Qualified research expenses generally include wages, supplies and contract research costs.

Wages — Qualified wages are for qualified services that directly relate to the research activities and are paid or incurred by the taxpayer. Qualified services include direct supervision, direct support or direct performance of qualified research. General or administrative wages generally do not qualify. For example, an allocated portion of the purchasing or receiving department’s wages would not qualify because these are indirect costs and are incidental to research activity.

Supplies — Supplies include tangible property that is consumed directly by the research activity or that is utilized in the development of a prototype. The supplies must be used in the conduct of qualified research. Supplies do not include land, improvements to land or property subject to the allowance for depreciation. Utilities (phone and electricity), small tools and allocations of total shipping cost do not qualify as supply expenses.

Contract research — Contract research expenses are amounts paid to non-employees (outside consultants) to perform qualified research. The taxpayer must enter into written agreement prior to performance of the research and must bear the costs even if the research is unsuccessful. The consultant must perform the research within Louisiana. If the research is conducted within and outside of Louisiana, only the expenditures incurred within Louisiana qualify. Only 65% of the Louisiana expense qualifies for the credit.