The Louisiana Tax Credit Registry (TCR) for Transferred Credits: Compliance and Context within the R&D Incentive Program

I. Executive Summary: The Tax Credit Registry (TCR) and Transferable R&D Credits

The Tax Credit Registry (TCR) is a mandatory centralized recordation system, administered by the Louisiana Department of Revenue (LDR), designed to track the ownership and utilization of transferable state tax credits. For the Louisiana Research and Development (R&D) Tax Credit, this registry is essential for making the sale or transfer of certified Small Business Innovation Research (SBIR) or Small Business Technology Transfer (STTR) credits legally effective and recognizable by the state.

The TCR was established by the Louisiana Tax Credit Registry Act (R.S. 47:1524) with the explicit goal of standardizing and regulating the secondary market for state tax incentives.1 This system of centralized recordation is critical for the Louisiana Department of Revenue (LDR) because transferable tax credits represent a fungible state asset that can be exchanged between taxpayers, necessitating regulatory control. The registration process ensures LDR maintains a definitive, legally enforceable chain of title for these credits, thereby mitigating uncertainty regarding state revenue loss and preventing the possibility of duplicative or fraudulent claims against the state’s tax base.2 Although the Louisiana R&D tax credit program offers attractive incentives up to 30% on qualified research expenditures (QREs), only the supplemental credits derived from the 30% calculation associated with federal SBIR or STTR grants are statutorily eligible for sale or transfer.3 Strict adherence to the administrative procedures, including the critical 10-day notification deadline to LDR, is a fundamental requirement, as failure to record the transfer in the TCR renders the transaction void for state tax purposes.5

II. Statutory and Regulatory Foundations of the Tax Credit Registry

A. The Legislative Mandate: Louisiana R.S. 47:1524 (The Louisiana Tax Credit Registry Act)

The legal foundation and operational authority of the Tax Credit Registry derive entirely from the Louisiana Tax Credit Registry Act, codified in Louisiana Revised Statutes (R.S.) Title 47, Section 1524.1 The statutory purpose, as articulated in R.S. 47:1524(A), explicitly states the intent is to establish a “centralized registration and recordation system for transferable tax credits granted, issued, and authorized by the state of Louisiana”.1

Pursuant to R.S. 47:1524(C)(1), the registry is formally established within the Louisiana Department of Revenue (LDR). LDR is the administrative body responsible for the ongoing maintenance and tracking of all certified transferable credits, including the monitoring of issuance, subsequent transfer, and final utilization.1 The requirements established under the TCR Act apply universally to all transferable tax credits granted by the state on or after January 1, 2014.1

B. The Doctrine of Ineffectiveness: Legal Consequences of Non-Registration

The central statutory provision governing the legal consequences of non-compliance is R.S. 47:1524(D)(2), which mandates: “no issuance, sale, or transfer of tax credits after January 1, 2014, shall be effective as between the transferor and transferee, or as to third parties or the department until it has been recorded in the registry”.1

This declaration of “ineffectiveness” creates a bright-line rule, establishing that the transaction’s validity for state tax purposes is entirely contingent upon the administrative act of recordation by LDR. A commercial contract for the sale of a tax credit, even if flawlessly executed under Louisiana Civil Code provisions, is considered voidable and non-recognized by the state until LDR officially validates and records the transfer in the TCR.1 This requirement applies equally to all parties involved, including the original seller (transferor), the buyer (transferee), and the Department itself.1

It is important to recognize the legislative intent behind this strict requirement. Historically, the law focused on the Department’s non-recognition of unregistered transfers.6 However, legislative amendments enacted in 2015 (Acts 129 and 144, effective January 1, 2016) explicitly amended R.S. 47:1524(D)(2) to render the transfer ineffective “as between the transferor and transferee” until recorded.6 This definitive action closed a potential loophole where a non-compliant transferee might have been able to pursue breach of contract claims against the transferor while simultaneously being denied the tax credit by the state. The current law places the absolute burden of timely administrative compliance squarely on the contractual parties.6 This legal reality mandates that tax counsel and tax equity investors must structure the closing of the transaction, defining the “Date of Transfer,” with extreme care to ensure the subsequent 10-day LDR filing deadline can be met. The LDR’s date of registration is the controlling factor for legal effectiveness, superseding the date of the private sales contract.

C. Initial Registration Process (Agency Certification)

The TCR process begins with the initial certification of the credit amount. For the R&D program, this phase is managed by the Louisiana Economic Development (LED) agency, which certifies that the qualified research expenditures (QREs) or the SBIR/STTR grant awards meet statutory requirements.7

Once LED certifies the credit, it must notify LDR. This is done by LED submitting the “Agency Certification of Credit” form (R-6121) along with the supporting documentation.2

Following this notification, LDR officially records the initial issuance in the TCR. As formal documentation of this recordation, LDR issues the “Credit Registration Form” (R-6135) to the original taxpayer (the transferor).2 This R-6135 is mandatory for all subsequent transactions; it serves as proof of initial registration and must be attached to every transfer filing (Form R-6140) and utilization claim, ensuring a consistent audit trail.2

III. Nuances of the Louisiana R&D Tax Credit Program and Transferability

A. Calculation and Certification Overview

The Louisiana R&D tax credit, governed by R.S. 47:6015, encourages R&D activity by providing tax incentives up to 30% on qualified research expenses (QREs) incurred within the state.7

The calculation of the standard base credit is based on the incremental increase of QREs over a specific historical base amount, which varies depending on the taxpayer’s size.3 For companies employing less than fifty persons, the base is 50% of the average QREs from the three preceding taxable years.3 For companies employing fifty or more persons, the base calculation is 80% of the average QREs from the preceding three years.3

The corresponding tax credit rates applied to the incremental increase are tiered: 30% for firms with less than 50 employees, 10% for firms with 50-99 employees, and 5% for firms with 100 or more employees.3 To be awarded, the expenditure must be claimed, and the LED application submitted, within one year after December 31 of the year in which the QRE was incurred.3

B. The Exclusive Nature of Transferable Credits

The standard tiered R&D credits based on incremental QREs are generally nonrefundable and non-transferable, intended solely for the earning company’s direct use to offset income or franchise tax liabilities.9

The statutory exception that permits transferability involves the supplemental credit specifically granted to recipients of federal Small Business Innovation Research (SBIR) or Small Business Technology Transfer (STTR) grants.3 This transferable credit is equal to 30% of the federal award received during the tax year.3 Since its introduction for the 2018 tax year, this SBIR/STTR component has been the only portion of the Louisiana R&D credit eligible for sale or transfer, making it the only component subject to the TCR registration requirements.4

C. Programmatic Limitations and Future Market Risk

A key legislative development impacting the future market valuation of transferable R&D credits is the introduction of a statewide utilization cap. Effective July 1, 2025, the total aggregate amount of R&D tax credits allowed statewide per fiscal year will be limited to $12 million.3

This limitation introduces significant utilization risk, as credit claims—including those filed by transferees—are subject to this cap on a first-come, first-served basis.3 If a claim is disallowed because the cap has been reached for that state fiscal year, the taxpayer’s claim will be granted priority filing status for the subsequent year.3

This statewide cap materially alters the financial predictability of purchasing these tax assets. A nonrefundable credit’s time value is maximized through immediate use. When the state enforces a delay in utilization through a cap, the credit becomes susceptible to required carryforward, which subsequently decreases its net present value. Tax equity investors buying these credits must necessarily incorporate this delay risk into their valuation models, which typically results in a demand for a deeper discount on the credit’s face value from the transferor.3

The transferability details are summarized below:

Louisiana R&D Tax Credit Transferability Summary

IV. Administrative Compliance and The Transfer Process (LDR Guidance)

The transfer of recorded tax credits is governed by the meticulous administrative procedures outlined in LDR instructions, particularly Form R-6140 (Credit Utilization Form), and detailed in Revenue Information Bulletin (RIB) 14-005.2

A. Documentation for Credit Transfer

The transfer process requires a joint submission by the original owner (transferor) and the purchaser (transferee).2

The primary instrument for recording the transaction is the Credit Utilization Form (R-6140). Specifically, Section 2 of the R-6140 is designated for transferring the credit to a third party, which also includes allocations to a flow-through entity.5 Key financial and identifying data points must be included on the form, such as the Transferor’s Credit Balance, the Amount of Credit Being Transferred, the Date of Transfer, the Transferee LDR Account ID, and the required disclosure of the Price Paid by the Transferee to the Transferor.5 Both parties must execute the form.5

The R-6140 submission must be complete and include the following mandatory attachments 2:

1. A copy of the Credit Registration Form (R-6135), issued by LDR, proving the certified and registered credit amount.
2. A copy of the Contract of Sale, which details the terms of the transaction. This document is required for third-party sales but is not necessary for flow-through entity allocations.5
3. Any applicable transfer fees.

LDR’s instructions impose a strict administrative structure, known as the “per-transferee/per-credit” rule. The guidance dictates that only one Credit Registration Form (R-6135) can be attached to a single R-6140, and critically, only one transferee can be listed on that form.5 This regulation creates substantial administrative friction for pass-through entities (e.g., partnerships or LLCs) that earn transferable SBIR credits and subsequently allocate portions to their partners or members via Schedule K-1. Because R.S. 47:1524(B)(6) defines “transfer” to include “allocation” 6, each partner receiving an allocated credit is technically a transferee, requiring a distinct, recorded R-6140 submission jointly filed by the original entity and the individual recipient to finalize the transfer’s effectiveness in the hands of every ultimate owner.

B. Critical Timing and Deadlines

The timing requirements for registration are exceptionally exacting and represent the primary administrative compliance challenge. The complete R-6140 submission package must be delivered to LDR within 10 days of the Date of Transfer.2 This short window necessitates that the administrative closing of the transfer is integrated into the financial closing; there is virtually no margin for delay if the transfer is to be legally effective.

Additionally, LDR guidance stipulates that all transferable R&D credits must be transferred by the original due date of the tax return for the year in which the credit was earned.12 This imposes a firm deadline for engaging in the secondary market.

C. Utilization of the Purchased Credit (The Transferee’s Obligation)

After receiving the R-6140 package, LDR reviews the documentation and records the change in ownership in the Registry. Following recordation, LDR issues a new Credit Registration Form (R-6135) directly to the transferee, serving as recorded proof of their recorded ownership and remaining credit balance.2

The transferee must utilize this new R-6135 to claim the credit. To claim the credit against Louisiana income or franchise tax liability, the new owner is required to attach a completed R-6140 (used to denote the utilization amount) and the copy of the R-6135 issued in their name to their tax return.2

If the transferee intends to use the purchased credit specifically for the payment of an outstanding tax liability (e.g., settling an audit assessment or past-due tax debt), they must utilize the Transferable Credit Payment Voucher (Form R-6170), submitting it to LDR along with a copy of their R-6135.5 The requirement to disclose the purchase price on R-6140 and subsequent utilization details provides LDR with a robust audit trail, linking the credit’s origin and market transaction to the tax benefit realized by the purchaser.

Key Requirements for Tax Credit Transfer Registration (R-6140 Submission)

V. Practical Example: The SBIR R&D Tax Credit Transfer Lifecycle

This practical scenario illustrates the necessary steps and critical compliance points for transferring a Louisiana R&D tax credit.

A. Scenario Definition

• Transferor: BioGen Innovations, LLC, a small business employing 30 persons.
• Credit Earned: BioGen received a federal SBIR grant of $200,000 in the tax year 2024.
• Certified Credit Value (Transferable): The transferable credit is 30% of the federal award, yielding a value of $60,000.3
• Transferee: PetroCorp Inc., a large Louisiana C-Corporation.
• Transaction: BioGen sells the full $60,000 credit to PetroCorp for 92% of par value, resulting in a cash payment of $55,200.
• Date of Transfer: November 15, 2025.

B. Step 1: Certification and Initial LDR Registration

BioGen applies to LED for certification of the $60,000 SBIR credit. Upon successful verification, LED reports the issuance to LDR using Form R-6121. LDR officially records the $60,000 credit in the TCR and issues the initial Credit Registration Form (R-6135) to BioGen, establishing the official state record of the asset.2

C. Step 2: Execution of Transfer and Strict Compliance (The 10-Day Rule)

The contract of sale is executed on November 15, 2025. To comply with R.S. 47:1524(D)(2) and LDR guidance, BioGen and PetroCorp must submit the joint package to LDR no later than November 25, 2025.

The required submission includes:

1. Form R-6140 (Section 2), jointly signed, detailing the transfer of $60,000 and listing the Price Paid as $55,200.5
2. A copy of BioGen’s R-6135.5
3. The Contract of Sale.5
4. Applicable transfer fees.

Following LDR processing, the TCR reflects the $60,000 balance transferred to PetroCorp’s LDR account ID. LDR then issues a new R-6135 directly to PetroCorp. The successful recordation and issuance of the R-6135 to the transferee is the decisive legal event that makes the transfer effective and recognizable by the Department.1

D. Step 3: Utilization by the Transferee (PetroCorp Inc.)

PetroCorp uses the $60,000 credit to offset its 2025 corporate income tax liability. PetroCorp must attach a completed R-6140 (reflecting utilization) and the R-6135 issued in its name as the transferee to its 2025 Louisiana corporate tax return.2

From a tax accounting perspective, BioGen reports the $55,200 in gross proceeds from the sale. PetroCorp’s basis in the credit is its purchase price of $55,200. When PetroCorp utilizes the $60,000 face value, it realizes a $4,800 discount ($60,000 value minus $55,200 cost), which must generally be treated as taxable income upon utilization. The comprehensive audit trail provided by the TCR, including the recorded purchase price, provides LDR with the necessary data to verify these income recognition aspects for both parties.5

VI. Risk Management and Advanced Considerations

A. Due Diligence Necessity and Validity of the Credit

It is imperative that transferees understand that while the TCR registers the transfer, it does not validate the underlying statutory eligibility or calculation of the certified credit amount. The transferee bears the risk should LED or LDR later challenge the accuracy of the original QREs or SBIR grant eligibility.

Therefore, investors acquiring R&D credits must conduct thorough due diligence to confirm the credit was accurately certified by LED and derived specifically from the transferable 30% SBIR/STTR component, ensuring it was not a non-transferable incremental credit.3 Furthermore, although the explicit requirement for a tax delinquency certification (Form R-90150) is specifically tied to the Motion Picture Production Credit, the general inclusion of this concept in LDR’s R-6140 instructions serves as a broad warning.5 Prudent investors routinely require the transferor to certify their federal, state, and local tax compliance to mitigate transactional risk.

B. The Influence of the $12 Million Annual Cap (Post-July 2025)

The looming $\$12$ million aggregate annual cap on R&D tax credit utilization, commencing July 1, 2025, constitutes a significant systemic risk to the predictability of utilizing transferred credits.3

This limitation necessitates strategic utilization planning. Companies holding substantial transferable credit volumes will need to submit their utilization claims at the earliest possible date in the fiscal year (July 1) to maximize their opportunity to be among the “first-come” claimants.3 While LDR offers priority filing for claims disallowed due to the cap, this mechanism only protects the credit against loss; it forces taxpayers to carry forward an asset they expected to use immediately, thereby delaying the financial return and lowering the asset’s overall market value.3 The presence of this cap introduces an investment horizon risk that must be accurately discounted in the current market price of transferable R&D credits.

C. The Supremacy of Recordation

The Louisiana Tax Credit Registry, reinforced by R.S. 47:1524, fundamentally asserts the state’s control over its tax assets. The final and definitive legal action in any R&D tax credit transfer transaction is the successful recordation in the TCR by LDR. The statutory language is explicit: without the formal administrative acknowledgment via the timely R-6140 submission and the subsequent issuance of a new R-6135 to the purchaser, no private agreement, escrow arrangement, or payment transfer possesses the legal force to render the credit valid or effective as a tax offset.1 This framework ensures transparency, mitigates fraud, and preserves the state’s regulatory authority over its transferable incentive programs.

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