Louisiana Administrative Code
Title 13 - ECONOMIC DEVELOPMENT
Part I - Financial Incentive Programs
Chapter 29 - Research and Development Tax Credit
Section I-2903 - Definitions
A. Terms not otherwise defined in this Chapter shall have the same meaning given to them in R.S. 47:6015 unless the context clearly requires otherwise.
B. In this Chapter, the following terms shall have the meaning provided in this Section, unless the context clearly requires otherwise.
Affiliate - a company that shares more than 50 percent common ownership or other means of control with respect to another company.
Base Amount-
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.
Business Component - any product, process, computer software, technique, formula, or invention which is to be held for sale, lease, license, or used in a trade or business of the taxpayer.
Credit Certification-a certification by LED of the amount of the research and development tax credit earned by a person for a particular tax year.
Custom Fabricator or Custom Manufacturer - companies that assemble, fabricate, or manufacturer parts, equipment, assemblies, vessels, software or other products ("specified item") in response to specific design criteria and delivery schedule provided by the customer/client.
a. The typical business model acquisition process utilized by custom fabricators and/or manufacturers is as follows:
i. the customer/client providing the custom fabricator and/or manufacturer with the detail specific design criteria for the specified item in a document generally referred to as a "request for proposal";
ii. after review and analysis, the custom fabricator and/or manufacturer submits a "proposal" to the customer/client in which they commit to a specific price and delivery schedule to assemble, fabricate, or manufacturer the specified item requested by the customer/client in their request for proposal;
iii. if the proposal is acceptable, the customer/client will generally issue a "purchase order" commitment document to the custom fabricator and/or manufacturer agreeing to the terms of their proposal, and authorizing the custom fabricator or manufacturer to begin work per their proposal; and
iv. although the custom fabricator or manufacturer generally commits to a fixed price to produce the requested item, they have effectively negated most, if not all, material or unusual commercial transaction risks by their ability to analyze the required design criteria before committing to a specific price and delivery schedule within their proposal.
Custom Manufacturing or Custom Fabricating-the business of companies (custom fabricators and/or manufacturers) that assemble, fabricate, or manufacturer parts, equipment, assemblies, vessels, software or other products ("specified item") in response to specific design criteria and delivery schedule provided by the customer/client.
a. The typical business model acquisition process utilized by custom fabricators and/or manufacturers is as follows:
i. the customer/client providing the custom fabricator and/or manufacturer with the detail specific design criteria for the specified item in a document generally referred to as a "request for proposal";
ii. after review and analysis, the custom fabricator and/or manufacturer submits a "proposal" to the customer/client in which they commit to a specific price and delivery schedule to assemble, fabricate, or manufacturer the specified item requested by the customer/client in their request for proposal;
iii. if the proposal is acceptable, the customer/client will generally issue a "purchase order" commitment document to the custom fabricator and/or manufacturer agreeing to the terms of their proposal, and authorizing the custom fabricator or manufacturer to begin work per their proposal; and
iv. although the custom fabricator or manufacturer generally commits to a fixed price to produce the requested item, they have effectively negated most, if not all, material or unusual commercial transaction risks by their ability to analyze the required design criteria before committing to a specific price and delivery schedule within their proposal.
LED-Louisiana Department of Economic Development.
Person-any natural person or legal entity including an individual, corporation, partnership, or limited liability company.
Professional Services Firm-a firm who is primarily engaged in work which requires specialized education, knowledge, labor, judgment or is predominantly mental or intellectual in nature; and which may require the holding of a professional license. These types of firms engage in activities which include, but are not limited to, architecture, engineering, legal services and accounting.
Qualified Research Expenses in the State-expenses for qualified research as defined under 26 U.S.C. § 41(d) ("qualified research") that are qualified research expenses under 26 U.S.C. § 41(b) ("qualified research expenses") and meet the following requirements:
a. wages described in 26 U.S.C. §41 (b)(2)(A)(i) shall be paid to individuals who are residents of Louisiana and perform their services in Louisiana;
b. supplies described in 26 U.S.C. §41 (b)(2)(A)(ii) shall be consumed in Louisiana;
c. expenses for the right to use computers as described in 26 U.S.C. §41 (b)(2)(A)(iii) shall be for the use of computers located in Louisiana; and
d. contract research expenses as described in 26 U.S.C. §41 (b)(3) shall be for services performed in Louisiana;
e. 26 U.S.C. § 41(d) also excludes expenditures associated with certain activities from the definition of qualified research. These activities include:
i. research conducted after the beginning of commercial production;
ii. activities related to the adaptation of an existing business component to a particular customer's requirements or needs;
iii. activities related to the reproduction, in whole or in part, of an existing business component from a physical examination of the business component, plans, blueprints, detailed specifications or publically available information with respect to such component;
iv. activities related to management functions or techniques, efficiency surveys, market research, testing or development, routine data collection or routine testing or inspections for quality controls;
v. research conducted using the social sciences including economics and business management, as well as behavioral sciences, arts and humanities; and
vi. research funded by a contract, grant, or otherwise by another person or governmental entity.
Research and Development Tax Credits-credits against Louisiana income or corporation franchise taxes that are earned by a person pursuant to the provisions of the Research and Development Tax Credit Program provided by R.S. 47:6015.
AUTHORITY NOTE: Promulgated in accordance with R.S. 47:6015.
