If an applicant does not have prior year expenses in Louisiana no base calculation will be needed. The calculation will be based solely on the current year R&D expenses. The base calculation will be based on the average of previous tax years. The calculation will be adjusted in the event there are no previous expenses in a prior year.

For example:

No Previous Years
A company with less than 50 employees incurred $210,000 in tax year 2019 and had no prior year R&D expenditures. There would be no base year. The calculation would be 30% of current years expenditures.

$210,000 x 30%, the 2019 R&D tax credit would be $63,000 – OR –

1 Previous Year
A company with less than 50 employees incurred $210,000 in tax year 2019 and had $100,00 R&D expenditures in tax year 2018.

The base calculation would be prior year times the appropriate percentage ($100,000 x 50%) which would be $50,000. In order to calculate the incremental increase in expenditures the base calculation is subtracted from the current year. The R&D tax credit is 30% of the incremental increase.

$100,000 x 50% = $50,000 base calculation
$210,000 – $50,000 = $160,000 incremental increase
$160,000 x 30% = $48,000 2019 R&D tax credit

2 Previous Years
A company with less than 50 employees incurred $210,000 in tax year 2019 and had $100,00 R&D expenditures in tax year 2018 and $150,000 in tax year 2017.

The base calculation would be the average of the prior year’s times the appropriate percentage ($100,000 + 150,000/2 x 50%) which would be $62,500. In order to calculate the incremental increase in expenditures the base calculation is subtracted from the current year. The R&D tax credit is 30% of the incremental increase.

($100,000 + 150,000/2 x 50%) = $62,500 base calculation
$210,000 – $62,500= $147,500 incremental increase
$147,500 x 30% = $44,250 2019 R&D tax credit

3 previous years applies the same rationale with using the average of the 3 prior years.

The base calculation and credit percentages will vary based on the size of the company.

View Examples of Base Calculations.

Formula:
6765
Average of three previous tax years * 80% = Base Amount
CTY R&D expenditures — Base Amount = increase in LA R&D
Increase in LA R&D * (5% or 10%) = R&D Tax Credit

LQRE – 6765
Average of three previous tax years * 50% = Base Amount
CTY R&D expenditures — Base Amount = increase in LA R&D
Increase in LA R&D * (30%) = R&D Tax Credit