2023 Louisiana Laws › Revised Statutes › Title 47 - Revenue and Taxation › §47:6015. Research and development tax credit

RS 47:6015 - Research and development tax credit
A. The Legislature of Louisiana hereby finds and declares that the health, safety, and welfare of the people of this state are dependent upon the continued encouragement, development, growth, and expansion of the private sector within the state. Therefore, it is declared to be the purpose of this Section to encourage new and continuing efforts to conduct research and development activities within this state.
B.(1) Any taxpayer who employs fifty or more persons and claims for the taxable year a federal income tax credit under 26 U.S.C. 41(a) for increasing research activities shall be allowed a tax credit to be applied against income and corporation franchise taxes due in the manner provided for in Subsection K of this Section.
(2) Any taxpayer who employs less than fifty persons and claims for the taxable year a federal income tax credit under 26 U.S.C. 41(a) for the taxable year, or meets the requirements of Subparagraph (3)(i) of this Subsection, shall be allowed a tax credit to be applied against income and corporation franchise taxes due in the manner provided for in Subsection K of this Section.
(3) Each taxpayer seeking the credits authorized in this Section shall apply to the Department of Economic Development for the credits. The taxpayer shall remit an application fee in accordance with R.S. 36:104. The application shall include all of the following:
(a) A federal income tax return and supporting documentation that shows the amount of the federal research credit for the same taxable year. If claiming the credit under Subsection D of this Section, the taxpayer shall also remit supporting documentation for the federal Small Business Innovation Research Grant.
(b) The total amount of qualified research expenses and the qualified research expenses in this state.
(c) The total number of persons employed in Louisiana by the taxpayer and the number of those persons employed in Louisiana directly engaged in research and development.
(d) The average wages of the persons employed in Louisiana not directly engaged in research and development and the average wages of the persons employed in Louisiana directly engaged in research and development.
(e) The average value of benefits received by all persons employed in Louisiana.
(f) The cost of health insurance coverage offered to all persons employed in Louisiana.
(g) At the department's request, the taxpayer shall provide federal income tax information related to the research and development credit. This information shall include but shall not be limited to IRS forms 8821 and 4506.
(h) Any other information required by the Department of Economic Development.
(i) A taxpayer who employs less than fifty employees may apply for credits without providing a federal income tax return as required by Subparagraph (a) of this Paragraph if all of the following criteria are met:
(i) The department shall engage and assign either a certified public accountant authorized to practice in the state of Louisiana or a tax attorney authorized to practice in the state of Louisiana to prepare and submit to the department an expenditure verification report on the taxpayer's claimed qualified research expenditures. The report shall be rendered based upon procedures and regulations developed by the department in accordance with the Administrative Procedure Act.
(aa) The taxpayer shall be responsible for payment of the expenditure verification report fee in accordance with R.S. 36:104.1, and shall make all records related to the tax credit application available to the certified public accountant or tax attorney selected by the department to prepare the expenditure verification report.
(bb) The taxpayer will be assessed the actual cost for the expenditure verification report fee. The maximum fee for the report shall be fifteen thousand dollars for verification of an application with claimed qualified research expenditures of up to one million dollars, and the maximum fee shall be twenty-five thousand dollars for verification of an application with claimed qualified research expenditures in excess of one million dollars.
(cc) At the time of application, the taxpayer shall submit a deposit of the expenditure verification report fee of seven thousand five hundred dollars for an application with claimed qualified research expenditures of up to one million dollars, and a deposit of fifteen thousand dollars for an application with claimed qualified research expenditures in excess of one million dollars.
(ii) The taxpayer provides all supporting documentation required by the department to show the amount of qualified research expenses for such taxable year.
(4) An expenditure verification report shall be required only for applicants with less than fifty employees that have not filed for federal research and development 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. Research and development tax credits shall be certified only upon the receipt and approval by the Department of Economic Development of an expenditure verification report as provided for in Item (3)(i)(i) of this Subsection.
(5) The Department of Economic Development shall approve or disapprove each application. No credits shall be granted to a taxpayer under this Section unless the credit is approved by the Department of Economic Development.
(6) The following types of businesses that do not have a pending or issued United States patent directly related to the qualified research expenditures claimed under this Section are ineligible to apply for or receive benefits under this Section, unless specifically invited by the secretary of the department to do so:
(a) Professional services firms as defined by departmental rule.
(b) Businesses primarily engaged in custom manufacturing and custom fabricating as defined by departmental rule.
C.(1) For purposes of determining the amount of the credit earned, an "entity" shall be determined by the total number of employees based on the aggregate of all affiliated companies.
(2) The amount of the credit authorized in this Section shall be equal to either:
(a) Five percent of the difference, if any, of the Louisiana qualified research expenses for the taxable year minus the base amount, if the taxpayer is an entity that employs one hundred or more persons.
(b) Ten percent of the difference, if any, of the Louisiana qualified research expenses for the taxable year minus the base amount, if the taxpayer is an entity that employs fifty to ninety-nine persons.
(c) Thirty percent of the difference, if any, of the Louisiana qualified research expenses for the taxable year minus the base amount, if the taxpayer is an entity that employs less than fifty persons.
(3)(a) All entities taxed as corporations for Louisiana income or corporation franchise tax purposes shall claim any credit allowed under this Section on their corporation income and corporation franchise tax return.
(b) Individuals shall claim any credit allowed under this Section on their individual income tax return.
(c) Estates or trusts shall claim any credit allowed under this Section on their fiduciary income tax returns.
(d) Entities not taxed as corporations shall claim any credit allowed under this Section on the returns of the partners or members as follows:
(i) Corporate partners or members shall claim their share of the credit on their corporation income or corporation franchise tax returns.
(ii) Individual partners or members shall claim their share of the credit on their individual income tax returns.
(iii) Partners or members that are estates or trusts shall claim their share of the credit on their fiduciary income tax returns.
D.(1) A taxpayer who receives a Phase I or II grant or contract from the federal Small Business Technology Transfer Program or a federal Small Business Innovation Research Grant as created by the Small Business Innovation Development Act of 1982 (P.L. 97-219), reauthorized by the Small Business Research and Development Enhancement Act (P.L. 102-564), reauthorized by the Small Business Reauthorization Act of 2000 (P.L. 106-554), and reauthorized again by the SBIR and STTR Extension Act of 2022 (P.L. 117-183) shall be allowed a tax credit in an amount equal to thirty percent of the award received during the tax year.
(2) In addition to the credit utilization allowed by Paragraph (C)(3) of this Section, research and development tax credits for tax years 2018 and later that are based on participation in the Small Business Technology Transfer Program or the Small Business Innovation Research Grant program and that were not previously claimed by any taxpayer against his income or corporation franchise tax may be transferred or sold to another Louisiana taxpayer, subject to the following conditions:
(a) A single transfer or sale may involve one or more transferees. A transferee of the tax credits may transfer or sell such tax credits subject to the conditions of this Paragraph.
(b) Transferors and transferees shall submit to the Department of Revenue in writing, a notification of any transfer or sale of tax credits within ten business days after the transfer or sale of such tax credits. No transfer or sale of tax credits shall be effective until recorded in the tax credit registry in accordance with R.S. 47:1524. The notification shall include the transferor's tax credit balance prior to transfer, a copy of any tax credit certification letter issued by the Department of Economic Development, the transferor's remaining tax credit balance after transfer, all tax identification numbers for both transferor and transferee, the date of the transfer, the amount transferred, a copy of the credit certificate, the price paid by the transferee to the transferor, and any other information required by the Department of Revenue. The notification submitted to the Department of Revenue shall include a transfer processing fee of two hundred dollars per transferee.
(c) Failure to comply with this Paragraph shall result in the disallowance of the tax credit until the taxpayers are in full compliance.
(d) The transfer or sale of this credit does not extend the time in which the credit can be used. The carryforward period for a credit that is transferred or sold begins on the date on which the credit was earned.
E. As used in this Section, the following terms shall have the meaning hereafter ascribed to them, unless the context clearly indicates otherwise:
(1) "Base amount" shall mean the following:
(a) If the taxpayer is an entity that employs fifty or more persons, the base amount shall be eighty percent of the average annual qualified research expenses within Louisiana during the three years preceding the taxable years.
(b) If the taxpayer is an entity that employs less than fifty persons, the base amount shall be fifty percent of the average annual qualified research expenses within Louisiana during the three preceding taxable years.
(2) "Department" shall mean the Department of Economic Development.
(3) "Incentive" shall mean a tax credit, deduction, or exclusion administered by the Department of Economic Development.
(4) "Person" shall mean a natural person.
(5) "Qualified research expenses" and "qualified research" shall have the same meanings as those terms are defined in 26 U.S.C. 41, as amended.
F. The department shall administer the provisions of this Section and shall have the following powers and duties in addition to those granted by other laws of this state:
(1) To monitor the implementation and operation of this Section and conduct a continuing evaluation of the program.
(2) To assist any taxpayer in obtaining the benefits of any incentive or inducement program authorized by Louisiana law.
(3) To promulgate program rules and regulations in consultation with the secretary of the Department of Revenue, in accordance with the Administrative Procedure Act.
(4) To receive information from the Department of Revenue regarding the identity of the taxpayer and the amount of credit claimed for any credits claimed pursuant to this Section. Such information shall not be public record and shall be subject to the same prohibition of disclosure as in the possession of the Department of Revenue.
(5) To verify all relevant records and accounts of any taxpayer applying for credits provided for by this Section.
G.(1) Each year, prior to the issuance of credits, the department shall perform a detailed examination of at least ten percent of all applications received. The department shall select applications for examination based on one or more of the following: a random sampling of applications, the applicant's business sector, and other selection criteria as determined by the department.
(2) If a taxpayer's application is selected for examination, the taxpayer shall submit all supporting documentation required by the department. The department shall use this evidence to verify that the amount of the qualified research expenses incurred in Louisiana for the taxable year support the corresponding tax credit.
(3) Upon examination, the department will disallow any credits that are not substantiated by supporting documentation to include Internal Revenue Service documents.
(4) The applicant bears the burden of proving that its activities meet the definition of qualified research provided in 26 U.S.C. 41(d).
(5) Nothing in this Subsection shall preclude the department from examining a taxpayer's application for research and development credits after the issuance of credits. Credits disallowed following an examination conducted after the issuance of credits will be subject to recovery, recapture, or offset.
H.(1) Credits granted under this Section, but later disallowed in whole or in part, may be recovered by the secretary of the Department of Revenue from the taxpayer applicant through any collection remedy authorized by R.S. 47:1561 that is initiated within three years from December thirty-first of the year in which the credit was originally granted. The only interest that may be assessed and collected on these recovered credits is interest at a rate three percentage points above the rate provided in R.S. 9:3500(B)(1), which shall be computed from the original due date of the return on which the disallowed credit was taken.
(2) The provisions of this Subsection are in addition to and shall not limit the authority of the secretary of the Department of Revenue to assess or to collect under any other provision of law. This includes the disallowance of any disallowed credit claimed by a taxpayer who received the credit through purchase or through a distribution by an entity not taxed as a corporation.
I.(1) Except as provided in Paragraph (2) of this Subsection, a taxpayer shall not receive any other incentive administered by the Department of Economic Development for any expenditures for which the taxpayer has received a credit pursuant to this Section.
(2) The limitation provided in Paragraph (1) of this Subsection shall not apply to small businesses that have received a state grant pursuant to the provisions of R.S. 51:2401 or 2402.
J. No credit shall be allowed pursuant to this Section for research expenditures incurred, Small Business Technology Transfer Program funds received or Small Business Innovation Research Grant funds received after December 31, 2029.
K. If the amount of the credit authorized pursuant to Subsection A of this Section exceeds the amount of tax liability for the tax year, the excess credit may be carried forward as a credit against subsequent Louisiana income or corporation franchise tax liability for a period not to exceed five years.
L. Commencing no later than January 31, 2016, the House Committee on Ways and Means and the Senate Committee on Revenue and Fiscal Affairs shall review the credit authorized pursuant to the provisions of this Section to determine if the economic benefit provided by such credit outweighs the loss of revenue realized by the state as a result of awarding such credit. The House and Senate committees shall make a specific recommendation no later than March 1, 2017, to either continue the credit or to terminate the credit.
Acts 2002, 1st Ex. Sess., No. 9, §1, eff. for all income tax years beginning on or after Jan. 1, 2003, and franchise tax years beginning on or after Jan. 1, 2004; Acts 2005, No. 402, §1, eff. July 1, 2005; Acts 2009, No. 477, §1, eff. July 9, 2009; Acts 2011, No. 407, §1, eff. July 5, 2011; Acts 2013, No. 257, §1, eff. July 1, 2013, applicable to tax years beginning on or after Jan. 1, 2013; Acts 2015, No. 133, §1; Acts 2015, No. 357, §1, June 29, 2015; Acts 2015, No. 361, §2, eff. July 1, 2015; Acts 2015, No. 412, §2; Acts 2017, No. 336, §1, eff. June 22, 2017; Acts 2020 1st Ex. Sess., No. 13, §1, eff. Jan. 1, 2021; Acts 2023, No. 251, §1, eff. June 12, 2023; Acts 2023, No. 350, §1, eff. June 12, 2023.
NOTE: Acts 2002, 1st Ex. Sess., No. 9 §2, provided that the Act would become null and void on Dec. 31, 2006. Acts 2009, No. 477, §2, deleted the termination language.
NOTE: See Acts 2011, No. 407, §3, relative to applicability.
NOTE: See Acts 2015, No. 133, §2, re: applicability.
NOTE: See Acts 2015, No. 412, §3, re: applicability.
NOTE: See Acts 2017, No. 336, §2, re: applicability.