Digital Interactive Media and Software Development Incentive
Louisiana's 35% Digital Interactive Media and Software Development refundable tax credit — the strongest of its kind in the nation — is helping traditional and digital companies of all sizes gain a competitive edge.
- Provides a 35% tax credit on payroll for in-state labor
- Offers a 25% tax credit for qualified production expenses made in Louisiana
- No cap and no minimum requirement
- Effective Jan. 1, 2012, the tax credit is available at the end of each year for a refund of 100% of its value claimed on Louisiana state tax return OR certified applicants can receive 85% of the value earned as a rebate any time during the year
The incentive is open to all Louisiana digital interactive media and software development projects that are not regulated under Louisiana Gaming Control Laws. The refundable tax credit does not apply to software developed for institutional, private or internal purposes and excludes largely static Internet sites. Only work physically performed in Louisiana and only direct development equipment purchased through Louisiana businesses qualifies for the incentive.
Qualifying development products include:
- Digital Media and Games
- Web-based and Mobile Applications
- Consumer Software
- Entertainment Software
- Business and Enterprise Software
- Interactive Devices and Consoles
- Embedded Systems
What qualifies as a Louisiana business?
- Registered with the Secretary of State
- Physically located in Louisiana
- Posted hours of business
- At least one full-time employee
*Note: Beginning July 1, 2011, eligible expenditures start six months from initial certification date (acceptance into the program) — R.S. 47:6022.
Eligible Labor Expenses
- Project Managers
- Quality Assurance
- Game Designers
- Industrial Designers
- Legal Staff
- Management R&D/Engineering
Non-Eligible Labor Expenses
- Customer Service Staff
- Business Development/Sales Staff
- C-level Executive Compensation
- Marketing/PR Staff
- Accounting/Financial Staff
- Clerical Staff
- Installation Staff
- Janitorial/Maintenance Staff
- Human Resources
- Miscellaneous Administrative/Payroll
- Manufacturing Staff
Eligible Production Expenses
- Production equipment directly related to development (Hardware/Software)
- Allocated rent for where direct development occurs
- Office supplies (related to development)
- Licenses/permits for development
Non-Eligible Production Expenses
- Furniture and fixtures
- Relocation expenditures
- Domain license fees
- Payroll processing fees
- Indirect production equipment (Hardware/Software)
- Entertainment expenditures
- Communications (telephone, cell phone, etc.)
- State/local taxes
- General insurance for business operations
- Interest paid on loans
- Auto rental/mileage
- Parking/fare expenditures
- Travel expenditures
- Recruiting/hiring expenditures
- Manufacturing expenditures
- Lodging/housing of staff
- Finance fees
Program Statutes & Rules:
All incentive program rules are in the Louisiana Administrative Code maintained by the Office of the State Register.
- View the Digital Interactive Media and Software Development Incentive Statutes
- View the Titles of the Louisiana Administrative Code
- Choose Title 61, Revenue and Taxation
- Rules for the Digital Interactive Media and Software Development Incentive can be found in Part I, Chapter 16, Subchapter D
This download includes the application, helpful tips and instructions on completing the form.
Initial Certification (60 to 90 days)
1. The applicant submits an application and preliminary budget to OEID. The preliminary budget should describe all the expenditures related to the development of the project. For example:
2. The application and preliminary budget are received by LED, and the applicant is notified via email that both were received.
3. The application and preliminary budget are reviewed for completeness, and the applicant is then sent a standard list of compliance questions.
4. The application, preliminary budget and compliance questions are reviewed by OEID staff. OEID staff will contact applicant and discuss any follow-up that's needed to determine eligibility.
5. Once approved, an initial certification letter is drafted and sent to the applicant.
Tax Certification (60 to 90 days)
1. Company submits a cost report of expenditures by mail or email to LED for certification of credits. (This step occurs after actual expenditures occur and at a time frame determined by the applicant — usually once a calendar year.)
2. The cost report is then reviewed by OEID staff and additional documentation may be requested at this step.
3. Once approved by both the Director of Digital Media and legal staff, the tax credit certification is then issued to the applicant.
4. To redeem the tax credit, by the original applicant or another party, one works with a designated representative from the Louisiana Department of Revenue.
Q: My company recently applied to the program and I have a very large development project with work dating back to 2005. Can I collect tax credits on expenses dating back to 2005?
A: NO. Beginning on July 1, 2011, qualifying expenditures can only begin six months from the date of initial certification (the date LED approves the project) — LA R.S. 47:6022. The typical processing time for most initial certifications can take up to 90 days, resulting in approximately three months of eligible historical expenditures.
Q: My company is planning to develop a project that will involve voluminous content including image files, music files and video files. Are the costs associated with this content eligible expenditures?
A: YES. Content including image files, music files and video files are eligible expenditures in the development stage up to the commercial release of the product. Updates to content after the commercial release of the product are non-eligible expenditures.
Q: My company is planning to develop a Software as a Service (SAAS) application. Part of the project involves an entirely new distribution network and several servers to run the service. Are the costs associated with purchasing this equipment eligible expenses?
A: NO. Eligible equipment includes equipment that is used entirely for the development of the product. Equipment used to distribute the product is considered non-eligible equipment because it is considered outside the development stage.
Q: What is Digital Interactive Media?
A: In the context of Louisiana's Digital Interactive Media program, it's essentially an interactive software product (e.g. video game, training software, web platform, etc.) that's built for commercial export and not for the producer's internal use.
Q: Is Louisiana's Digital Interactive Media Incentive a grant program?
A: NO. It is an incentive that awards state tax credits to producers of Digital Interactive Media.
Q: What's a tax credit?
A: A tax credit is a credit that can be used against Louisiana tax liability. In the case of the Digital Interactive Media program, it's a refundable credit with an option for an 85% rebate.
Q: What can I do with the tax credits once I receive them?
A: Firstly, you can cover your Louisiana state tax liability. Since the credits awarded in the Digital Interactive Media Program are refundable, the remainder of the credits are considered an overpayment and refunded to the applicant by the Department of Revenue. There is also an option to take the value of the credits as a one-time rebate (any time during the year) at 85% of their original value.
Q: Will I need to hire anyone to help me apply for the program?
A: LED's Office of Entertainment Industry Development has full-time staff members whose job it is to help companies through the process of applying for and receiving the Digital Interactive Media tax credit. We strive to continually improve the transparency and ease with which firms can apply and enter the program.
Q: Will I need to hire a CPA?
A: YES. However, a CPA is only needed at the end of the process. Due to an alteration in the 2009 legislative session, the program no longer requires an audit, but instead a cost report performed by a CPA. (For more information on the steps involved in participating in the program, please see the sections titled "Applying" and "After Application.")
Q: How much will I receive back in tax credits for what I spent?
A: Digital Interactive Media projects are awarded a 25% tax credit on qualified production expenses paid to a Louisiana entity/vendor, and labor costs (for Louisiana residents) are awarded an additional 10% (an effective 35% total awarded on labor costs paid to Louisiana residents).
Q: Can I still get tax credits for hiring out-of-state labor?
A: Any qualified expenditures can receive the tax credit award of 25%, regardless of whether the labor is performed by Louisiana residents, so long as the work is done in the state of Louisiana. All labor must be verified to have been performed in Louisiana, and any work performed outside of the state would not qualify.
Q: What project expense costs qualify?
A: The simple answer is costs that are directly related to the project development itself. This includes items such as hardware and software, labor and lease costs — but not for costs associated with running the company (administrative, clerical, etc.) or marketing/distributing the product.
Q: What is considered eligible equipment?
A: Equipment such as computer hardware and software purchased from a Louisiana business for the direct development of the product is considered eligible. Furniture and fixtures do not qualify for the program.
Q: What constitutes a purchase made in Louisiana?
A: An expenditure paid to a Louisiana company that has an active registration with the Louisiana Secretary of State and has a physical presence in the state, posted business hours and at least one full-time employee.
Q: Is there a minimum investment?
A: For the Digital Interactive Media Program, there is no minimum spend required.
Q: Is there a maximum for how many tax credits my project or company can receive?
A: There isn't a maximum amount of tax credits that a project or company can earn, nor is there a cap on the program as a whole.
Q: Can this incentive be used in combination with other LED incentives?
A: LED has many business incentives, some of which may be combined with the Digital Interactive Media Incentive. Other incentives may carry their own "anti-stacking" clauses, and the various branches of LED can work with your firm to see what you might be eligible for.
Q: Can this incentive be used in combination with LED's Quality Jobs program?
A: A specific exclusion in the Digital Media Program prohibits a firm from taking advantage of both the additional Digital Media Incentive as well as LED's Quality Jobs program for the same employee. However, a firm may have some employees enrolled in the Quality Jobs program, while others are claimed under the Digital Media incentive.
Q: Before I can apply, do I have to begin production or spend any money in the state?
A: An applicant can apply before beginning production or expending funds in Louisiana.
Q: I started spending money in Louisiana before I received initial certification. Can I still claim what I've spent?
A: Under the law, a company can claim their first expenditure on a project six months prior to the date their project is approved (initially certified) for the program.
Q: How much does it cost to apply for each project?
A: Application to the Digital Interactive Media Program does not carry a fee.
Q: If I apply, does that obligate me to do the production in Louisiana?
A: NO. An applicant to the Digital Interactive Media Program is not obligated to expend funds in the state — even after an application has been pre-certified.
Q: Should companies apply once, together?
A: NO. Firms interested in joining the program should separately apply for each project. By doing this, we can more easily separate production costs and tax credits awarded.
Q: Does my project qualify?
A: The best way to determine this is to apply. Applying to the program is free, and the form should take less than half an hour to complete. If you have any questions about filling out the application, please contact Chris Stelly at firstname.lastname@example.org.
Q: When do I receive my tax credits?
A: Tax credits are issued with a project's final certification.
Q: How do I know if my project has been accepted into the program?
A: As soon as we've had a chance to review and clear up any outstanding issues in the application (which we strive to complete as quickly as possible), we will then send the applicant a letter of "pre-certification" that acknowledges a project's applicable expenditures of those proposed in the application.
Q: Do expenditures related to website related content qualify for the program?
A: YES. Expenditures related to web content (pictures, video, etc.) do qualify up to the first commercial release of the product.
EMERGING TECH HUB
In a world of interactive content, Louisiana is a software developer’s paradise. From innovative tax credits and an affordable cost of living to an emerging digital ecosystem, Louisiana is a technology hub. Start elevating your playing field and gain a competitive edge in Louisiana.