qualified research spend for most companies. A Louisiana startup can claim both credits for the same research, as long as it tracks the same qualified research expenses under both the federal Section 41 rules and the state's Section 47:6015 rules.

Startups under $5 million in revenue can also use the federal credit to offset up to $500,000 a year in payroll taxes, even with no income tax liability yet. Louisiana's state credit is nonrefundable, so a young company with little or no state tax bill may need to carry it forward until it owes Louisiana income tax.

Example: a Louisiana software company with 8 engineers and an average salary of $95,000 spends about $760,000 a year on qualified research. With fewer than 50 employees, it qualifies for the 30% state rate. If its research spend has grown $510,000 over its three year base, the state credit is around $153,000. The federal credit on the same spend runs about $53,200. Together, that is roughly $206,200 in combined credits, before the CPA applies any state program caps.

Eligibility and how to claim it

Any company doing qualified research in Louisiana can apply, from early stage software startups to manufacturers building new processes. The research has to meet the same four part test used for the federal credit: it has to be technological, aimed at eliminating uncertainty, involve a process of experimentation, and support a new or improved business component.

The credit is claimed on Form CIT-620, Schedule NRC-P3, using Credit Code 458 for the standard credit or Code 252 for the transferable SBIR and STTR credit. Before that, the company must apply and get certified through Louisiana Economic Development. The application requires a fee based on the size of the expected credit.

Claimship preps the underlying research study and the documentation Louisiana Economic Development and the Louisiana Department of Revenue expect to see. The company's CPA files the actual application and the state tax return, and claims the credit once Louisiana Economic Development issues certification.

Official source: Louisiana Economic Development.

Carryforward and deadlines

Unused credit carries forward for 5 years. There is no cash refund if the credit is bigger than the company's Louisiana tax bill in a given year.

The application to Louisiana Economic Development generally needs to be filed within about a year of the close of the expenditure year, and the statewide $12 million cap is allocated on a first come, first served basis each fiscal year. Companies that wait too long into the year risk missing the cap. The credit is set to sunset December 31, 2029 unless the legislature extends it again.

Common questions