United States: Louisiana Gives Tax Benefits to Biotech Research And Technology Commercialization

By Van R. Mayhall Jr., and Van. R. Mayhall, III.

In an effort to induce and foster biotechnological research and technological commercialization in the state, the Louisiana legislature has granted a special sales and use tax incentive to biotechnology start-up companies that invest in new research equipment. Louisiana has also established the Technology Commercialization Credit Program to encourage companies that invest in and commercialize technology developed at Louisiana universities to locate and grow their businesses in the state.

The Technology Commercialization Credit Program allows for tax credits against Louisiana income taxes or corporation franchise taxes for those individuals or businesses that invest in the commercialization of technology produced or developed at a Louisiana college or university. "Technology" is defined under the Program to include any research, product, or intellectual property owned or sponsored by a regionally accredited college, technical school, or university located in Louisiana, as well as any product or intellectual property to which significant development or enhancement occurred at such a college, technical school, or university.

The special tax credits under the Program are earned and granted for a period of not less than four years. To qualify, the applying individual or business must invest in commercialization costs, including investments by purchase or lease of machinery and equipment, maintained in service in Louisiana, directly related to the production of technology or used to produce resources essential to the production of technology. The investment must be of at least two hundred and fifty thousand dollars in the first taxable year, and of at least two million dollars by the end of the fourth year. An individual or business may qualify for four additional years of tax credit immediately succeeding the first four years under the Program by investing two hundred and fifty thousand dollars or more in each succeeding tax year.

The sale of certified technology commercialization credits to other taxpayers is permitted under certain circumstances. Credits once earned and granted may be claimed by the taxpayer against tax liability in the tax year earned or retained for use in future tax years. Moreover, the maximum amount of tax credit which may be claimed in any tax year under the Program is twenty million dollars, and no tax credit may be earned on investments in machinery or equipment that is not in regular service in Louisiana.

Finally, effective July 1, 2002, the Louisiana Legislature established a sales and use tax exclusion applicable to capital expenditures for new research equipment by a biotechnology company. The exclusion does not apply to the purchase of any consumable by a qualified biotechnology company, and becomes null and void in its entirety on June 30, 2006. In order to qualify, the company must be an eligible commercial biotechnology research company identified by the North American Industry Classification System under one of the five specific codes listed in La R.S. 47:301(10)(a)(v).

For more information, please contact Van R. Mayhall, Jr., vrm@bswllp.com, or Van R. Mayhall, III, vm@bswllp.com.