Can Companies Claim
R&D Tax Credits in Louisiana?
Yes. Louisiana offers a Research and Development (R&D) Tax Credit similar to the federal version, with state-specific rules.
Only research expenses incurred in Louisiana qualify.
Unused credits can be carried forward up to five years, but the credit is fully refundable if claimed on an amended return filed after July 1, 2015.
Primary credits are not transferable, though SBIR and SBTT grant-related credits can be sold or transferred starting in 2018.
Base amount calculation depends on company size:80% of the average of the prior three years of qualified research expenditures for companies with 50 or more employees.50% of the average of the prior three years for companies with fewer than 50 employees.
Credit rate based on company size:Less than 50 employees: 30%50–99 employees: 10%100+ employees: 5%
The total R&D credit is capped at $12 million per fiscal year starting July 1, 2025, with claims allowed on a first-come, first-served basis.
SBIR or SBTT grant recipients can claim a credit equal to 30% of the grant.
Certain businesses are ineligible, including professional services or custom manufacturing firms without a pending or issued U.S. patent related to their research.
The Louisiana R&D credit will sunset on December 31, 2029.
Companies must apply for a credit certification from the Louisiana Department of Economic Development, with a fee of 0.5% of the requested credit (minimum $500, maximum $15,000).
Qualifying Research Activities
This example demonstrates how the Louisiana R&D Tax Credit rewards companies for growth in R&D spending over time. Small businesses with fewer than 50 employees benefit from a higher credit rate of 30%, which helps offset costs of research and innovation. The calculation adjusts depending on the number of prior years’ expenditures, ensuring that credits are focused on new and increased research efforts rather than routine spending.
Scenario 1: No Previous Years of R&D Spending
A small Louisiana company with fewer than 50 employees incurred $210,000 in R&D expenses in 2019 but had no prior-year research expenditures. Since there are no prior years to calculate a base amount, the credit is simply 30% of the current year’s expenses. Credit Calculation: $210,000 × 30% = $63,000
Scenario 2: One Previous Year of R&D Spending
The same company incurred $100,000 in R&D expenses in 2023 and $210,000 in 2024.
To calculate the credit: Determine the base: $100,000 × 50% = $50,000
Calculate the incremental increase: $210,000 − $50,000 = $160,000
Apply the credit rate: $160,000 × 30% = $48,000
Scenario 3: Two Previous Years of R&D Spending
The company incurred $150,000 in 2022, $100,000 in 2023, and $210,000 in 2024.
Determine the base: (($100,000 + $150,000)/2) × 50% = $62,500
Incremental increase: $210,000 − $62,500 = $147,500
Apply the credit rate: $147,500 × 30% = $44,250
Qualifying Research Activities
The four-part test below defines what counts as qualified research activities
Purpose of the Research
The activity should develop or improve a business component, such as a product, process, software, formula, technique, or invention, by enhancing functionality, performance, reliability, or quality.
Resolving Uncertainty
The work must address technical uncertainties, such as determining the optimal design, method, or approach to achieve the desired outcome. The results should not be known in advance.
Systematic Experimentation
Eligible research must follow a structured experimentation process, including trial and error, modeling, simulation, or testing alternatives to reach the intended improvement.
Technological Basis
The activity should develop or improve a business component, such as a product, process, software, formula, technique, or invention, by enhancing functionality, performance, reliability, or quality.
Why the R&D Tax Credit Matters ?
Since 1981, the R&D Tax Credit has helped businesses save billions in federal and state taxes. The credit enables companies to hire more staff, expand R&D, invest in facilities, and drive innovation. Thousands of businesses across multiple industries take advantage of this benefit each year.