Louisiana R&D Tax Credit

Documentation is often enough to suffice as proof of qualified expenses. Financial records, payroll records, and invoices are some of the documentation you need to support your qualified expenses.

The Louisiana Research and Development Tax Credit, also known as the Louisiana Tax Credit Incentive, provides businesses with a potentially significant tax benefit when research and development business activities are conducted within the state of Louisiana.
The research credit in Louisiana is different from the Federal R&D credit in several significant ways:

Louisiana businesses can receive up to 30% in tax credit through the research credit. The research credit amount is based on the number of employees a business has:

30% research credit for up to 50 employees
10% research credit for 50 to 99 employees
5% research credit for 100 or more employees

Additionally:

The base amount of the Louisiana research credit is 70% of the average previous 3 years of the Qualified Research Expenses
The credit can be carry forward 5 years
Before any research credits can be claimed, the Louisiana Economic Development (LED) Secretary must receive an application for a credit certification
The research credit must be claimed within 1 year following December 31st when the Qualified Research Expenses were paid for

You can read more about the Louisiana research tax credit here.

What is the Louisiana R&D Tax Credit?

R&D tax credits, also known as the Research and Development credit, enable businesses to potentially receive up to a 30% tax credit on qualified research expenditures that have been incurred within the state of Louisiana. Taxpayers might qualify for the credit if they paid for (or incurred) Qualified Research Expenses.

What are Qualified Research Activities in LA?

Qualified Research Activities can include the below. All qualified activities must take place in the state of LA and taxpayers must apply for the research certificate from the LED Secretary before claiming any activity expenses.

Creating improved products, processes, formulas, software, and techniques

Automating or improving internal manufacturing processes

Designing tools, jigs, fixtures, and molds

Integrating new equipment

Development of data centers, big data, and data mining tools

Integration of APIs and other technologies

Development of financial or pricing models

Manufacturing new or improved products

Developing prototypes, first articles, models

Evaluation of alternative materials

Development of firmware

Network hardware and software development and optimization

Developing simulators

Development of risk management systems

Hiring outside consultants to perform any of the listed activities

Eligibility:
LA R&D Tax Credit

Your Louisiana business might be eligible for the tax incentive if it:

Incurred research and development expenditures in the state of Louisiana

Claims research expenses within 1 year after December 31st from the year the research expenses occurred

Louisiana Economic Development specifically states that the following businesses are not eligible:

Businesses engaged in custom manufacturing and fabricating without a pending/issued U.S. patent related to Qualified Research Expenditures. This also applies to professional services firms.

The R&D tax credit can be applied to a wide variety of industries that extend beyond research labs and includes startups.

Find out if you qualify for the LA research credit.

How the R&D Tax Credit Works in LA

What Information is Needed?

Properly claiming the R&D tax credit can be difficult without the right expertise - That’s where GOAT.tax comes in. Our R&D tax credit software identifies any qualified research expenses your company paid and qualified research activities to ensure you receive the largest refund possible.

These qualified expenses typically include employee compensation, contracted services, and materials. Typical forms needed for proof often include payroll records, detailed financial records, and vendor invoices.

Meeting the Four-Part Test

All companies in Louisiana (regardless of industry, size, or revenue) that perform these qualified research activities must satisfy the following criteria of the IRS Four-Part Test as outlined in IRC §41(d):

1. Business Component Test

The activity must be related to the performance, quality, reliability, or new or improved function of a business component of the taxpaying company. A business component is defined to be “any product, process, software, technique, formula or invention used by the taxpaying company in trade or business.”

2. Technological Uncertainty Test

The activity must involve the elimination of uncertainty. An activity entails uncertainty if the taxpayer did not know one or more of the following:

Whether the desired results could be achieved.
The specific means of achieving the desired result.
The appropriate design of the business component is being developed.

3. Process-of-Experimentation Test

“Substantially all” of the activity must involve a “process of experimentation” involving more than one possible approach toward achieving the result, where the capability or method of achieving the result is uncertain at the outset of the activity.

4. Technological‐in‐Nature Test

Activities that are undertaken to discover information must be technological in nature. For example, experiments used to eliminate uncertainty must rely on principles of physical or biological sciences, engineering, or computer science.

Credit Carryforward

The LA research credit can be carried forward 5 years.

R&D Tax Credit Calculation Method

The credit calculation is based on the number of employees a business has:

30% research credit for up to 50 employees,

10% research credit for 50 to 99 employees,

or 5% research credit for 100 or more employees

over a base amount.

How To Claim Your Louisiana R&D Tax Credit

The Research and Development Tax Credit Incentive application must be submitted in order to claim the certificate from the LED Secretary. After receiving the certificate, a business can claim the research credit. Businesses must also file Form 6765 for the current tax year and 3 previous tax years.

Louisiana R&D Tax Credit From The Experts: GOAT.tax

GOAT.tax was created for the purpose of educating businesses on the R&D tax credit and assisting companies that qualify for the credit to claim it. Through the 305+ years of collective automating R&D tax credit experience across our nationwide team of over 50 R&D tax professionals, we have been able to take all the guesswork out of this complex tax credit incentive. The experts at GOAT.tax can help your business with automating R&D credit through our innovative platform.

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What industry are you in?

What is your total payroll for 2021?

Which of these apply to your business?

Hire US-based engineers, developers, or scientists.

Designs and develops product prototypes and/or software.

Performs experimentation and validation on products, manufacturing processes, and/or software.

None of the above.

This calculator has been developed utilizing data from a variety of studies conducted in the industries listed. This is only an approximation based on a variety of assumptions and should be treated as such.

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