Comprehensive Analysis of Louisiana Form R-620 (R&D Tax Credit Claim Form) and Its Statutory Context

The Louisiana Research and Development Tax Credit (Form R-620) is a state incentive providing eligible businesses up to a 30% non-refundable tax credit on qualified research expenditures incurred within the state.

It is claimed against Louisiana income or franchise tax liability after mandatory pre-certification by Louisiana Economic Development (LED) and is designed to incentivize technological innovation and job creation.1

This program is a crucial mechanism designed to encourage existing businesses with operational facilities in Louisiana to establish or continue research and development activities within the state.1 The incentive offers substantial financial relief, providing up to a 30% credit on qualified research expenditures (QREs), with no per-taxpayer cap and no minimum expenditure requirement for participation.1 Although often referred to generically as “Form R-620” in commercial contexts, the credit is officially claimed on the Form CIFT-620 (Louisiana Corporation Income and Franchise Tax Return), utilizing the attached Schedule NRC (Nonrefundable Tax Credits, Exemptions, and Rebates).3

The administrative framework governing the Louisiana R&D credit introduces significant compliance complexity due to its mandatory dual-agency approval system. Successful claim execution requires coordinated effort across two distinct state entities: the Louisiana Economic Development (LED), which handles the application, review, and certification of the expenses through the FASTLANE system 1, and the Louisiana Department of Revenue (LDR), which manages the actual tax filing and utilization of the certified credit.6 This structure establishes a unique administrative compliance calendar that dictates the timeline for claiming the credit.

II. Statutory Foundation, Eligibility, and Qualified Research (R.S. 47:6015)

The legal basis for the Research and Development Tax Credit program is established under Louisiana Revised Statute 47:6015.7 This statute defines the program’s scope, eligibility requirements, calculation methods, and adherence to federal R&D standards.

A. Legislative Mandate and Program Duration

The program’s core mandate is rooted in economic policy: to encourage the growth and expansion of the private sector and to foster new and continuing efforts to conduct R&D activities within Louisiana.7 This long-term commitment has been reaffirmed by legislative action extending the program’s duration. The eligibility period for research expenditures incurred or funds received has been extended from December 31, 2025, to December 31, 2029.8 This extension provides crucial certainty for multi-year corporate investment planning in research facilities and staffing within the state.

B. Defining “Qualified Research” (Adherence to IRC §41)

Louisiana maintains a strict linkage to federal tax law, specifically adopting the definitions of “Qualified Research” and “Qualified Research Expenses” (QREs) as established in Internal Revenue Code (IRC) §41.1 This linkage standardizes the research criteria but simultaneously imports the complex documentation requirements associated with federal R&D claims.

For an activity to qualify for the Louisiana R&D credit, it must satisfy the Four-Part Test derived from IRC §41(d)(1) 1:

1. IRC §174 Deduction: The expense must be deductible under IRC §174 (related to experimental expenditures).
2. Technological Nature: The activity must be undertaken to discover information that is technological in nature.
3. New or Improved Component: The discovery must be intended to be useful in developing a new or improved business component of the taxpayer.
4. Process of Experimentation: Substantially all of the activities, defined as 80% or more, must involve a process of experimentation.1

The burden of proof rests on the taxpayer to demonstrate that each specific business component activity meets all four federal tests separately.10 Given the possibility of a detailed examination by LED staff, the ability to provide rigorous, contemporaneous technical and financial documentation is critical to substantiating the claim.1

C. Qualified Research Expenses (QREs)

Only expenditures incurred for research activities conducted physically within Louisiana are eligible.1 QREs fall into three distinct categories 11:

1. Wages: Wages paid for qualified services, which include individuals directly performing, directly supporting, or directly supervising qualified research. The category of “direct supervision” is narrowly interpreted to mean first-line management; higher-level managers are specifically excluded, even if they possess research credentials.1
2. Supplies: Tangible property that is either consumed directly by the research activity or utilized in the development of a prototype.11
3. Contract Research: Amounts paid to non-employees (e.g., outside consultants) under a written agreement to perform qualified research. The qualified expense amount for this category is limited to 65% of the total amount paid.12

D. Exclusion Criteria

R.S. 47:6015 includes restrictions designed to filter out applications based on routine business services or custom activities that may not meet the state’s intent to foster genuine innovation.13 Businesses that do not possess a pending or issued United States patent directly related to the QREs being claimed are ineligible to apply if they are 13:

• Professional services firms.
• Businesses primarily engaged in custom manufacturing and custom fabricating.

III. Calculation Methodology: Tiered Rates and the Incremental Base

The Louisiana R&D credit utilizes a strategic incremental calculation model, providing maximum incentive to smaller firms and those demonstrating growth in QREs over a three-year historical baseline.12

A. The Calculation Framework

The calculation is based on the concept of Excess QREs, which represents the current year’s Louisiana QREs minus a calculated Base Amount. The certified credit amount is the result of applying the applicable tiered rate to these Excess QREs.12

B. Establishing the Base Amount

The Base Amount is determined by reviewing the taxpayer’s average QREs over the three preceding taxable years.12 This historical average establishes the non-incentivized baseline.

For companies new to R&D in Louisiana, or those with no QREs in the preceding three years, the Base Amount is set to zero dollars.12 This allows 100% of the current year’s QREs to qualify as Excess QREs, maximizing the credit available for new market entrants or startups.

C. Tiered Credit Rates and Employee Count

The state employs a tiered structure that links the credit rate and the calculation of the Base Amount to the company’s size, based on the number of persons employed.

Table 3: Louisiana R&D Credit Calculation Structure

This design prioritizes small businesses. By setting the base percentage at 50% for smaller firms (versus 80% for larger firms) and simultaneously providing a dramatically higher credit rate (30% versus 5% or 10%), the policy is structured to strongly reward moderate R&D investment growth among small Louisiana employers.12

D. The SBIR/STTR Grant Credit Component

Recipients of federal Small Business Innovation and Research (SBIR) or Small Business Technology Transfer (STTR) grants are eligible for a separate, substantial credit equal to 30% of the qualifying Phase I or Phase II award amount received that year.12 A significant distinction for this specific credit is its explicit designation as transferable.2 This feature allows recipients, often early-stage companies lacking state tax liability, to sell the certified credit to other Louisiana taxpayers for cash, providing vital non-dilutive financing.

IV. Administrative Phase: Mandatory LED Certification via FASTLANE

The R&D credit is strictly a pre-approved benefit. The critical compliance function is managed by Louisiana Economic Development (LED) and must be finalized before the credit can be utilized on the state tax return.1

A. The Certification Process and System

Per R.S. 47:6015, all taxpayers seeking the credit must apply to LED.9 The application, fee, and required documentation must be submitted through LED’s proprietary secure online interface, FASTLANE Next Generation.1 This web-based system manages the incentive program and enables electronic submission of all project data for review and ultimate approval by LED staff.5

B. Strict Application Timeline

Adherence to the application deadline is non-negotiable and governs the ability to claim the credit. Taxpayers must submit the LED application within one year after December 31 of the year in which the expenditure was incurred.1 This administrative deadline often precedes the deadline for filing the corporate tax return (Form CIFT-620). A failure to meet this specific LED deadline results in the forfeiture of the credit for that tax year, making the application date the foundational compliance requirement.

C. Required Documentation for LED Review

LED staff thoroughly reviews submissions, occasionally selecting applications for a desk audit or detailed examination.1 Applicants must submit a comprehensive packet of information, including 1:

• A breakdown of costs segmented by expenditure category (wages, supplies, contracted research) and tied to each specific business component activity.
• Financial records, such as W-2s, 1099s, K-1s, and invoices, confirming the claimed QRE amounts.
• Technical evidence demonstrating the research meets the four-part test, including diagrams, notes, mark-ups, and documentation of any pending or issued patents.1
• The application also requires a submission fee, typically 0.5% of the credit claimed, with a minimum of $500.12

V. Filing Phase: LDR Guidance and Form R-620 in Context

Once LED has approved the credit amount, the utilization phase commences, managed by the Louisiana Department of Revenue (LDR) during the corporate tax filing process.

A. The Formal Claim Form (CIFT-620)

The credit is formally claimed on the Form CIFT-620 (Louisiana Corporation Income and Franchise Tax Return).4 This form must be filed annually by all domestic Louisiana corporations and foreign corporations deriving income from Louisiana sources.4 The R&D credit is then itemized on the attached Schedule NRC (Nonrefundable Tax Credits, Exemptions, and Rebates).3

B. Linking Certification to Filing: The R-6135 and Certification Number

The mechanism that connects the LED approval to the LDR return is the LDR State Certification Number.

• Form R-6135: Upon approval by LED and registration in the LDR Tax Registry, the LDR issues Form R-6135, the Credit Utilization Form.2 This form contains the unique LDR State Certification Number that verifies the credit amount.
• Filing Requirement: The taxpayer must enter this LDR State Certification Number onto the specified lines (Lines 6A, 7A, or 8A) of the Schedule NRC attached to Form CIFT-620.6 This number serves as the necessary internal authorization for LDR to recognize the claimed credit amount.

C. LDR Compliance Requirements

LDR mandates meticulous attention to administrative detail.18 The Louisiana Revenue Account Number, not the FEIN, must appear on every page of the return; failure to include it may lead to an assessment for a negligence penalty.18 Furthermore, corporations must retain all working papers used in preparing the return until the taxes have prescribed. If the corporation incurs a Net Operating Loss (NOL), the working papers must be retained until the NOL has prescribed.4

VI. Credit Utilization, Transferability, and Program Limitations

The R&D credit’s effectiveness is constrained by its utilization rules and, increasingly, by the new state-level aggregate funding cap.

A. Non-Refundability and Carryforward

The standard R&D credit is non-refundable for credits issued after July 1, 2015.2 It provides an offset against Louisiana income or franchise tax liability.16 Any unused credit balance may be carried forward for up to five years to offset future tax liabilities.1

B. Transferability Process

The transferable nature of the SBIR/STTR credit is a crucial exception that provides cash flow benefits.2 LDR manages the transfer through its Tax Registry.2 The owner (transferor) must submit the completed Transferable Credit Payment Voucher (R-6170) and a copy of the R-6135.19 The transfer process requires the use of LDR forms (R-6140/R-6145) and strict adherence to deadlines: the taxpayer must notify LDR within 10 business days of the transfer, and the transfer must be completed by the original due date of the return.20

C. Statewide Program Cap and Strategic Implications

A highly restrictive aggregate cap is scheduled to impact the program, fundamentally altering the risk management requirements for taxpayers.

• Cap Implementation: Effective July 1, 2025, the total statewide R&D credits allowed annually will be capped at $12 million.12
• Strategic Allocation Risk: The total incentive claims in FY 2023 were already $11.48 million.13 Given this high utilization rate, the $12 million cap is likely to be met quickly each fiscal year. The credits will be allocated on a first-come, first-served basis.12 This implementation compels taxpayers to accelerate their application process via FASTLANE to secure certification as early as possible following the close of the tax year, mitigating the substantial risk of fund exhaustion before their credit is recognized.

VII. Detailed Calculation Example

This example demonstrates the calculation of the R&D Tax Credit for a company with fewer than 50 employees, illustrating the 30% rate applied to excess expenditures.

Scenario: Small Business (<50 Employees)

Zenith Labs, a Louisiana company with 45 employees, incurred $1,000,000 in Louisiana Qualified Research Expenses (QREs) in the current year. Their QRE history for the three preceding years is provided below 12:

Step 1: Calculate the Average Prior QREs (3-Year Average) 12

$$\text{Average QREs} = \frac{(\$200,000 + \$300,000 + \$500,000)}{3} = \$333,333$$

Step 2: Calculate the Base Amount

For a company with less than 50 employees, the base amount is 50% of the 3-year average.12

$$\text{Base Amount} = \$333,333 \times 50\% = \mathbf{\$166,667}$$

Step 3: Calculate Excess QREs (The Incremental Increase)

$$\text{Excess QREs} = \text{Current QREs} – \text{Base Amount}$$

$$\text{Excess QREs} = \$1,000,000 – \$166,667 = \mathbf{\$833,333}$$

Step 4: Apply the Tiered Credit Rate

The applicable rate for this employee size is 30%.12

$$\text{R\&D Tax Credit} = \$833,333 \times 30\% = \mathbf{\$250,000}$$

Step 5: Illustrate SBIR Credit (Transferable Component)

If Zenith Labs also received a $100,000 Phase II SBIR award in the current year 12:

$$\text{SBIR Credit} = \$100,000 \times 30\% = \mathbf{\$30,000}$$

Zenith Labs is entitled to a total certified credit of $280,000, consisting of a $250,000 non-refundable incremental credit and a $30,000 transferable credit.

VIII. Conclusion and Strategic Recommendations

The Louisiana R&D Tax Credit is strategically important for promoting innovation, particularly within manufacturing sectors like Chemical Manufacturing and Paper Manufacturing, which accounted for a large portion of the $11.48 million in claims in FY 2023.13 However, the program’s fluctuating economic ROI necessitates heightened compliance and timing strategies for claimants.

A. Key Takeaways

1. Dual Compliance is Mandatory: The credit is not a simple tax filing deduction but a two-step process requiring mandatory pre-certification by LED via FASTLANE followed by claiming on the LDR Form CIFT-620 utilizing the LDR State Certification Number (R-6135).6
2. Deadline Precedence: The LED application deadline (one year after the expenditure year-end) governs eligibility and overrides traditional tax filing deadlines.1
3. High-Risk Cap: The impending $12 million aggregate state cap (starting July 1, 2025) introduces a competitive, first-come, first-served allocation system, creating substantial risk for delayed applications.12

B. Strategic Recommendations for Claimants

Corporate tax counsel should adopt strategies focused on speed and integrity to mitigate risk:

• Front-Load the Certification Process: To secure access under the forthcoming cap, taxpayers must prioritize completing the LED application (Phase 1) immediately following the close of the fiscal year, ensuring the claim is processed before the annual allocation is depleted.12
• Leverage Transferability: Companies with SBIR/STTR grants should capitalize on the credit’s transferability, registering the R-6135 with LDR and executing the transfer promptly to maximize liquidity and avoid the risk associated with non-refundability.20
• Establish Perpetual Audit Readiness: Given the stringent application of the four-part IRC §41 test and the high probability of an audit, businesses must maintain detailed, contemporaneous working papers proving the technological nature and experimentation components of the research. These records must be retained in accordance with LDR prescription rules.1

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