2009 Louisiana Laws TITLE 47 Revenue and taxation :: RS 47:6007 Motion picture investor tax credit

§6007.  Motion picture investor tax credit

A.  Purpose.  The primary objective of this Section is to encourage development in Louisiana of a strong capital and infrastructure base for motion picture production in order to achieve an independent, self-supporting industry.  This objective is divided into immediate and long-term objectives as follows:

(1)  Immediate objectives are to:

(a)  Attract private investment for the production of motion pictures in Louisiana.

(b)  Develop a tax and capital infrastructure which encourages private investment.  This infrastructure will provide for state participation in the form of tax credits to encourage investment in state-certified productions.

(c)  Develop a tax infrastructure utilizing tax credits which encourage investments in multiple state-certified productions.

(2)  Long-term objectives are to:

(a)  Encourage increased employment opportunities within this sector and increased global competitiveness with other states in fully utilizing economic development options within the motion picture industry.

(b)  Encourage new education curricula in order to provide a labor force trained in all aspects of film and digital production.

B.  Definitions.  For the purposes of this Section:

(1)  "Base investment" means cash or cash equivalent investment made and used for production expenditures in the state for a state-certified production.

(2)  "Expended in the state" means an expenditure to lease immovable property located in the state; an expenditure as compensation for services performed in the state; or an expenditure to purchase or lease tangible personal property within the state where the transaction is subject to the state sales or lease tax provisions of Title 47 of the Louisiana Revised Statutes of 1950.  A transaction that is subject to the state sales or lease tax provisions of Title 47 of the Louisiana Revised Statutes of 1950 shall include transactions which are also subject to a statutory exclusion or exemption.

(3)  "Expenditure" means actual cash or cash equivalent exchanged for goods or services.

(4)  "Headquartered in Louisiana" means a corporation incorporated in Louisiana or a partnership, limited liability company, or other business entity domiciled and headquartered in Louisiana for the purpose of producing nationally or internationally distributed motion pictures as defined in this Section.

(5)  "Motion picture" means a nationally or internationally distributed feature-length film, video, television pilot, television series, television movie of the week, animated feature film, animated television series, or commercial made in Louisiana, in whole or in part, for theatrical or television viewing.  The term "motion picture" shall not include the production of television coverage of news and athletic events.

(6)  "Motion picture production company" means a company engaged in the business of producing nationally or internationally distributed motion pictures as defined in this Section.  Motion picture production company shall not mean or include any company owned, affiliated, or controlled, in whole or in part, by any company or person which is in default on a loan made by the state or a loan guaranteed by the state, nor with any company or person who has ever declared bankruptcy under which an obligation of the company or person to pay or repay public funds or monies was discharged as a part of such bankruptcy.

(7)  "Office" means the Governor's Office of Film and Television Development until August 15, 2006; thereafter, the term "office" means the office of entertainment industry development in the Department of Economic Development provided for in R.S. 51:938.1.

(8)  "Payroll" means all salary, wages, and other compensation, including benefits paid to an employee for services relating to a state-certified production and taxable in this state.  However, "payroll" for purposes of the additional tax credit for Louisiana-resident payroll shall exclude any portion of an individual salary in excess of one million dollars.

(9)  "Production expenditures" means preproduction, production, and postproduction expenditures in this state directly relating to a state-certified production, including without limitation the following: set construction and operation; wardrobes, makeup, accessories, and related services; costs associated with photography and sound synchronization, lighting, and related services and materials; editing and related services; rental of facilities and equipment; leasing of vehicles; costs of food and lodging; digital or tape editing, film processing, transfer of film to tape or digital format, sound mixing, special and visual effects; and payroll.  This term shall not include expenditures for marketing and distribution, non-production related overhead, amounts reimbursed by the state or any other governmental entity, costs related to the transfer of tax credits, amounts that are paid to persons or entities as a result of their participation in profits from the exploitation of the production, the application fee, or state or local taxes.

(10)  "Resident" or "resident of Louisiana" means a natural person domiciled in the state.  A person who maintains a permanent place of abode within the state and spends in the aggregate more than six months of each year within the state shall be presumed to be domiciled in the state.

(11)  "Secretary" means the secretary of the Department of Economic Development.

(12)  "Source within the state" means a physical facility in Louisiana, operating with posted business hours and employing at least one full-time equivalent employee.

(13)  "State" means the state of Louisiana.

(14)  "State-certified production" shall mean a production approved by the office and the secretary which is produced by a motion picture production company domiciled and headquartered in Louisiana and which has a viable multi-market commercial distribution plan.

C.  Investor tax credit; specific productions and projects.

(1)  There is hereby authorized a tax credit against state income tax for Louisiana taxpayers for investment in state-certified productions.  The tax credit shall be earned by investors at the time expenditures are made by a motion picture production company in a state-certified production.  However, credits cannot be applied against a tax or transferred until the expenditures are certified by the office and the secretary. For state-certified productions, expenditures shall be certified no more than twice during the duration of a state-certified production unless the motion picture production company agrees to reimburse the office for the costs of any additional certifications.  The tax credit shall be calculated as a percentage of the total base investment dollars certified per project.

(a)  For state-certified productions approved by the office and the secretary on or after January 1, 2004, but before January 1, 2006:

(i)  If the total base investment is greater than three hundred thousand dollars and less than or equal to eight million dollars, each taxpayer shall be allowed a tax credit of ten percent of the actual investment made by that taxpayer.

(ii)  If the total base investment is greater than eight million dollars, each taxpayer shall be allowed a tax credit of fifteen percent of the actual investment made by that taxpayer.

(iii)  The initial certification shall be effective for a period twelve months prior to and twelve months after the date of initial certification, unless the production has commenced, in which case the initial certification shall be valid until the production is completed.

(b)  For state-certified productions approved by the office and the secretary on or after January 1, 2006, but before July 1, 2009:

(i)  If the total base investment is greater than three hundred thousand dollars, each investor shall be allowed a tax credit of twenty-five percent of the base investment made by that investor.

(ii)  To the extent that base investment is expended on payroll for Louisiana residents employed in connection with a state-certified production, each investor shall be allowed an additional tax credit of ten percent of such payroll.  However, if the payroll to any one person exceeds one million dollars, this additional credit shall exclude any salary for that person that exceeds one million dollars.

(iii)  The initial certification shall be effective for a period twelve months prior to and twelve months after the date of initial certification, unless the production has commenced, in which case the initial certification shall be valid until the production is completed.

(c)  For state-certified productions approved by the office and the secretary on or after July 1, 2009:

(i)  If the total base investment is greater than three hundred thousand dollars, each investor shall be allowed a tax credit of thirty percent of the base investment made by that investor.

(ii)  To the extent that base investment is expended on payroll for Louisiana residents employed in connection with a state-certified production, each investor shall be allowed an additional tax credit of five percent of such payroll. However, if the payroll to any one person exceeds one million dollars, this additional credit shall exclude any salary for that person that exceeds one million dollars.

(d)  Motion picture investor tax credits associated with a state-certified production shall never exceed the total base investment in that production.

(2)  The credit shall be allowed against the income tax for the taxable period in which the credit is earned or for the taxable period in which initial certification authorizes the credit to be taken.  If the tax credit allowed pursuant to this Section exceeds the amount of such taxes due for such tax period, then any unused credit may be carried forward as a credit against subsequent tax liability for a period not to exceed ten years.

(3)  Application of the credit.

(a)  All entities taxed as corporations for Louisiana income tax purposes shall claim any credit allowed under this Section on their corporation income tax return.

(b)  Individuals, estates, and trusts shall claim any credit allowed under this Section on their income tax return.

(c)  Entities not taxed as corporations shall claim any credit allowed under this Section on the returns of the partners or members as follows:

(i)  Corporate partners or members shall claim their share of the credit on their corporation income tax returns.

(ii)  Individual partners or members shall claim their share of the credit on their individual income tax returns.

(iii)  Partners or members that are estates or trusts shall claim their share of the credit on their fiduciary income tax returns.

(4)  Transferability of the credit.  Any motion picture tax credits not previously claimed by any taxpayer against its income tax may be transferred or sold to another Louisiana taxpayer or to the office, subject to the following conditions:

(a)  A single transfer or sale may involve one or more transferees.  The transferee of the tax credits may transfer or sell such tax credits subject to the conditions of this Subsection.

(b)  Transferors and transferees shall submit to the office, and to the Department of Revenue in writing, a notification of any transfer or sale of tax credits within thirty days after the transfer or sale of such tax credits.  The notification shall include the transferor's tax credit balance prior to transfer, a copy of any tax credit certification letter(s) issued by the office and the secretary of the Department of Economic Development and, the transferor's remaining tax credit balance after transfer, all tax identification numbers for both transferor and transferee, the date of transfer, the amount transferred, a copy of the credit certificate, price paid by the transferee to the transferor, in the case when the transferor is a state-certified production, for the tax credits, and any other information required by the office or the Department of Revenue.  For the purpose of reporting transfer prices, the term "transfer" shall include allocations pursuant to Paragraph (2) of this Subsection as provided by rule.  The office may post on its website an average tax credit transfer value, as determined by the office and the secretary of the Department of Economic Development to reflect adequately the current average tax credit transfer value.  The tax credit transfer value means the percentage as determined by the price paid by the transferee to the transferor divided by the dollar value of the tax credits that were transferred in return.  The notification submitted to the office shall include a processing fee of up to two hundred dollars per transferee, and any pricing information submitted by a transferor or transferee shall be treated by the office and the Department of Revenue as proprietary to the entity reporting such information and therefore confidential.  However, this shall not prevent the publication of summary data that includes no fewer than three transactions.

(c)  Failure to comply with this Paragraph will result in the disallowance of the tax credit until the taxpayers are in full compliance.

(d)  The transfer or sale of this credit does not extend the time in which the credit can be used.  The carryforward period for credit that is transferred or sold begins on the date on which the credit was earned.

(e)  To the extent that the transferor did not have rights to claim or use the credit at the time of the transfer, the Department of Revenue shall either disallow the credit claimed by the transferee or recapture the credit from the transferee through any collection method authorized by R.S. 47:1561.  The transferee's recourse is against the transferor.

(f)(i)  Beginning on and after January 1, 2007, the investor who earned the motion picture investor tax credits may transfer the credits to the office for seventy-two percent of the face value of the credits.  Beginning January 1, 2009, and every second year thereafter, the percent of the face value of the tax credits allowed for transferring credits to the office shall increase two percent until the percentage reaches eighty percent.  Upon the transfer, the Department of Economic Development shall notify the Department of Revenue and shall provide it with a copy of the transfer documentation.  The Department of Revenue may require the transferor to submit such additional information as may be necessary to administer the provisions of this Section.  The secretary of the Department of Revenue shall make payment to the investor in the amount to which he is entitled from the current collections of the taxes collected pursuant to Chapter 1 of Subtitle II, provided such credits are transferred to the office within one calendar year of certification.

(ii)  For projects which receive initial certification on and after July 1, 2009, the investor who earned the motion picture investor tax credits pursuant to such certification may transfer the credits to the office for eighty-five percent of the face value of the credits in accordance with the procedures and requirements of Item (i) of this Subparagraph.

(5)  The transferee shall apply such credits in the same manner and against the same taxes as the taxpayer originally awarded the credit.

(6)  Notwithstanding any other provision of law, on or after January 1, 2006, a state-certified production which receives tax credits pursuant to the provisions of this Chapter shall not be eligible to receive the rebates provided for in R.S. 51:2451 through 2461 in connection with the activity for which the tax credits were received.

D.  Certification and administration.

(1)(a)  The secretary of the Department of Economic Development and the office shall determine through the promulgation of rules the minimum criteria that a project must meet in order to qualify according to this Section.  The secretary, the office, and the division of administration shall determine through the promulgation of rules the minimum criteria that a project must meet in order to qualify according to this Section.

(b)  The secretary, the office, and the division of administration shall determine, through the promulgation of rules, an appeals process in the event that an application for or the certification of motion picture production tax credit is denied.  The office shall promptly provide written notice of such denial to the Senate Committee on Revenue and Fiscal Affairs and the House Committee on Ways and Means.

(c)  In addition, these rules shall be approved by the House Committee on Ways and Means and the Senate Committee on Revenue and Fiscal Affairs in accordance with the provisions of the Administrative Procedure Act.

(d)  When determining which productions may qualify, the office and the secretary of the Department of Economic Development shall take the following factors into consideration:

(i)  The impact of the production on the immediate and long-term objectives of this Section.

(ii)  The impact of the production on the employment of Louisiana residents.

(iii)  The impact of the production on the overall economy of the state.

(2)(a)  Application.  An applicant for the motion picture investor credit shall submit an application for initial certification to the office and the secretary of the Department of Economic Development that includes the following information:

(i)  For state-certified productions the application shall include:

(aa)  The multi-market commercial distribution plan.

(bb)  A preliminary budget including estimated Louisiana payroll and estimated base investment.

(cc)  The script, including a synopsis.

(dd)  A list of the principal creative elements, including the cast, producer, and director.

(ee)  A statement that the production will qualify as a state-certified production.

(ff)  Estimated start and completion dates.

(b)  If the application is incomplete, additional information may be requested prior to further action by the office or the secretary of the Department of Economic Development.  An application fee shall be submitted with the application based on the following:

(i)  Two-tenths of one percent times the estimated total incentive tax credits.

(ii)  The minimum application fee is two hundred dollars, and the maximum application fee is five thousand dollars.

(c)  The office and the secretary shall submit their initial certification of a project as a state-certified production to investors and to the secretary of the Department of Revenue indicating the total base investment which shall be expended in the state on the state-certified production.  The initial certification shall include a unique identifying number for each state-certified production.

(d)  Prior to any final certification of the state-certified production, the motion picture production company shall submit to the office and the secretary an audit of the production expenditures certified by an independent certified public accountant as determined by rule.  The office and the secretary shall review the audit, the production expense details, and may require additional information needed to make a determination.  Upon approval of the audit, the office and the secretary shall issue a final tax credit certification letter indicating the amount of tax credits certified for the state-certified production to the investors.  The rules required by this Subparagraph shall, at a minimum, require that:

(i)  The auditor shall be a certified public accountant licensed in the state of Louisiana and shall be an independent third party, not related to the producer.

(ii)  The auditor's opinion shall be addressed to the party which has engaged the auditor (e.g., directors of the production company, producer of the production).

(iii)  The auditor's name, address, and telephone number shall be evident on the report.

(iv)  The auditor's opinion shall be dated as of the completion of the audit fieldwork.

(v)  The audit shall be performed in accordance with auditing standards generally accepted in the United States of America and the auditor shall have sufficient knowledge of accounting principles and practices generally recognized in the film and television industry.

(e)  In addition to the requirements of Subparagraph (d) of this Paragraph, prior to any final certification of a state-certified production or infrastructure project, the motion picture production company or infrastructure project applicant shall submit to the office a notarized statement demonstrating conformity with, and agreeing to, the following:

(i)  To pay all undisputed legal obligations the film production company has incurred in Louisiana.

(ii)  To publish, at completion of principal photography, a notice at least once a week for three consecutive weeks in local newspapers in regions where filming has taken place in order to notify the public of the need to file creditor claims against the film production company by a specified date.

(iii)  That the outstanding obligations are not waived should a creditor fail to file by the specified date.

(iv)  To delay filing a claim for the film production tax credit until the office delivers written notification to the secretary of the Department of Revenue that the film production company has fulfilled all requirements for the credit.

(3)  The secretary of the Department of Revenue, in consultation with the office and the secretary of the Department of Economic Development shall promulgate such rules and regulations as are necessary to carry out the intent and purposes of this Section in accordance with the general guidelines provided herein.

(4)(i)  Any taxpayer applying for the credit shall be required to reimburse the office for any audits required in relation to granting the credit.

(ii)(aa)  The production application fee provided for in Subparagraph (2)(b) of this Subsection received by the office shall be deposited upon receipt in the state treasury.  After compliance with the requirements of Article VII, Section 9(B) of the Constitution of Louisiana relative to the Bond Security and Redemption Fund and prior to any money being placed into the general fund or any other fund, an amount equal to that deposited as required by this Item shall be credited by the treasurer to a special fund hereby created in the state treasury to be known as the Entertainment Promotion and Marketing Fund.  The money in the fund shall be appropriated by the legislature to be used solely for promotion and marketing of Louisiana's entertainment industry.

(bb)  The money in the fund shall be invested by the treasurer in the same manner as money in the state general fund and interest earned on the investment of the money shall be credited to the fund after compliance with the requirements of Article VII, Section 9(B) of the Constitution of Louisiana relative to the Bond Security and Redemption Fund.  All unexpended and unencumbered money in the fund at the end of the year shall remain in the fund.

(5)  A motion picture production company applying for the additional credit for the employment of Louisiana residents must remit a schedule to the Department of Revenue, in a machine-sensible format approved by the secretary of the Department of Revenue, that includes the following information: the names of all persons who received salary, wages, or other compensation for services performed in Louisiana in connection with the state-certified production, and the address, taxpayer identification number, permanent address of, and the amount of compensation for services performed in Louisiana received by each such person.

(6)  With input from the Legislative Fiscal Office, the office shall prepare a written report to be submitted to the Senate Committee on Revenue and Fiscal Affairs and the House of Representatives Committee on Ways and Means no less than sixty days prior to the start of the Regular Session of the Legislature in 2007, and every second year thereafter.  The report shall include the overall impact of the tax credits, the amount of the tax credits issued, the number of net new jobs created, the amount of Louisiana payroll created, the economic impact of the tax credits and film industry, and any other factors that describe the impact of the program.

(7)  The Department of Economic Development may request an additional audit of the expenditures submitted by the motion picture production company at the cost of the motion picture production company.

(8)  As a condition for receiving certification of tax credits under this Section, state-certified productions may be required to display an animated state brand or logo, or both, which includes a fleur de lis as prescribed by the secretary of the Department of Economic Development as long as the animated state brand or logo is not contrary to any rule or regulation of the Federal Communications Commission.

E.  Recapture of credits.  If the office finds that monies for which an investor received tax credits according to this Section are not invested in and expended with respect to a state-certified production within twenty-four months of the date that such credits are earned, then the investor's state income tax for such taxable period shall be increased by such amount necessary for the recapture of credit provided by this Section.

F.  Recovery of credits by Department of Revenue.  (1)  Credits previously granted to a taxpayer, but later disallowed, may be recovered by the secretary of the Department of Revenue through any collection remedy authorized by R.S. 47:1561 and initiated within three years from December thirty-first of the year in which the twenty-four-month investment period specified in Subsection E of this Section ends.

(2)  The only interest that may be assessed and collected on recovered credits is interest at a rate three percentage points above the rate provided in R.S. 9:3500(B)(1), which shall be computed from the original due date of the return on which the credit was taken.

(3)  The provisions of this Subsection are in addition to and shall not limit the authority of the secretary of the Department of Revenue to assess or to collect under any other provision of law.

Acts 1992, No. 894, §1; Acts 1997, No. 658, §2; Acts 2002, 1st Ex. Sess., No. 6, §1, eff. July 1, 2002; Acts 2003, No. 551, §§3 and 6; Acts 2003, No. 1240, §3, eff. July 1, 2003; Acts 2004, 1st Ex. Sess., No. 7, §1, eff. March 25, 2004; Acts 2005, No. 456, §1; Acts 2007, No. 456, §2, eff. July 1, 2007; Acts 2009, No. 478, §1, eff. July 9, 2009; Acts 2009, No. 530, §1, eff. July 10, 2009.

NOTE:  See Acts 1992, No. 894, §2.

NOTE:  Acts 2005, No. 456, §2, provides that the "Act shall become effective for taxable years beginning after December 31, 2005, and shall not apply to state-certified productions that have received an effective initial certification date that is prior to December 31, 2005.  For state-certified infrastructure projects, this Act shall become effective on or after July 1, 2005."

NOTE:  See Acts 2009, No. 530, §1, which was superceded by Acts 2009, No. 478, §1.