Louisiana offers one of the more generous R&D tax credit rates in the country, but the program works differently than most. Credits are certified by Louisiana Economic Development before they can ever be claimed, and the statewide funding pool is awarded on a first come, first served basis each fiscal year. Understanding that process is just as important as understanding the credit itself.
How the Credit Works
The Louisiana Research and Development Tax Credit encourages existing businesses with operating facilities in the state to establish or continue research and development activities there. Louisiana law generally conforms to the federal research credit framework enacted under the Small Business Job Protection Act of 1996, with modifications, most notably that both basic research and qualified research must actually be conducted within Louisiana. Qualified research must meet the same four part federal test used for the federal credit: it must qualify as a business deduction under IRC Section 174, aim to discover technological information, be intended to develop a new or improved business component, and involve a process of experimentation for substantially all of the research activity.
Unlike states where the credit is simply claimed on a tax return, Louisiana requires businesses to apply directly to LED. A business submits an application and fee, LED reviews it and may select it for detailed examination, and only after LED certifies the credit and notifies the Louisiana Department of Revenue can the business claim it on a state income tax return. The process typically takes three to six months.
Credit Amount
The credit rate depends on company size, measured by Louisiana full time equivalent employees. Businesses with fewer than 50 employees can receive up to 30% of qualified research expenditures. Businesses with 50 to 99 employees receive 10%, and businesses with 100 or more employees receive 5%. Only 65% of qualifying contract research expenses count toward the credit, and general or administrative wages are excluded.
Funding Cap and Timing
Louisiana’s R&D credit operates on a fiscal year allocation that is awarded first come, first served once an application is complete. Applications must be received within one year of December 31 of the year the expense was incurred. Credits can be fully claimed before a fiscal year ends, at which point new applications wait for the next allocation period beginning July 1. Even when a given year’s funding is exhausted, submitting a complete application still matters, since pending applications on file move to the front of the line when the next allocation opens.
Carryforward
Once certified, credits are claimed on the return for the year the qualified expenses were paid or incurred, or carried forward for up to 5 years.
Who’s Claiming It
Louisiana Economic Development identifies several key industries the state actively courts for research investment, and these sectors are common claimants of the credit:
- Energy and process industries, including oil and gas, LNG, hydrogen, and carbon reduction technology
- Aerospace and defense
- Life sciences
- Technology
- Agribusiness
What This Means for Your Business
Because Louisiana’s credit requires certification before it can be claimed, and because funding is awarded on a first come, first served basis, businesses benefit from applying early in the fiscal year and keeping thorough documentation ready in case an application is selected for detailed examination. A well prepared application, submitted promptly, is often the difference between securing the credit and waiting another year.
CSSI helps businesses identify and defend tax savings through detailed, engineering based studies. If you’d like to know whether your Louisiana operations qualify, request a free analysis to get started.
FAQ: Louisiana R&D Tax Credit
Can I just claim Louisiana’s R&D credit on my tax return like the federal credit?
No. Louisiana Economic Development must review and certify the credit before it can be claimed on a state income tax return.
How much is the credit worth?
It depends on company size. Businesses with fewer than 50 Louisiana employees can receive up to 30% of qualified research expenditures, businesses with 50 to 99 employees receive 10%, and businesses with 100 or more employees receive 5%.
Is there a cap on how much credit is available statewide?
Yes. Louisiana allocates funding by fiscal year and awards it first come, first served. Once a year’s allocation is exhausted, new applications wait for the next period beginning July 1.
What happens if I apply after the current year’s funding runs out?
Complete, pending applications are placed first in line when the next fiscal year’s allocation opens, so it’s worth applying even if current funding is exhausted.
Is there a deadline to apply?
Yes. Applications must be received within one year of December 31 of the year the expense was incurred.
Can unused credit be carried forward?
Yes, for up to 5 years after certification.
Which industries typically claim this credit in Louisiana?
Energy and process industries, aerospace and defense, life sciences, technology, and agribusiness are especially active, reflecting the state’s key economic sectors.
How do I know if my business qualifies?
The best way to find out is through a professional analysis of your research activities and expenses, timed to support a strong LED application. CSSI offers a free analysis to help determine eligibility and estimate potential savings.
