Changes to Louisiana’s Digital Media Tax Credit

Did you know Louisiana has some of the nation’s most competitive tax incentives for startups? Its Digital Interactive Media and Software Development Incentive, which rewards the creation of digital interactive media products or platforms in Louisiana, provides a refundable tax credit on qualified expenses, such as labor and production equipment related to the creation of said digital media or software. It’s a refundable tax credit, meaning it goes above and beyond what a company would have paid in taxes in the first place. In other words, free money for Louisiana startups!

Gary Perilloux, communications director for Louisiana Economic Development (LED), says over the past 10 years the state has paid out about $60 million to 300 different companies through this program.

But changes to the program, made during last year’s legislative session in response to a massive budget shortfall, have caused some confusion, leading some in the startup community to wonder if this is still even an option at all. The tax credit is by no means gone; it’s just not as good as it once was. Here’s what you need to know.

The changes are temporary. Incentive rates were reduced from 25.2 percent for qualified in-state expenditures and 10 percent for qualified in-state payroll expenditures to 18 percent and 7.2 percent, respectively. This applies to all applications submitted after July 1, 2015, through the next three fiscal years. As of now, the rates are set to return to the higher thresholds on July 1, 2018.

There’s a new administrative fee. As part of last year’s changes, startups seeking this tax credit now pay an application fee of $500 or 0.05 percent of the expected credit of the project, whichever is greater, but no more than $7,500. Perilloux says this nonrefundable application fee is really an advance deposit for mandatory accounting services provided by LED to verify the expenditures. This was always a required portion of the program, but previously startups could retain their own CPAs to fulfill the reporting requirements.

Perilloux says despite the LED’s efforts to inform the startup community about programs like this one, his office still sees a general lack of interest in this program. “The most common mistake that businesses make is typically waiting too long to contact our office, because they feel it is too complicated a process to access the incentives,” he says. “We have made this as simple as possible, and will continue to do so.”