Author Topic: Louisiana tax incentives for game developers  (Read 3725 times)

Rak'kar

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Louisiana tax incentives for game developers
« on: September 21, 2009, 04:13:17 PM »
A lawyer did a favor for me, so in return I'm posting about an act, the Louisiana Digital Media Act, he co-sponsored. From what I've been told, Louisiana is trying to attract software developers with tax incentives.  This is what he had to say:

Quote
"This Act makes it very attractive for businesses to design and develop software, web platforms, web applications, mobile applications and video games in Louisiana. To the extent that such products are designed and developed in Louisiana, the state of Louisiana will grant to the developer marketable/transferable tax credits in an amount equal to 35% of the amount paid for labor residing in Louisiana and 25% of the other costs incurred in Louisiana. There is no expiration date on the Act and no cap on the amount of tax credits that one or all developers can earn in a given year or over any period of time. Depending on the method used to sell the tax credits in the current market, the seller can realize between $0.85 and $0.91 per dollar of tax credits sold."

When asked for further details:

Quote
"There are really four broad ways that you can take advantage of the Louisiana Digital Media Act. I will start with the lowest level of commitment and effort on your part and move to the options that involve the highest level of commitment and effort.
 
1. If you don't want to move yourself and your software development company to Louisiana, but want to get some of the benefit of the act, you can hire a Louisiana Digital Media Company such as Louisiana Digital Interactive Associates, LLC. (LDI) to develop software and video game applications for you on a contract basis. LDI is a "general contractor" for software development, but the state of Louisiana pays the contractor fee and the client pays a wholesale price for coders while LDI manages the project for free to the client.
 
2. You create a Louisiana Digital Media Company and use the prospect for getting DIM tax credits as a means for partially financing the start up through a "Tax Credit Broker." You get the money quick, but the discount on the tax credits is significant, i.e., you will yield less than $0.85 on the dollar of tax credits. It is like a loan.
 
3. You create a Louisiana Digital Media Company. You finance the start up yourself. You sell the tax credits after earned to a tax credit broker. You get about $0.85 on the dollar of tax credits earned. I can introduce you to a "Tax Credit Broker."
 
4. You create a Louisiana Digital Media Company. You finance the start up yourself. You earn the tax credits and then market them yourself to
CPA's and financial planners who in turn arrange for their tax return clients to buy them. You may yield about $0.90 on the dollar of tax
credits earned.
 
Labor Costs are pretty much as follows. The following are very rough numbers and subject to enormous variability. If you hire individual contract coders in Louisiana and pay them a rate like an employee, the cost will be $40-$60/hour. You might find some people less expensive, but it is all a matter of experience and ability. You have to supervise them and provide your own project planning and management. They do what they are told to do, but not much more. Some skill sets are more expensive than others and rates vary considerably based upon experience and resume.
 
You hire LDI to do the work. You pay a fee based upon a wage rate of about $85-$90 per hour. It is simple and easy. You don't even have to think about how to market tax credits. You just get a discount on the labor.
 
You hire a software development contracting firm generally in Louisiana. Their fees will be  based upon a wage rate of about $125.00
- $130.00 per hour and perhaps more depending on what is being done. If you move to Louisiana and hire employees at $40-$60 per hour and
market the tax credit directly to CPA and financial planning community, you would save an enormous amount over a similar operation in Northern California. On the oppose side that is an enormous commitment to Louisiana."
« Last Edit: September 21, 2009, 04:16:40 PM by Rak'kar »