RESEARCH AND DEVELOPMENT TAX CREDIT

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2 RESEARCH AND DEVELOPMENT TAX CREDIT OVERVIEW The Research and Development Tax Credit program was created to encourage the development, growth and expansion of Louisiana businesses by encouraging new and continued efforts to conduct research and development activities within this state. ELIGIBILITY Any taxpayer who: Claims for the taxable year a federal income tax credit under 26 U.S.C. 41(a) for increasing research activities. This is calculated with the IRS Form 6765, Credit for Increasing Research Activities, and/or Receives a federal Small Business Innovation Research Grant, or SBIR, as authorized by the Small Business Reauthorization Act of Beginning with the 2009 tax year, any taxpayer who employs up to fifty (50) Louisiana residents and incurs qualified research expenses for the taxable year, as defined in 26 U.S.C. 41(b) may also be eligible for the tax credit without having to claim the federal income tax credit. BENEFITS State tax credits for tax years 2003 to 2008 are non-refundable and transferrable. Starting with tax year 2009, all tax credits awarded will be refundable. R&D Tax Credit 2003 & 2004 Tax Years 2005 to 2008 Tax Years 2009 Tax Year and Beyond Credit for Increasing 8% for all taxpayers with 20% for taxpayers with 20% for taxpayers with 50 to Research Activities a phase in amount fewer than 500 LA 99 LA employees (Regular) employees 8% for taxpayers with more than 500 LA employees 8% for taxpayers with more than 100 LA employees Credit for Increasing Research Activities (Alternative) SBIR Grants R&D Expenditures (only) 25% for all taxpayers with a phase in amount 8% for all taxpayers with a phase in amount N/A 25% for all taxpayers 25% for all taxpayers 20% for all taxpayers 40% for all taxpayers N/A 40% for all taxpayers with fewer than 50 LA employees Note: All credits are calculated on Louisiana s apportioned share of qualified research expenditures North Third Street Baton Rouge, LA OpportunityLouisiana.com

3 RESEARCH & DEVELOPMENT TAX CREDIT QUALIFIED RESEARCH AND DEVELOPMENT The term "qualified research" means research, which is undertaken for the purpose of discovering information-- which is technological in nature, and the application of which is intended to be useful in the development of a new or improved business component of the taxpayer, and substantially all of the activities of which constitute elements of a process of experimentation Research shall be treated as conducted for a purpose described in this paragraph if it relates to a new or improved function, performance, or reliability or quality. Research shall in no event be treated as conducted if it relates to style, taste, cosmetic, or seasonal design factors. The term "qualified research" shall not include any of the following: Research after commercial production.--any research conducted after the beginning of commercial production of the business component. Adaptation of existing business components.--any research related to the adaptation of an existing business component to a particular customer's requirement or need. Duplication of existing business component.--any research related to the reproduction of an existing business component (in whole or in part) from a physical examination of the business component itself or from plans, blueprints, detailed specifications, or publicly available information with respect to such business component. Surveys, studies, etc.--any-- (i) efficiency survey, (ii) activity relating to management function or technique, (iii) market research, testing, or development (including advertising or promotions), (iv) routine data collection, or (v) routine or ordinary testing or inspection for quality control. Computer software.--except to the extent provided in regulations, any research with respect to computer software which is developed by (or for the benefit of) the taxpayer primarily for internal use by the taxpayer, other than for use in-- (i) an activity which constitutes qualified research (determined with regard to this subparagraph), or (ii) a production process with respect to which the requirements of paragraph (1) are met Foreign research.--any research conducted outside the United States, the Commonwealth of Puerto Rico, or any possession of the United States. Social sciences, etc.--any research in the social sciences, arts, or humanities. Funded research.--any research to the extent funded by any grant, contract, or otherwise by another person (or governmental entity) North Third Street Baton Rouge, LA OpportunityLouisiana.com

4 RESEARCH & DEVELOPMENT TAX CREDIT QUALIFIED RESEARCH EXPENSES Wages, that are subject to withholding, paid to Louisiana resident employees who perform services in o Louisiana in any of the following capacities -Engaged in research, -Directly supervising research, or -Directly supporting research Supplies used in the conduct of research and development Expenses for the right to use computers in the conduct of research in Louisiana, and Contract research expenses are 65% of any expense paid or incurred to any person other than an employee of the tax payer, for services performed in Louisiana. APPLICATION PROCEDURES For approval of tax credits, a taxpayer must complete the following steps: Submit a signed application and affidavit with a $250 fee and the following documentation: - A taxpayer who claims for the taxable year a federal income tax credit under 26 U.S.C. 41(a), must submit a signed copy of the taxpayer s tax return. If a Research & Development Tax Study was completed, a copy should also be submitted. - A taxpayer who receives a federal SBIR or STTR must submit a copy of the grant along with copies of award payments received during the tax year. AND/OR - Starting with the 2009 tax year, a taxpayer who employs up to fifty (50) Louisiana residents and incurs qualified research expenses for the taxable year must submit a list of the qualified research expenses incurred. If a Research & Development Tax Study was completed or the federal income tax credit was claimed, a copy should also be submitted (in addition to all of the documents requested on the application). After approval by LED, a Tax Credit Certificate or letter is issued to the taxpayer stating the amount of tax credits allowed. A copy is also sent to the Louisiana Department of Revenue. A copy of the certificate or letter must be attached to any Louisiana return on which the credit is taken. Calculation sheets are also available to assist taxpayers in estimating the tax credit. CONTACT Shamelda Pete spete@la.gov (225) North Third Street Baton Rouge, LA OpportunityLouisiana.com

5 Mailing Address Louisiana Economic Development P.O. Box Baton Rouge, LA Physical Address 1051 North Third Street Baton Rouge, LA R&D Tax Credit Program Application BUSINESS INFORMATION For Office Use Only Deposit Date Receipt # Check # Check Amt. Initials Business Name Business Address1 Business Address2 City State Zip Code - Parish Phone Number Ext Fax Number Business Contact Address LA State Senator LA State Representative NAICS Code Dept of Revenue ID Federal Tax ID Unemployment ID Third Party/Consultant (if applicable) RESEARCH & DEVELOPMENT INFORMATION Tax Year Business Industry List Louisiana Locations Federal Qualified Research Expenses LA Qualified Research Expenses SBIR/STTR grants expensed in LA LA Resident Employees LA Resident R&D Employees Average Wage of Non-R&D LA Employees Average Wage of R&D LA Employees Average Value of Benefits Received by all LA Employees Cost of Health Ins Coverage Offered APPLICATION FEE: $250 Please make checks payable to LED. 03/11

6 Business Name RESEARCH & DEVELOPMENT EXPENSES EMPLOYEE NAME TITLE JOB DESCRIPTION SALARY % ENGAGED IN R&D List of Supplies and Contracted Research VENDOR DESCRIPTION COST TOTAL AMOUNT $ If including payments to a research company, or clinical trial company, please include a copy of the agreement with a copy of all payments made during the year. 03/11

7 Business Name CHECKLIST OF ATTACHMENTS Detailed Narrative of Research and Development conducted Federal Income Tax Return and supporting documentation (Tax Years ) Copy of Small Business Innovation Research Grant (SBIR) with documentation showing payments received (if applicable) Copy of the complete tax study (if applicable) Notarized Affidavit If less than 50 employees, include the following: list of research expenses incurred: 3 rd and 4 th Louisiana Employer's Quarterly Wage & Tax Report (LWC ES4) for tax year claiming credit W-2 s for wages listed on the application Invoices for supplies or contracted research listed on the application Audited or Reviewed Financial Statements for the last 2 tax years including certification from CPA that the claimed research and development expenditures meet the requirements of Internal Revenue Code Section 41 (b) and (d). $250 application fee, made payable to LOUISIANA ECONOMIC DEVELOPMENT or LED Research & Development Tax Credit Program Administrator: Shamelda Pete - spete@la.gov Phone: Fax: /11

8 Business Name AFFIDAVIT The undersigned authority hereby certifies: That he/she is of Title and that he/she has the authority to sign on behalf of the company. That he/she has Company examined the information contained in this application and found the information given to be true and correct to the best of their knowledge. That he/she has verified that these expenditures meet the requirements of Internal Revenue Code Section 41. That he/she understands the R&D Tax credits are subject to audit and recapture for a period of three years. Subscribed on, 20. Company Official Print Company Official Notary 03/11

9 R & D Calculation Form 2003 for Regular Credit 1 Base Period Percentage (Federal Form 6765, line 9) % 2 Average Annual Gross Receipts (Federal From 6765, line 10) $ 3 Base Period Amount (Federal Form 6765, larger of line 11 or 13) $ Qualified Research Expenses (Federal Form 6765, line 8) $ 5 Excess (line 4 minus line 3) $ 6 Louisiana Qualified Research Expenses $ 7 Louisiana Percentage (line 6 divided by line 4) $ 8 Excess Apportioned to LA (line 5 times line 7) $ 9 Credit Percentage 8% 10 Phase in Percentage 25% 11 Louisiana Research Credit (line 8 times line 9 times line 10) $ Alternative Incremental Credit Qualified Research Expenses (Federal Form 6765, line 25) $ 2 Louisiana Qualified Research Expenses $ 3 Louisiana Percentage (line 2 divided by line 1) % 4 Alternative Incremental Credit (Federal Form 6765, Line 39) $ 5 Louisiana Percentage of Credit (line 4 times line 3) % 6 Credit Percentage 25% 7 Phase in Percentage 25% 8 Louisiana Research Credit (line 8 times line 9 times line 10) $ SBIR/STTR 1 Awards received during 2003 $ 2 Credit Percentage 8% 3 Phase in Percentage 25% 4 Louisiana Research Credit (line 1 times line 2 times line 3) $ Revised 1 /09

10 R & D Calculation Form 2004 for Regular Credit 1 Base Period Percentage (Federal Form 6765, line 9) % 2 Average Annual Gross Receipts (Federal From 6765, line 10) $ 3 Base Period Amount (Federal Form 6765, larger of line 11 or 13) $ Qualified Research Expenses (Federal Form 6765, line 8) $ 5 Excess (line 4 minus line 3) $ 6 Louisiana Qualified Research Expenses $ 7 Louisiana Percentage (line 6 divided by line 4) % 8 Excess Apportioned to LA (line 5 times line 7) $ 9 Credit Percentage 8% 10 Phase in Percentage 50% 11 Louisiana Research Credit (line 8 times line 9 times line 10) $ Alternative Incremental Credit Qualified Research Expenses (Federal Form 6765, line 25) $ 2 Louisiana Qualified Research Expenses $ 3 Louisiana Percentage (line 2 divided by line 1) % 4 Alternative Incremental Credit (Federal Form 6765, Line 39) $ 5 Louisiana Percentage of Credit (line 4 times line 3) % 6 Credit Percentage 25% 7 Phase in Percentage 50% 8 Louisiana Research Credit (line 8 times line 9 times line 10) $ SBIR/STTR 1 Awards received during 2004 $ 2 Credit Percentage 8% 3 Phase in Percentage 50% 4 Louisiana Research Credit (line 1 times line 2 times line 3) $ Revised 1 /09

11 R & D Calculation Form 2005 for Regular Credit 1 Base Period Percentage (Federal Form 6765, line 10) % 2 Average Annual Gross Receipts (Federal From 6765, line 11) $ 3 Base Period Amount (Federal Form 6765, larger of line12 or 14) $ Qualified Research Expenses (Federal Form 6765, line 9) $ 5 Excess (line 4 minus line 3) $ 6 Louisiana Qualified Research Expenses $ 7 Louisiana Percentage (line 6 divided by line 4) % 8 Excess Apportioned to LA (line 5 times line 7) $ 9 Credit Percentage (8% or 20% if less than 500 LA employees) 8% or 20% 10 Louisiana Research Credit (line 8 times line 9) $ Alternative Incremental Credit Qualified Research Expenses (Federal Form 6765, line 27) $ 2 Louisiana Qualified Research Expenses $ 3 Louisiana Percentage (line 2 divided by line 1) % 4 Alternative Incremental Credit (Federal Form 6765, Line 41) $ 5 Louisiana Percentage of Credit (line 4 times line 3) % 6 Credit Percentage 25% 7 Louisiana Research Credit (line 5 times line 6) $ SBIR/STTR 1 Awards received during 2005 $ 2 Credit Percentage 20% 3 Louisiana Research Credit (line 1 times line 2) $ Revised 1 /09

12 R & D Calculation Form 2006 for Regular Credit 1 Base Period Percentage (Federal Form 6765, line 10) % 2 Average Annual Gross Receipts (Federal From 6765, line 11) $ 3 Base Period Amount (Federal Form 6765, larger of line 12 or 14) $ Qualified Research Expenses (Federal Form 6765, line 9) $ 5 Excess (line 4 minus line 3) $ 6 Louisiana Qualified Research Expenses $ 7 Louisiana Percentage (line 6 divided by line 4) % 8 Excess Apportioned to LA (line 5 times line 7) $ 9 Credit Percentage (8% or 20% if less than 500 LA employees) 8% or 20% 10 Louisiana Research Credit (line 8 times line 9) $ Alternative Incremental Credit Qualified Research Expenses (Federal Form 6765, line 28) $ 2 Louisiana Qualified Research Expenses $ 3 Louisiana Percentage (line 2 divided by line 1) % 4 Alternative Incremental Credit (Federal Form 6765, Line 42a) $ 5 Louisiana Percentage of Credit (line 4 times line 3) % 6 Credit Percentage 25% 7 Louisiana Research Credit (line 5 times line 6) $ Alternative Simplified Calculation Qualified Research Expenses (Federal Form 6765, line 53) $ 2 Louisiana Qualified Research Expenses $ 3 Louisiana Percentage (line 2 divided by line 1) % 4 Alternative Incremental Credit (Federal Form 6765, Line 59) $ 5 Louisiana Percentage of Credit (line 4 times line 3) % 6 Credit Percentage 25% 7 Louisiana Research Credit (line 5 times line 6) $ SBIR/STTR 1 Awards received during 2006 $ 2 Credit Percentage 20% 3 Louisiana Research Credit (line 1 times line 2) $ Revised 1 /09

13 R & D Calculation Form 2007 for Regular Credit 1 Base Period Percentage (Federal Form 6765, line 10) % 2 Average Annual Gross Receipts (Federal From 6765, line 11) $ 3 Base Period Amount (Federal Form 6765, larger of line 12 or 14) $ Qualified Research Expenses (Federal Form 6765, line 9) $ 5 Excess (line 4 minus line 3) $ 6 Louisiana Qualified Research Expenses $ 7 Louisiana Percentage (line 6 divided by line 4) % 8 Excess Apportioned to LA (line 5 times line 7) $ 9 Credit Percentage (8% or 20% if less than 500 LA employees) 8% or 20% 10 Louisiana Research Credit (line 8 times line 9) $ Alternative Incremental Credit Qualified Research Expenses (Federal Form 6765, line 28) $ 2 Louisiana Qualified Research Expenses $ 3 Louisiana Percentage (line 2 divided by line 1) % 4 Alternative Incremental Credit (Federal Form 6765, Line 41) $ 5 Louisiana Percentage of Credit (line 4 times line 3) % 6 Credit Percentage 25% 7 Louisiana Research Credit (line 5 times line 6) $ Alternative Simplified Calculation Qualified Research Expenses (Federal Form 6765, line 53) $ 2 Louisiana Qualified Research Expenses $ 3 Louisiana Percentage (line 2 divided by line 1) % 4 Alternative Incremental Credit (Federal Form 6765, Line 59) $ 5 Louisiana Percentage of Credit (line 4 times line 3) % 6 Credit Percentage 25% 7 Louisiana Research Credit (line 5 times line 6) $ SBIR/STTR 1 Awards received during 2007 $ 2 Credit Percentage 20% 3 Louisiana Research Credit (line 1 times line 2) $ Revised 1 /09

14 R & D Calculation Form 2008 for Regular Credit 1 Base Period Percentage (Federal Form 6765, line 10) % 2 Average Annual Gross Receipts (Federal From 6765, line 11) $ 3 Base Period Amount (Federal Form 6765, larger of line12 or 14) $ Qualified Research Expenses (Federal Form 6765, line 9) $ 5 Excess (line 4 minus line 3) $ 6 Louisiana Qualified Research Expenses $ 7 Louisiana Percentage (line 6 divided by line 4) % 8 Excess Apportioned to LA (line 5 times line 7) $ 9 Credit Percentage (8% or 20% if less than 500 LA employees) 8% or 20% 10 Louisiana Research Credit (line 8 times line 9) $ Alternative Incremental Credit Qualified Research Expenses (Federal Form 6765, line 28) $ 2 Louisiana Qualified Research Expenses $ 3 Louisiana Percentage (line 2 divided by line 1) % 4 Alternative Incremental Credit (Federal Form 6765, Line 42) $ 5 Louisiana Percentage of Credit (line 4 times line 3) % 6 Credit Percentage 25% 7 Louisiana Research Credit (line 5 times line 6) $ Alternative Simplified Calculation Qualified Research Expenses (Federal Form 6765, line 53) $ 2 Louisiana Qualified Research Expenses $ 3 Louisiana Percentage (line 2 divided by line 1) % 4 Alternative Incremental Credit (Federal Form 6765, Line 59) $ 5 Louisiana Percentage of Credit (line 4 times line 3) % 6 Credit Percentage 25% 7 Louisiana Research Credit (line 5 times line 6) $ SBIR/STTR 1 Awards received during 2008 $ 2 Credit Percentage 20% 3 Louisiana Research Credit (line 1 times line 2) $ Revised 1 09

15 IRS From 6765 Regular Credit 1 Base Period Percentage (Federal Form 6765, line 10) % 2 Average Annual Gross Receipts (Federal From 6765, line 11) 3 Base Period Amount (Federal Form 6765, larger of line12 or 14) Qualified Research Expenses (Federal Form 6765, line 9) 5 Excess (line 4 minus line 3) 6 Louisiana Qualified Research Expenses 7 Louisiana Percentage (line 6 divided by line 4) 8 Excess Apportioned to LA (line 5 times line 7) 9 Credit Percentage (8% or 20%) 8% or 20% 10 Louisiana Research Credit (line 8 times line 9) IRS Form 6765 Alternative Simplified Calculation Qualified Research Expenses (Federal Form 6765, line 28) 2 Louisiana Qualified Research Expenses 3 Louisiana Percentage (line 2 divided by line 1) 4 Alternative Incremental Credit (Federal Form 6765, Line 34) 5 Louisiana Percentage of Credit (line 4 times line 3) 6 Credit Percentage 25% 7 Louisiana Research Credit (line 5 times line 6) SBIR/STTR R & D Calculation Form 2009 for 1 Awards received during Credit Percentage 40% 3 Louisiana Research Credit (line 1 times line 2) Revised 04/10

16 R & D Calculation Form 2010 for IRS From 6765 Regular Credit 1 Base Period Percentage (Federal Form 6765, line 10) % 2 Average Annual Gross Receipts (Federal From 6765, line 11) - 3 Base Period Amount (Federal Form 6765, larger of line12 or 14) Qualified Research Expenses (Federal Form 6765, line 9) - 5 Excess (line 4 minus line 3) - 6 Louisiana Qualified Research Expenses - 7 Louisiana Percentage (line 6 divided by line 4) % 8 Excess Apportioned to LA (line 5 times line 7) 9 Credit Percentage (8% or 20% with 50 to 99 LA employees) 8% or 20% 10 Louisiana Research Credit (line 8 times line 9) IRS Form 6765 Alternative Simplified Calculation Qualified Research Expenses (Federal Form 6765, line 28) - 2 Louisiana Qualified Research Expenses - 3 Louisiana Percentage (line 2 divided by line 1) % 4 Alternative Incremental Credit (Federal Form 6765, Line 34) - 5 Louisiana Percentage of Credit (line 4 times line 3) 6 Credit Percentage 25% 7 Louisiana Research Credit (line 5 times line 6) - SBIR/STTR 1 Awards received during Credit Percentage 40% 3 Louisiana Research Credit (line 1 times line 2) - Revised 03/11

17 Louisiana Qualified Research Expenses Tax Year: Company: Prepared by: Less than 50 LA Employee Expenses As of : Wages Supplies Desciption of Cost Documentation Total Expense Allowable Disallowed % Third-Party Computer Use Contracted Research (65%) Total $ $ $ 40% of Costs $ Revised 04/10

18 Mailing Address Louisiana Economic Development P.O. Box Baton Rouge, LA Physical Address 1051 North Third Street Baton Rouge, LA Application for Sale of R&D Tax Credits OpportunityLouisiana.com BUSINESS INFORMATION Business Name Business Address1 Business Address2 City State Zip Code - Parish Phone Number Ext Fax Number Website Address Business Contact Address LA State Senator LA State Representative NAICS Code Dept of Revenue ID Number of Employees Number of LA Resident Employees RESEARCH & DEVELOPMENT INFORMATION Date of Approval of Original Tax Credits Original Amount of Tax Credits Allowed Tax Credits Used Tax Credits to be Sold Selling Price Tax Credit Purchaser SSN Please attach the following: Copy of Signed Agreement to Sell Tax Credits Copy of Original Certificate issued by LED Copy of the last two LDOL Quarterly Report of Wages CERTIFICATION The undersigned authority hereby certifies: That he/she is of Title. That he/she has examined the information contained in this application and found the Company information given to be true and correct to the best of their knowledge. Subscribed on, 20. Company Official Print Company Official /09

19 LAC 13:I.CHAPTER 29` Page 1 LOUISIANA ADMINISTRATIVE CODE - TITLE 13 ECONOMIC DEVELOPMENT Part I. Financial Incentive Programs Chapter 29. Research and Development Tax Credit Purpose and Application A. The purpose of this Chapter is to implement the Research and Development Tax Credit Program as established by R.S. 47:6015. B. This Chapter shall be administered to achieve the following purposes: 1. encourage the development, growth, and expansion of the private sector within the state; and 2. encourage new and continuing efforts to conduct research and development activities within this state. C. This Chapter shall apply to any person 1. claiming a credit; 2. selling or otherwise transferring a credit; or 3. purchasing or otherwise acquiring a credit under this program. D. A person shall be allowed a credit against income or corporation franchise tax liability for the following: 1. any person who claims for the taxable year a federal income tax credit under 26 U.S.C. 41(a) for increasing research activities shall be allowed a credit ; a. for income tax years beginning on or after January 1, 2003, and before January 1, 2005; and franchise tax years beginning on or after January 1, 2004 and before January 1, 2006, in the amount of either: i. eight percent of the state's apportioned share of the taxpayer's expenditures for increasing research activities; or ii. twenty-five percent of the state's apportioned share of the federal research credit claimed for research expenditures in the state if the taxpayer claims the alternative incremental tax credit under 26 U.S.C. 41; and b. for income tax years beginning on or after January 1, 2005, and franchise tax years beginning on or after January 1, 2006, in the amount of either: i. eight percent of the state's apportioned share of the taxpayer's expenditures for increasing research activities if the applicant is an entity that employs five hundred or more Louisiana residents; ii. twenty percent of the state's apportioned share of the taxpayer's expenditures for increasing research activities if the applicant is an entity that employs fewer than five hundred Louisiana residents; or ii. twenty-five percent of the state's apportioned share of the federal research credit claimed for research expenditures in the state if the

20 LAC 13:I.CHAPTER 29` Page 2 taxpayer claims the alternative incremental tax credit under 26 U.S.C. 41; and 2. a person who receives a federal Small Business Innovation Research Grant as created by the Small Business Innovation Development Act of 1982 (P.L ), reauthorized by the Small Business Research and Development Enhancement Act (P.L ), and reauthorized again by the Small Business Reauthorization Act of 2000 (P.L ), shall be allowed a credit in an amount equal to: a. for income tax years beginning on or after January 1, 2003 and before January 1, 2005, and franchise tax years beginning on or after January 1, 2004 and before January 1, 2006, eight percent of the award received during the tax year; or b. for income tax years beginning on or after January 1, 2005, and franchise tax years beginning on or after January 1, 2006, twenty percent of the award received during the tax year. B. The credit may be carried forward for up to 10 years, or under certain circumstances may be sold pursuant to the provisions of R.S. 47:6015 and this Chapter. AUTHORITY NOTE: Promulgated in accordance with R.S. 47:6015. HISTORICAL NOTE: Promulgated by the Department of Economic Development, Office of Business Development Services, Business Resources Division, LR 30:977 (May 2004), amended by the Office of Business Development, LR Definitions A. Terms not otherwise defined in this Chapter shall have the same meaning given to them in R.S. 51:2352 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. Credit Certification-a certification by DED of the amount of the Research and Development Tax Credit earned by a person for a particular tax year. DED-Louisiana Department of Economic Development. Person-any natural person or legal entity including an individual, corporation, partnership, or limited liability company. Qualified Research Expenses in the State-expenses that are qualified research expenses under 26 U.S.C 41(b) 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

21 LAC 13:I.CHAPTER 29` Page 3 d. contract research expenses as described in 26 U.S.C. 41(b)(3) shall be for services performed in Louisiana. 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. AUTHORITY NOTE: Promulgated in accordance with R.S. 47:6015. HISTORICAL NOTE: Promulgated by the Department of Economic Development, Office of Business Development Services, Business Resources Division, LR 30:977 (May 2004) Certification of Amount of Credit A. Prior to claiming a research and development tax credit on any tax return or selling any research and development tax credit, a person must apply for and obtain a credit certification from DED. B. The application for a credit certification shall be submitted on a form provided by the DED and shall include, but not be limited to to following information: 1. The taxpayer's federal income tax return and supporting documentation that shows the amount of the federal research credit for the same taxable year. If claiming the credit under Subsection D, the taxpayer shall also remit supporting documentation for the federal Small Business Innovation Research Grant; 2. The total amount of qualified research expenses and the qualified research expenses in this state; 3. The total number of Louisiana residents employed by the taxpayer and the number of those Louisiana residents directly engaged in research and development; 4. The average wages of the Louisiana resident employees not directly engaged in research and development and the average wages of the Louisiana resident employees directly engaged in research and development; 5. The average value of benefits received by all Louisiana resident employees; 6. The percentage of health insurance coverage offered to all Louisiana resident employees; 7. Any other information required by the Department of Economic Development. C. DED shall review the application and issue a credit certification in the amount determined to be eligible and provide a copy to the Department of Revenue. The credit certification and the amount of such certification shall be considered preliminary and shall be subject in all respects to audit by the Louisiana Department of Revenue. AUTHORITY NOTE: Promulgated in accordance with R.S. 47:6015. HISTORICAL NOTE: Promulgated by the Department of Economic Development, Office of Business Development Services, Business Resources Division, LR 30:977 (May 2004), amended by the Office of Business Development, LR Sale of Research and Development Tax Credits

22 LAC 13:I.CHAPTER 29` Page 4 DED A. Research and development tax credits may be transferred only by sale approved by No sale or other transfer of a research and development tax credit shall be valid until the proposed sale or transfer is submitted to DED for approval and approved by DED. B A request for the approval of a sale or transfer shall be to the DED in writing and shall include the following information: 1. a copy of the proposed sale or transfer detailing all of its terms; 2. a reference to the original credit certification that authorized the research and development tax credit; and 3. copies of the taxpayer's last two LDOL Quarterly Report of Wages. C. The taxpayer's business must be within one of the following clusters as described in Louisiana Vision 2020, 2003 Update: 1. advanced materials; 2. agriculture and food products; 3. entertainment; 4. environmental technologies; 5. food technologies; 6. health care; 7. information technologies; 8. life sciences (including biomedical and biotechnology); 9. micro - and nano- technologies; 10. oil, gas and energy technologies; 11. chemicals/petrochemicals; 12. shipbuilding and other durable goods manufacturing; 13. transportation and logistics; 14. tourism; 15. wood, lumber, and paper. D. DED shall review the proposed sale and if the sale complies with the criteria established by law, DED shall issue an approval certification. DED shall maintain a record of all credits sold and provide a copy of all approved sales to the Department of Revenue. AUTHORITY NOTE: Promulgated in accordance with R.S. 47:6015. HISTORICAL NOTE: Promulgated by the Department of Economic Development, Office of Business Development Services, Business Resources Division, LR 30:978 (May 2004) Application Fee A. 1. An application fee in the amount of $250 shall be submitted with the each application. 2. All fees shall be made payable to: Louisiana Department of Economic Development.

23 LAC 13:I.CHAPTER 29` Page 5 AUTHORITY NOTE: Promulgated in accordance with R.S. 47:6015 HISTORICAL NOTE: Promulgated by the Department of Economic Development, Office of Business Development Services, Business Resources Division, LR 30:978 (May 2004), amended by the Office of Business Development, LR Recapture of Credits A. An application for credit certification shall constitute: 1. a consent by the taxpayer that credits granted under this Section, but later disallowed in whole or in part, may be recovered by the secretary of the Department of Revenue from the taxpayer applicant through any collection remedy authorized by the provisions of R.S. 47:6015(H); and 2. a consent by the taxpayer that the Department of Revenue may disclose to DED, any tax information of the taxpayer related to the earning of, or use of research and development tax credits by the taxpayer or any other information required by DED for the effective administration of this program, provided that such tax information, shall remain confidential in the possession of DED. AUTHORITY NOTE: Promulgated in accordance with R.S. 47:6015. HISTORICAL NOTE: Promulgated by the Department of Economic Development, Office of Business Development Services, Business Resources Division, LR 30:978 (May 2004).

24 LAC 13:I.CHAPTER 29` Page 1 LOUISIANA ADMINISTRATIVE CODE - TITLE 13 ECONOMIC DEVELOPMENT Part I. Financial Incentive Programs Chapter 29. Research and Development Tax Credit Purpose and Application A. The purpose of this Chapter is to implement the Research and Development Tax Credit Program as established by R.S. 47:6015. B. This Chapter shall be administered to achieve the following purposes: 1. encourage the development, growth, and expansion of the private sector within the state; and 2. encourage new and continuing efforts to conduct research and development activities within this state. C. This Chapter shall apply to any person 1. claiming a credit; 2. selling or otherwise transferring a credit; or 3. purchasing or otherwise acquiring a credit under this program. D. A person shall be allowed a credit against income or corporation franchise tax liability for the following: 1. any person who claims for the taxable year a federal income tax credit under 26 U.S.C. 41(a) for increasing research activities shall be allowed a credit ; a. for income tax years beginning on or after January 1, 2003, and before January 1, 2005; and franchise tax years beginning on or after January 1, 2004 and before January 1, 2006, in the amount of either: i. eight percent of the state's apportioned share of the taxpayer's expenditures for increasing research activities; or ii. twenty-five percent of the state's apportioned share of the federal research credit claimed for research expenditures in the state if the taxpayer claims the alternative incremental tax credit under 26 U.S.C. 41; and b. for income tax years beginning on or after January 1, 2005, and franchise tax years beginning on or after January 1, 2006, in the amount of either: i. eight percent of the state's apportioned share of the taxpayer's expenditures for increasing research activities if the applicant is an entity that employs five hundred or more Louisiana residents; ii. twenty percent of the state's apportioned share of the taxpayer's expenditures for increasing research activities if the applicant is an entity that employs fewer than five hundred Louisiana residents; or ii. twenty-five percent of the state's apportioned share of the federal research credit claimed for research expenditures in the state if the

25 LAC 13:I.CHAPTER 29` Page 2 taxpayer claims the alternative incremental tax credit under 26 U.S.C. 41; and 2. a person who receives a federal Small Business Innovation Research Grant as created by the Small Business Innovation Development Act of 1982 (P.L ), reauthorized by the Small Business Research and Development Enhancement Act (P.L ), and reauthorized again by the Small Business Reauthorization Act of 2000 (P.L ), shall be allowed a credit in an amount equal to: a. for income tax years beginning on or after January 1, 2003 and before January 1, 2005, and franchise tax years beginning on or after January 1, 2004 and before January 1, 2006, eight percent of the award received during the tax year; or b. for income tax years beginning on or after January 1, 2005, and franchise tax years beginning on or after January 1, 2006, twenty percent of the award received during the tax year. B. The credit may be carried forward for up to 10 years, or under certain circumstances may be sold pursuant to the provisions of R.S. 47:6015 and this Chapter. AUTHORITY NOTE: Promulgated in accordance with R.S. 47:6015. HISTORICAL NOTE: Promulgated by the Department of Economic Development, Office of Business Development Services, Business Resources Division, LR 30:977 (May 2004), amended by the Office of Business Development, LR Definitions A. Terms not otherwise defined in this Chapter shall have the same meaning given to them in R.S. 51:2352 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. Credit Certification-a certification by DED of the amount of the Research and Development Tax Credit earned by a person for a particular tax year. DED-Louisiana Department of Economic Development. Person-any natural person or legal entity including an individual, corporation, partnership, or limited liability company. Qualified Research Expenses in the State-expenses that are qualified research expenses under 26 U.S.C 41(b) 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

26 LAC 13:I.CHAPTER 29` Page 3 d. contract research expenses as described in 26 U.S.C. 41(b)(3) shall be for services performed in Louisiana. 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. AUTHORITY NOTE: Promulgated in accordance with R.S. 47:6015. HISTORICAL NOTE: Promulgated by the Department of Economic Development, Office of Business Development Services, Business Resources Division, LR 30:977 (May 2004) Certification of Amount of Credit A. Prior to claiming a research and development tax credit on any tax return or selling any research and development tax credit, a person must apply for and obtain a credit certification from DED. B. The application for a credit certification shall be submitted on a form provided by the DED and shall include, but not be limited to to following information: 1. The taxpayer's federal income tax return and supporting documentation that shows the amount of the federal research credit for the same taxable year. If claiming the credit under Subsection D, the taxpayer shall also remit supporting documentation for the federal Small Business Innovation Research Grant; 2. The total amount of qualified research expenses and the qualified research expenses in this state; 3. The total number of Louisiana residents employed by the taxpayer and the number of those Louisiana residents directly engaged in research and development; 4. The average wages of the Louisiana resident employees not directly engaged in research and development and the average wages of the Louisiana resident employees directly engaged in research and development; 5. The average value of benefits received by all Louisiana resident employees; 6. The percentage of health insurance coverage offered to all Louisiana resident employees; 7. Any other information required by the Department of Economic Development. C. DED shall review the application and issue a credit certification in the amount determined to be eligible and provide a copy to the Department of Revenue. The credit certification and the amount of such certification shall be considered preliminary and shall be subject in all respects to audit by the Louisiana Department of Revenue. AUTHORITY NOTE: Promulgated in accordance with R.S. 47:6015. HISTORICAL NOTE: Promulgated by the Department of Economic Development, Office of Business Development Services, Business Resources Division, LR 30:977 (May 2004), amended by the Office of Business Development, LR Sale of Research and Development Tax Credits

27 LAC 13:I.CHAPTER 29` Page 4 DED A. Research and development tax credits may be transferred only by sale approved by No sale or other transfer of a research and development tax credit shall be valid until the proposed sale or transfer is submitted to DED for approval and approved by DED. B A request for the approval of a sale or transfer shall be to the DED in writing and shall include the following information: 1. a copy of the proposed sale or transfer detailing all of its terms; 2. a reference to the original credit certification that authorized the research and development tax credit; and 3. copies of the taxpayer's last two LDOL Quarterly Report of Wages. C. The taxpayer's business must be within one of the following clusters as described in Louisiana Vision 2020, 2003 Update: 1. advanced materials; 2. agriculture and food products; 3. entertainment; 4. environmental technologies; 5. food technologies; 6. health care; 7. information technologies; 8. life sciences (including biomedical and biotechnology); 9. micro - and nano- technologies; 10. oil, gas and energy technologies; 11. chemicals/petrochemicals; 12. shipbuilding and other durable goods manufacturing; 13. transportation and logistics; 14. tourism; 15. wood, lumber, and paper. D. DED shall review the proposed sale and if the sale complies with the criteria established by law, DED shall issue an approval certification. DED shall maintain a record of all credits sold and provide a copy of all approved sales to the Department of Revenue. AUTHORITY NOTE: Promulgated in accordance with R.S. 47:6015. HISTORICAL NOTE: Promulgated by the Department of Economic Development, Office of Business Development Services, Business Resources Division, LR 30:978 (May 2004) Application Fee A. 1. An application fee in the amount of $250 shall be submitted with the each application. 2. All fees shall be made payable to: Louisiana Department of Economic Development.

28 LAC 13:I.CHAPTER 29` Page 5 AUTHORITY NOTE: Promulgated in accordance with R.S. 47:6015 HISTORICAL NOTE: Promulgated by the Department of Economic Development, Office of Business Development Services, Business Resources Division, LR 30:978 (May 2004), amended by the Office of Business Development, LR Recapture of Credits A. An application for credit certification shall constitute: 1. a consent by the taxpayer that credits granted under this Section, but later disallowed in whole or in part, may be recovered by the secretary of the Department of Revenue from the taxpayer applicant through any collection remedy authorized by the provisions of R.S. 47:6015(H); and 2. a consent by the taxpayer that the Department of Revenue may disclose to DED, any tax information of the taxpayer related to the earning of, or use of research and development tax credits by the taxpayer or any other information required by DED for the effective administration of this program, provided that such tax information, shall remain confidential in the possession of DED. AUTHORITY NOTE: Promulgated in accordance with R.S. 47:6015. HISTORICAL NOTE: Promulgated by the Department of Economic Development, Office of Business Development Services, Business Resources Division, LR 30:978 (May 2004).