Louisiana is still open for film business!Posted on May 4th, 2016 by Leonard Alsfeld
Recent changes in the law regarding the Louisiana film tax credits may have made headlines over the past few months, but here is a quick breakdown of why Louisiana is still the Hollywood of the South.
The Hollywood of the South
Louisiana has earned this shiny nickname over the past decade after implementing a business development program which offered tax incentives to production companies who were looking for a place to film. This program provided that a tax credit would be granted based on the expenditures within a production budget that were made in Louisiana; thus, this gave production companies cash back for every dollar they spent here. The current program provides a 30% incentive, with an additional 10% for local labor utilized, which provides a great incentive to production companies to use our skilled local crews.
Within a few years of its inception, the Motion Picture Investor Tax Credit helped create an entire entertainment industry in the State of Louisiana that had been lacking in previous years. The industry expanded greatly, as a sturdy, deep local infrastructure was developed that helped attract billions of dollars’ worth of production expenditures to the state each year. While adding more than 17,000 high paying jobs, by 2013 Louisiana outnumbered both California and New York in $100 million+ budgeted film productions and took on the title as the “film production capital of the world.”
By the end of 2015, the Louisiana legislature believed the tax program was due for some changes, as they felt the cost for these credits outgrew the benefits of the program. As a result, the law was adjusted in several ways. Most prominently, the legislature placed a cap on the amount of credits that may be utilized by taxpayers per fiscal year– $180 million– in an attempt to stabilize the cost-benefit efficacy of the program for the future. The state was prohibited from buying the credits back from producers for the first fiscal year (July 1, 2015-June 30, 2016), but it will come back as a buyer of credits beginning July 1, 2016 at $0.85/tax credit dollar. There were many other positive changes as well (as discussed below). And it’s also important to note that the law did not place a cap on the amount of credits that may be issued per year by the state.
House Bill 829 (now Act 134), or more affectionately called the “Louisiana’s Homegrown Filmmakers Bill,” tweaked the original law in several key ways in an effort to keep local talent, as well as dollars, in the state. However, since its passage, many misconceptions have emerged regarding how the law has changed. To help clarify, we offer a few noteworthy points.
First, the bill does not cap or limit the amount of productions that can take place in the state. And, there is no limit or cap on the amount of tax credits that the state can certify per year. That has never changed. What has changed with regard to “caps” is two-fold: (1) there is a cap on the total amount of credits that a movie can earn– $30million per film (which will not affect most filmmakers since there were very few films shot here that surpassed that number in our 10-year history); and (2) a cap was created on the use or redemption of tax credits by taxpayers and production companies at $180million per fiscal year, but only for fiscal years 2015-2018 (with each year beginning July 1 and ending June 30). If the $180million is not utilized in the fiscal year, any overages are rolled over into the next year. At the current pace for the first fiscal year, it seems that we will have some overages rolled into the next year.
Second, the bill places some new regulations on which expenditures qualify for tax credits but also opens the doors to new opportunities to earn credits. For instance, fees relating to airfare no longer qualify, but in-state marketing and advertising expenses do! Other expenses like those relating to the screenplay and the soundtrack may also qualify now.
Third, HB 829 provides greater incentives to use local companies and the local labor force, helping to ensure that the money used in the incentive program will ultimately flow back into the state through local tax-paying companies and workers. The new legislation increased the percentage of tax credits that a production company may receive if it uses local labor (i.e. Louisiana residents) from 5% to 10%. That is a great additional bonus for filmmakers and also the local crew base! Further, the law provided an avenue for those Louisiana residents who wish to make a film in the $50,000 and over range (whereas before, the minimum spending threshold for everyone was $300,000 to earn a credit). These smaller filmmakers must accept as a condition of earning their 30% tax credit that the total amount of expenditures for above-the-line services shall be expended on Louisiana residents and that 90% or more of the total number of jobs on the production shall be handled by Louisiana residents.
These changes were made in order to make the incentive program economically sustainable for the long term, while allowing the film industry to continue to thrive in Louisiana.
Louisiana Still Open for Business
Now more than ever Louisiana is open for business to the worldwide film industry. IATSE has a strong member presence even though Louisiana is a right to work state. We have some of the most skilled labor force and probably the deepest crew base in the country. We have studios in all four corners of the state, with state of the art sound stages, and varied and open landscapes of all kinds for your location needs. Over the past decade, we have attracted all of the necessary support services that filmmakers need that you would get in Hollywood, Vancouver or any other major hub– from post-production services, to lighting and electrical, and even major completion bond companies. What’s more, banks and lenders can now step into the shoes of the production company and receive the tax credits directly from the state, and can also sell them back to the state at $0.85/tax credit dollar, opening up the option for more local lending institutions to finance the films based on the credits at a discount to help with the budgets. Our tax credit market is still strong, with buyers still attracted to the program and using the tax credits despite the misconceptions surrounding the cap. All in all, nothing much has changed and Louisiana is more than happy to host your next film!
If you are interested in filming in Louisiana, please contact us today!